Your home may be repossessed if you do not keep up repayments on your mortgage
Your credit score, or credit rating, can be crucial to the success of your mortgage application.
Your credit score is a number which a credit agency gives you to show how reliable you are at managing your finances. The higher the score, the better your reputation for financial management. Credit Reference Agencies (CRAs) take information from public sources, such as court judgements and information from lenders about your credit history and create a report which banks or lenders use to help reach a decision on whether to offer you credit. Things which may make up your credit score include:
Every lender has different criteria when deciding whether to lend money and most of these formulas are secret. It's likely that the lender will look at:
There are three CRAs which provide credit scores within the UK. It's possible that you could score badly with one but not with another. So if you were to be rejected by a lender, another lender using a different CRA may still accept you, every lender is different. Remember to consider that a number of applications in a short period of time can hurt your credit rating too. Our guide on How much can I borrow has more information on what lenders may be looking for.
You can check your credit score directly through the credit reference agencies such as Experian or Equifax. Their websites will, for a monthly fee, allow you access to your credit score and any changes that happen to it. They will also let you know when someone else checks your credit score. It's important that you check the information on your credit report is accurate. It is possible for mistakes to be made and these could hugely affect your credit score. The CRA should offer advice on how to report inaccurate information on your credit report to the lender involved.
The obvious thing to do is make sure that you are making all payments for any debts on time and in full. Additionally:
Before they offer you a mortgage a lender will make sure that you are able to pay the money back. Your credit score is only a part of their decision but it is an important part. You should be sure that you understand what your credit score is and how you can help improve it.
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