Your
credit history provides mortgage lenders with an indication of how financially
responsible and reliable you; and helps lenders determine whether they will lend to you and at what
interest rate.
Unfortunately;
the importance of having good credit isn't highlighted from a young age which
ultimately leaves many prospective buyers unable to get on the property ladder.
Here
are Property Cohorts top 10 credit tips:
1. Check your credit
It
may seem very simple but you'll be surprised how many people we speak to that
have never checked their credit rating. It's the FIRST step to knowing what you need to improve and it's one of the
first things that a lender will check when offering you a mortgage.
You
only have to enter a few personal details and both will give you your credit
score along with some tips on how you can improve your score. Clear Score is
free and Experian offer a free 30 day trial.
PCTIP - See what you need to improve and cancel after
the 30-day trial. You can always log back in at a later date if you want to
check again. (It's very easy to fall into the trap of signing up to free trials
then continuously forgetting to cancel the service when the direct debits start
coming out.)
3. Plan in advance
3. Plan in advance
If
you're planning to buy a property, it's worth starting to manage your credit file at least a year in
advance.Getting
your credit up to scratch does not happen overnight!
4. Get yourself a credit card
If
you've never had credit before, it's difficult for a lender to assess you.
Consider taking out a credit card and making a couple of purchases on it each
month and then repaying the balance in full at the end with a direct debit to
build a good credit history. This will show that you can responsibly manage
credit.
5. Never miss repayments
Always
pay your direct debits and credit card bills on time, if possible pay off your
credit card in full. (I am personally really against paying interest on credit
cards, so I always pay off my full balance when it’s due as opposed to the
minimum payment amount)
PCTIP - If you’ve made late
payments in the past, set up a direct debit so you don’t miss them again.
6. Keep your credit card
balances low
One major factor in your credit score is your
credit utilisation. This is essentially how much you currently owe divided
by your credit limit. E.g. If you have spent £8000 on a credit card with a
limit of £10,000 then your credit utilisation is 80%. The smaller this percentage is, the
better it is for your credit rating.To
boost your score, pay down your balances, and keep your credit utilisation low.
7. Get on the electoral role
Your
presence on the electoral roll provides valuable proof of your address to
lenders. Electoral
roll information is used to confirm your identity, which is then passed onto
lenders when you apply for credit, to prevent fraud. Thus, if you're not on the
roll when making an application it will appear that you don't exist, or you're
starting afresh with no credit record; both will have a negative impact.Many
people assume they're automatically registered, or don't bother doing it.
Do
not apply for lots of credit cards or loans at one time. Each time you apply
for a financial product, a search will be recorded on your credit record (the
so-called credit footprint). If you apply for lots of credit or are
declined credit many times in a short period of time this will impact your
credit rating.
9. You can get a mortgage
if you have bad credit
There
are specialists’ lenders who will lend to those with bad credit. For example, a
company called the
Mortgage Lender
offer mortgages to the self-employed, older borrowers and those with poor credit.
PCTIP - Be aware that you may
find yourself paying a higher interest rate due to poor credit.
10. Act on the above tips!
― Stephen R. Covey, The 7 Habits of Highly Effective People
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