Securing a mortgage can feel like you have a mountain to climb, especially if you have a complex income situation and you’ve never done this before.
Saving hard for a deposit and meticulously controlling your expenditure is part of the journey, but there’s plenty more you can do to control the outcome in your favour. Here are the important steps you can take:
Give your score a boost
This is not something you can do overnight – it takes months of preparation before you need to apply for a mortgage. Lenders want to satisfy themselves that you are a safe bet for the mortgage and that you will not have any issues in repaying it. This check involves evaluating your credit score and predicting your future behaviour based on your past conduct with commitments. These standards are not published, so it is impossible to determine exactly what lenders want. At Cleerly, we understand which lenders are more selective and what they look for in a borrower. Get copies of your credit file from all three credit reference agencies — Equifax, Experian and TransUnion (formerly Callcredit), or better still get a multi-agency credit report that contains the information that all three agencies hold about you in one report. But don’t bother paying for ‘credit scores’ that the agencies try to sell, they are indicative only as lenders use their own metrics.
Once you receive your credit report, check everything for errors. If you think your information is incorrect, ask your lender to correct it. You can add a letter of correction to your credit report explaining the reason for the inaccuracy and your understanding of how the situation arose. If the credit reporting agencies cannot help you, you can lodge a complaint with the Financial Ombudsman Service. Keep in mind that lenders also rely on your application and past transactions with you, which will not be reflected in your credit file. For example, if you have had credit agreements with your bank, and apply for a mortgage with them, they can also use their experience of dealing with you on other financial products, like bank accounts, to assess your creditworthiness for a mortgage.
Register to vote
Things become very tricky for you if you do not appear on the electoral register. Visit ww.gov.uk/register-to-vote to add yourself to the electoral register, or check if you are already registered. For someone who is not eligible to vote (e.g., foreign nationals), you can add a note to your credit file stating that you have other documents proving your address/residence. Being on the voters register will also boost your credit score (see above).
Check addresses on your credit report
Check your address is up to date on all active accounts (even if you no longer use them), and make sure the dates you were resident there are also accurate. Inconsistent data makes you look untidy to potential mortgage lenders and could affect their decision to lend.
‘Disassociate’ past relationships
If you are financially linked to an individual whom you no longer hold any financial connection with, such as ex-partners, you can write to the credit referencing agencies and ask them to complete a ‘Financial Disassociation’. Subject to all joint financial accounts being closed, the lenders are obliged to permanently remove any link to that person. If an ex-partner has bad credit and they are linked to you, it can cause a straight decline of a mortgage application.
Build/Rebuild your score
If you have a bad credit score you cannot turn it into a good one quickly. It takes time and corrective action to restore it. One way you can do this is to get a credit card and spend on it each month. This proves to lenders you can borrow responsibly without falling behind on payments. You should only do this if you can settle the card in full every month. Accumulating new debt without reducing the balance can have a negative impact, especially when you already have a weak score.
Stay on top of your commitments
If you miss payments on debts, utility bills, or mobile phone contracts your creditors will register these on your credit report at the drop of a hat. The impact can be huge if you then approach a mortgage lender with a stain on your payment history. Set up direct debits rather than payments that you have to remember to make, and ensure you have the funds in your bank account to meet these.
New credit applications
These should be stopped in the months leading up to your application for a new mortgage. Whether you are accepted for that new credit card or car loan, or declined, the application is stamped on your credit history. New credit applications also include certain insurances, new mobile phone contracts, and new energy suppliers. If your mortgage is the most important financial application right now, prioritise that and apply for these other things after your mortgage is approved.
For more information, please visit Cleerly's official website.
Alternatively, you can fill in our request a callback form below or try out our contractor mortgage calculator for a more precise quote.