After the 2008 mortgage bubble and crash, mortgage companies have been under a greater duty to make sure that borrowers are able to pay their monthly payments even if mortgage rates increased significantly. This means that more detailed enquiries will be made to confirm your household income, expenditure and the reliability of your cashflow.

In addition to stress testing the borrower’s finances, the lender will undertake ‘credit checks’ to establish a borrower’s credit history including any evidence of bad debts or loan defaults. Credit checks are now quite sophisticated. Your age, employment details, where you live, who you bank with and for how long, whether you borrow money elsewhere and if you pay it back as agreed; all of these things are considered in an effort to ‘profile’ your likely risk and your profitability to the lender. For example, if you are not registered to vote or you have never borrowed any money or entered any contract for a utility, this will affect your credit rating.

Knowing your budget and living within it is good practice for all of us, but if you have a phone contract, a credit card and a broadband bill and you pay them regularly, on time, this will all help to improve your credit profile. Make sure you don’t apply for credit you don’t use as every application is noted and if you don’t take up credit (or it is refused) a lender may draw conclusions that are harmful to your score. Obviously, judgements against you in court (only for credit related matters or fraud) are likely to be detrimental to your score, although criminal records cannot be searched by lenders, They can, of course, ask you and you must not lie.

Many UK lenders use one of the main credit agencies such as Experian, Equifax or Call Credit, with Experian being the most widely used for mortgage applications. These agencies collate a picture of your past credit history to better predict your future behaviour.

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