Why your credit report can be crucial to your mortgage approval

Mortgage - credit report
Your credit report can be crucial to your mortgage approval

When you make a mortgage application, lenders will want to ensure that you’re able to pay it back before they agree to it.

Most of us don’t like completing paperwork so will skim over the small print of the application to get it completed as quickly as possible. However, it pays to do your homework as taking care of the detail can be crucial.

Lenders are likely to want to see evidence that you could afford your mortgage if interest rates go up, and that you’re not relying on a rise in house prices to repay your loan.

They may also want to be satisfied that you have enough left over for your mortgage repayments once you’ve paid essential bills such as your utilities, food and council tax.

Lenders have different past experiences with various types of applicants so they will take different factors into consideration when assessing an application.  The various lenders are likely to score an application differently and the same lender may even score a mortgage application differently to a credit card.

To make yourself a more attractive proposition to a mortgage lender one thing that you can do is to ensure that your credit report is accurate, up-to-date, and reflects your present circumstances. If you do find anything that isn’t correct, contact the relevant lender to get it altered.

Keeping an eye on your credit report may help you get your mortgage approved.  Here are a few things to watch out for:

Pay on time, every time

Lenders look for proof that you’re a reliable and responsible borrower and late or missed repayments stay on your credit report for at least six years. it is best to remain within your agreed credit limits, always make your repayments on time, paying more than the minimum off your credit cards each month if you can.  It can take time to build up a good credit history so financial discipline is important.

Check out your credit report history

Checking your credit report may not be at the top of your list of recreational pastimes but it could end up saving you money. Your credit report shows your payment history and lists the credit you’ve had, including loans, mobile phone accounts and your mortgage.

Ignore the details at your peril

Check that your credit report is up to date, that the information on it is accurate and reflects your current circumstances. Discrepancies, that need to be addressed, could include different ways of listing your address, or errors such as duplicate listing of accounts or closed accounts marked as open. If you do find anything that needs correcting, contact the relevant lender and ask for them to amend any incorrect information. Even small details like the way your name and address is recorded could have a significant impact.

Extra steps to remember

There are other simple steps you can take such as registering to vote at your current address, closing any unused accounts or adding a “notice of correction” (up to 200 words) explaining if special circumstances caused payments to be missed in the past. Credit scoring can also look at the average age of your accounts, awarding extra points for longstanding relationships, so try not to chop and change all of your accounts on a regular basis. Also, review financial links to other people and ask for any outdated links (e.g. to an ex-partner) to be broken.

Space out your credit applications

Avoid making too many credit applications close together, as this could be seen as a sign of financial stress.  Each application is recorded on your credit report and if lenders see lots in a short period, they could think that you’re desperate or suspect fraud. You can obtain a copy of your credit file to check for any inconsistencies.

Post courtesy of the Express.