Search: Improve your credit rating
- Check your credit hasn't been tampered with
- Tips on avoiding identity theft
- Check the best current mortgage deals
The mortgage famine shows no sign of ending and lenders remain cautious in the extreme, whether they're assessing remortgages at the end of fixed rate deals or new applications.
The good news is that it's possible to improve your chances of getting the mortgage you want. The following steps should help:
1. Work out what you can afford
Set out a detailed budget including fees, moving costs, stamp duty, council tax, mortgage repayments and major running costs such as utility bills.
Remember that we're currently suffering from quite high inflation, so factor that in. Don't be tempted to break your top limit, even if you think the property is a bargain, or you could join the 18,900 people who had their homes repossessed in the first half of 2008, according to the Council of Mortgage Lenders.
2. Do your research
There's a wealth of information on personal finance websites and newspaper supplements, as well as specialist magazines. Check them out so you know exactly what kind of mortgage deals are available.
- Compare available deals and rates
Then try price comparison sites that will match your circumstances to lenders' offers or talk to a mortgage broker. You'll find consumer advice from the Council of Mortgage Lenders at www.cml.org.uk3. Take a credit health-check
Look at your credit report ¢ it's what a lender is likely to do when you apply for a mortgage. Your credit report lists loans, credit cards, previous mortgages and other credit accounts, your payment history and other details that help lenders to decide if you can comfortably afford to repay what you owe. If you're buying with someone else, get them to check their credit report too ¢ if either one of you has had past problems, from missed repayments to a bankruptcy, it will count against you both.4. Understand how lenders make decisions
Most mortgage lenders take the information on your application form and in your credit report and allocate each item a value. The total value is called a credit score. It is designed to assess the chances that you will repay what you owe, on time and in full. The higher your score, the easier you may find it to borrow the money you need.
5. Clear up misunderstandings
Check carefully through your credit report. Look for errors or misunderstandings that could lower your credit score - for example, accounts that you have paid off that aren't marked as closed.
If you find anything, contact the relevant lender with proof and ask them to update it. If special circumstances explain problems you've had the past ¢ maybe you missed a few repayments because you were ill but have had no trouble before or since ¢ you can add a note to your report. Again, be prepared to provide proof.
6. Improve your credit history
There are simple things you can do to boost your credit score. Are you registered to vote at your current address? If not, you could be damaging your chances, because lenders use the electoral roll as a precaution against fraud, to be sure that you are who you claim to be and live where you say you do.
Do you have any unused accounts? Close them now ¢ lenders look at how much you might borrow on your existing accounts, not simply how much you have already borrowed. They also prefer to see a limited number of well-run accounts, so you might consider taking out a single, more cost-effective loan to setting up a series of smaller deals. Try price comparison sites to see what's available.
7. Be realistic
There's no point targeting a mortgage designed for someone with 50 per cent equity when you can barely scrape together 10 per cent, or applying for a deal that demands a 20 per cent deposit when you simply don¢t have the cash. Every lender targets a specific group of people with each mortgage, so make sure you fit the profile before you apply.
8. Don't send off lots of applications
It is not a good idea to fire off a series of mortgage applications in the hope that you'll get a positive answer to one of them. Every time you submit an application, the lender will search your credit report and leave a record.
If other lenders see a large amount of these, they can think you're shopping around or even that a fraud is being planned.
9. Don't despair
If you're remortgaging, you may have to accept that you'll have to pay more than you did before - but your current lender may offer you a replacement deal. If it's a first buy, or you think the time's right to return to the market after a break, and you still can't get what you want, then you have a number of options.
For example, you could wait while you save up a larger deposit, work on improving your credit history or gamble that prices will continue to fall.
10. Keep on monitoring your credit status
Regular checks on your credit report are like part of a financial MOT ¢ they let you see what you owe, how well you¢re coping and if there are any areas that need attention. If you like what you see, the chances are that lenders will too.
To view your personal credit information that lenders are currently basing their credit decisions on, apply now for a free online credit report. Click here for a free 30-day trial and a free copy of your Experian credit report
