Buying your first property can feel like a daunting process.
There are certain things that you can do to improve your credit score and your chances of getting a mortgage and the following list may help. First it is important to understand what exactly a credit score is.
Each lender has their own score card. This is literally a points system for each question on an application. Depending on the answer a score is given. This is used in conjunction with the information contained in your credit file. This is your payment history over the last 6 years. The score is then added up and the total is your credit score.
How to improve your score
- Make sure you are on the Voters Roll. If you are not on the Voters Roll the lender will not automatically decline your application but it will help to increase your credit score and improve your chances of getting a mortgage.
- Do not have too many credit searches done in the lead up to an application. Credit searches are normally carried our when you apply for credit. It is also quite common for car insurance companies and utility companies to carry out credit searches if you are applying to pay monthly. Too many searches carried out over a short period of time could potentially lower your score.
- Make sure you pay all your bills on time. This includes mobile phones, credit cards and personal loans. The easiest way to ensure that your payments are made is to set up direct debits.
- If you do not have any credit, it is a good idea to take out some form of credit such as a credit card. Even with a small credit limit this card can be used to pay your regular bills e.g. petrol. Ensure that you clear the balance on a monthly basis as this will help to demonstrate to a lender that you are trustworthy and pay your bills on time.
- Obtain a copy of your credit file and make sure that the information accurately reflects the financial agreements you have. You can obtain your file from one of the credit agencies listed below.
The next step is to save for a deposit. The size of your deposit will determine the type of mortgage schemes available to you and the rate that will be payable. Having a bigger deposit will give you a wider choice of lenders.
You will then need to work out what you can afford to pay every month remembering to factor in other regular household bills that will be incurred. It is important at this stage to speak to a financial expert who will help guide you through what you can afford and also help to get you a mortgage agreed in principle.