Whether it’s Experian, Equifax, TransUnion or any other credit reference agency, people often keep close watch of their credit score and think it’s the be all and end all when a lender comes to assessing your credit history in relation to obtaining a mortgage. The truth is, what your credit report says, not your credit score, is much more important!
If you’ve not had a look at your credit report before, these can be downloaded from the same credit reference agencies you use to view your credit score. A credit report will show a breakdown of your credit history over the last 6 years as well as anytime you’ve applied for credit, your address history and various other ‘relevant’ information from your financial history. They’re not the easiest documents to decipher so if you want any help, we’ll be happy to talk you through them. Agencies may try and charge you to obtain a copy of your report but there’s often a free trial period if you’ve not viewed it before. If you cancel before the end of the trial period you shouldn’t have to pay anything to get your report!
With regards to your credit score, we’re certainly not dismissing this as something to be ignored. The issue in relation to using it as an indicator when applying for a mortgage is that most lenders are not particularly interested in what it says. Your credit score is a volatile measure and therefore doesn’t provide a broad enough picture. Mortgage lenders typically have their own internal credit scoring system they use and this which takes into account the relevant information contained on your credit report when assessing your creditworthiness.
For example, when setting up your broadband provider, the company will perform a credit search on you and this will cause your credit score to go down but this is not a reflection of you being any less creditworthy. In the opposite sense, if you missed a couple of mortgage payments last year but have paid all subsequent payments, your credit score will have likely recovered but this would be a major red flag to most high street banks.
If you do have any adverse credit, whether it be missed mortgage or credit card payments, CCJs or a missed phone bill, fear not. There are plenty of lenders out there who will work with you if it is reasonable. If the problem is only minor, you’ll still be able to access most competitive deals too. However, we would of course stress the importance of making sure all payments are made in full and on time!
For first time buyers, equally important as a good credit history is having a credit history at all! This means if you’ve never had a bill registered in your name, a credit card that you use or any form of credit, you’re going to struggle to be accepted for a mortgage. This is because the bank has absolutely no record of you paying credit off and therefore cannot assess your creditworthiness. Ensuring all your documents and bank details are registered to your home address and that you’re on the electoral roll is a great place to start. If there’s anything like a phone bill which you’re paying for each month, make sure this is registered in your name if possible too.