How Your Credit History Really Affects Your Mortgage

If you’re wondering how your credit score affects your mortgage application, it could make all the difference between getting the keys to your dream home and being refused a home loan.

Considering Credit ReportA credit history shows credit card and mortgage companies and other lenders how financially reliable and responsible you are, and give them the information they need before deciding whether to offer you a loan.

Your credit score will be calculated by potential mortgage lenders using the information in your credit report, the personal details (like salary) that you provide and other policy rules to assesses the level of risk involved in lending you the money to buy your home.

If your credit score shows you to be a “good” risk, then you will get the mortgage you are applying for.

Who keeps the info?

In the UK, most people’s information is held by credit agencies, like Experian.
Details held cover credit history, address and anything that could count against you, from bankruptcies to County Court Judgements (CCJs).

How you can get a good credit score

You will help your mortgage application and get the home loan you want if you:

  • Pay off all debts on time, covering at least the minimum payment, for more mortgage options
  • If you can go one better and pay off your credit card in full each month, you will be doing yourself a favour
  • It’s not a bad idea to try and build up a credit history. If you don’t have a credit card or have never borrowed money, you won’t have a credit history. This could even go against you, since no potential lender will be able to forecast your fiscal behaviour. So your application could be rejected. There are even special credit building cards for those with a limited credit history so they can build up their credit score.

Some more tips:

  • Use any savings to pay off any outstanding debts before applying for a mortgage. Lenders tend to take into account how much money you owe.
  • Avoid having multiple credit card or loans on your credit history, especially within a short period of time. Lenders may well foresee repayment problems. It’s also a good idea to cancel any accounts or cards that you are not using.
  • It will help if you have been at your current address for some time, and with the same employer for a while, and if you have a fixed landline rather than a mobile phone number on your application.

If you get rejected once, immediately check the files are right, otherwise you could find other lenders rejecting you as well. Your lender will tell you which credit agency is used to assess your information, so concentrate on that.

Finally, never lie about your credit history when applying for a mortgage. Not only is this a criminal offence, it could have a severe impact on how creditworthy you are deemed to be.

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