Knowing what a credit score consists of is the first thing. All mortgage lenders have their own credit score which designed to capture business which fits their lending profile.
The exact methodology is secret but we know that in broad brush terms the score is arrived at by considering the following;
- Your payment history. In other words, do you pay your monthly bills? This information accounts for a good % of your credit score. If you think about it, this is pretty obvious. After all, who wants to lend money to someone that has a track record of not paying their creditors!
- Another % of your score relates to your borrowings and more specifically how much you are borrowing against the total credit limits you enjoy.
- Part of your credit score comes from things like the age of your credit history. In other words, how old is your oldest bank account? do you have mature loans that you’ve held for some time? Do you have mature savings accounts?
- How close are you to your credit limit on your credit cards?
- Do you have any bad credit? I.E. whether you have CCJs against your name (County Court Judgments) or defaults.
- What % deposit do you have towards the property (the higher the better)
- The final part of your score is based around stability and lifestyle, are you on the Electoral Register? How many addresses have you had in the past few years? Are you married? Self Employed or Employed etc
However, scoring varies amongst the banks and Building Societies and and there are many additional sources of information that are weighted differently between mortgage lenders.
If you are a well paid, self-made business person you might have more wealth than your neighbour but if your income relies on self employment you might find yourself getting less points than you might expect. Lenders like stability and they generally equate that with long term employment.
Taking into account all of the above, it may surprise you to find that having a mortgage actually increases your credit score, especially once a few years of regular payments have gone by and more especially if your home’s value is growing. Your mortgage becomes an asset, in credit terms at least.
If you need to check your credit history consider contacting one of the major credit agencies like Equifax, Experian or Call Credit - or view this short video for more information.
For more information contact us or speak to a mortgage adviser on 01628 507477.
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