Lenders will ask to see your credit rating in order to access a breakdown of your financial history and status. The purpose of this, is so that the lender can make a prediction on your future financial behaviour as this can impact how eligible you are to take on an investment like a mortgage.
Credit ratings can be affected by:
Payment History – missed bills and late payments is a huge red flag for any lender and can automatically affect your eligibility for a mortgage. Often, 35% of your total credit score is based on this one segment.
Credit Use – This gives a breakdown of how often you use credit cards. It simply gives lenders an insight into how much you rely on a credit card for daily purchases.
History Length – This is how much credit you actually have, as well as how long you have had credit accounts. The longer the history the better.
Various Credit – Having a mixed range of credit can positively affect your mortgage acceptance as it shows that you are capable of managing various credit products.
How To Improve Credit Score
Improving your credit score can be done in many ways. It is important to know the methods you can use to do this to ensure you do not run into any disappointments for problems when you apply for credit or a mortgage.
Be Registered To Vote
Many lenders use the electoral system as a method of identity confirmation. Ensure that you are registered to vote and that you are registered at your current address. If you are not registered at your current address, this will result in information on your application not adding up which points in the direction of fraud.
Credit History
Having no credit history at all can negatively impact your application as lenders will not be able to see how you manage your finances. You want to use this as a way to impress and show that you are more than capable of using credit for some monthly purchases and paying it off on time.
Pay Off Debt
If you are able to pay more than ‘minimum’ each month to debts, this is a positive step in the right direction. It shows you are able to manage debt and are responsible enough to borrow money and pay it back on time or even early.
Don’t Over-Apply
It is better to try and figure out how likely you are to be accepted before applying, as when you apply, it leaves a ‘history mark’ on your name and your finances. Lenders do not like when there are too many marks from applying consistently for credit. Only apply to something if you feel it is a necessity and is a positive financial decision that will benefit you in the long run.