Having a good credit score is imperative for several reasons. Remember, a good credit score means it could be easier to obtain mortgage finance. Establishing a good credit score will not only aid you to save money because this usually unlocks cheaper interest rates, but also makes the process of applying for a mortgage that much easier. On the flip side, if you’re a potential mortgage borrower with a bad credit score you need to sharpen your pencil accordingly and get the right information and guidance to help you achieve your goal of home ownership. Therefore, if at all possible, you should always try to maintain a good credit score so that you can open up more doors to affordable mortgage products.
If you want to increase your credit score then this blog is perfect for you. Read the blog till the end so that you can understand the things that reduce credit score and how to counteract these so that eventually you can increase your credit score.
Things That Reduce Your Credit Score
- Using multiple lines of credit: Start to investigate what your credit profile is looking like right now. You will then be able to know what is working in your favour and what is not. This is how you can see if the things you are doing are helping or reducing your score. Things that contribute to getting a higher credit score including your credit history of paying payments on time, low balances in comparison to credit limits on your credit card/s, a mixture of different credit cards loans, hire purchase agreements, store cards, utilities, phone contracts, previous credit accounts, and enquiries for new credit, etc. There are few major things to avoid being late or missed payments, high credit card balances, and judgments. These will reduce your credit score.
- Payment history: This is the most important element that could affect your credit score. Late payments will hamper your credit score without a doubt. That’s why it is really important to pay at least the minimum payments on time, usually payments are collected by direct debit each month. So, paying late can affect your credit history for up to 6 years. As any blip on a credit file will remain on the credit file for this period.
- Credit usage: Credit usage is also a significant factor here. It is the second important factor after payment history. It measures how you are using the credit that is available to you. For example, if you had a credit card with an allowable limit of £1,000, if you had an outstanding balance of £900 then the available remaining credit is just £10 which is a credit utilisation of 90%. Lenders like to see realistically a credit utilisation on all credit of less than 50%. Having credit shows a lender that you are able to manage your financial affairs, but over exposure of credit can have a negative effect.
- Credit mix: It also has a little impact on your credit score. If you maintain abalance on rolling credit accounts such as credit cards or store cards catalogues or buy now pay later (BNPL). It is vitally important to keep things up to date. Make payments on time, as any delays in the payment reaching the creditor could allow the creditor to mark your credit file with a missed or late payment marker. Again, having lots of these could be detrimental in you obtaining a mortgage deal.
Tips To Improve Your Credit Score
It is very difficult to understand how best to manage your finances there are so many things to consider, it’s a bit complex. So, applying for credit can be a very stressful time. Your credit score can increase quickly depending on what you do and when you do it. For instance, paying down all your debts within a very short time can have a negative effect too. Lenders like to see a good track record of consistent payments. However, if you’re starting off looking for a mortgage when you have bad credit, it can take a little more time to get yourself what the guys at Independent Mortgage Brokers Halifax say “mortgage ready”. No matter what, the only important thing you could do to affect your profile when having bad credit is create stability within your financial affairs.
Here Are Some More Useful Tips That Could Help You To Build Up Your Credit Score.
- Review for errors on your record. Even if there is just a slightly incorrect address, it can affect your score. So, make sure to check everything, check all of the details and if there is any obvious mistakes, get these corrected immediately as with anything it can take time for the agencies to update you credit profile.
- Pay your bills and commitments on time. Paying for things like communication commitments, such as phones, broadband contracts on time is a huge advantage to prove to lenders that you can manage your expenses. These types of commitments and the companies involved are extremely keen on payments being made on time, even if it is a genuine error it may be terribly hard and time consuming to rectify this error.
- Financial associations to a person you have applied for credit with such as your spouse, friend, or family member. your credit rating is linked to your account. So, a joint borrowing could affect your score if they have a lower rating. Or they miss payments. Taking on a credit commitment with someone else, is sometimes dangerous if you are not confident in their attitude towards paying bills on time etc.
- Are you being scammed? If you see something unusual on your credit report, make sure you investigate it and do something about it. Don’t just assume it will go away by itself. If you believe it shouldn’t be showing on your credit file then contact the credit agency to get it removed. You may need to go one step further and report it to the police they may ask you to file an action fraud statement on-line.
- If you receive any county court judgments (CCJ) for debt then it will affect your credit score seriously. If you’re having difficulties paying up with your payments, then contact our Independent Mortgage Brokers Halifax for free online advice they may be able to help.
- If you owe any high levels of existing debt, then you should try to reduce the debt before you apply for a mortgage. This is because banks, or building societies, take a dim view on high credit utilisation.
- important to ensure you’re registered to vote if eligible. Make sure you’re registered on the voters roll. Lenders always want to know that you live where you say you live. The longer you live at a property the more stable you are perceived. If you are moving from home to home this looks like you live an unstable life. A lender may consider you to be less credit worthy.
- Keep your credit utilisation low. Your credit utilisation is how much of your available credit limit you use. Don’t be fooled into maxing your credit cards out.
- If you are struggling to increase your credit score, it might be worth talking Independent Mortgage Brokers Halifaxthey are happy to help you and advise you on different ways to increase your credit score.
If you are struggling to increase your credit score or you have a low credit score because you don’t have credit. If you are looking to get yourself a mortgage then Independent Mortgage Brokers Halifaxcan help and guide you through the process. They will get you “mortgage ready” Saving you time& effort. Simply contact one of our expert independent mortgage brokers. We provide all types of bad credit mortgages, online mortgages, and Free Mortgage Advice and help you get the mortgage you deserve.