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HomeMortgage Help GuidesImprove your credit score for a mortgage

Improve your credit score for a mortgage

Last updated on 10th August 2023 by Martin Alexander

If you’re planning on getting a mortgage, improving your credit score before applying can certainly help. Doing so can help your chances of approval, but a healthy credit score can also give you better rates.

It’s also important to understand that when you apply for a mortgage, your credit score is only part of your mortgage application. Lenders interpret credit checks differently, so having an excellent credit score won’t guarantee a mortgage. Nonetheless, boosting your credit score can provide many benefits.

How does a credit score affect a mortgage?

When you apply for a mortgage, lenders will check your credit score. Your credit score gives lenders an indication of whether or not you’re reliable with repayments. A mortgage is a loan that has to be repaid, so lenders need to know if they’re likely to be repaid or not.

A great credit score will be a tick in the box. A bad credit score can result in mortgage applications being declined. That said, a great credit score won’t guarantee a mortgage. It’s also possible to get a mortgage with a poor credit rating.

Having a good credit score will always be advantageous. Excellent credit scores usually open doors to other forms of finance and can be secured at lower-than-average rates. This is because you’re deemed to be a reliable borrower. A credit score can determine whether or not a lender will lend to you, how much they’ll lend, and at what interest rate.

How can I improve my credit rating for a mortgage?

It is recommended that you improve your credit history before applying for a mortgage. This is especially true if you have previously had credit issues.

Lenders will likely not acknowledge historic issues, such as defaults that occurred ten years ago. However, if your credit issues are more recent, you can take the steps below to fast-track your credit score recovery!

Read more: What credit score will I need for a mortgage?

Check your credit report

First things first, download a copy of your credit report. Downloading your credit report won’t leave a footprint of any kind. A footprint is only left when you actively apply for credit.

There are three leading credit agencies in the UK. They are Experian, Equifax, and TransUnion. Most lenders use Experian and Equifax, with fewer lenders using TransUnion. We’d advise you to download reports from all three agencies as they can show different records.

Make sure your credit file is accurate

If you notice any discrepancies or incorrect information on your credit reports, then be sure to inform the credit agency. Also, check that your information is all relevant and up to date, including personal details and account information. Look out for anything that seems suspicious and notify your creditor immediately. Identity fraud is a problem, and many people aren’t aware until they’re affected.

Take control of your finances

The chances are you already have a bank account. If you don’t, then create one as soon as possible. You need a credit card or a credit facility to build up your credit history. No credit history will result in no credit score! How can a credit agency give you a score if they have no credit information for you?

You’re reading this because you want to improve your credit score, so you’ve probably already got bank accounts and have used credit cards, but at some point, a financial dip has caused your score to drop. Even having a bank account and not using your overdraft can show credit agencies that you’re financially stable.

Make sure your credit is repaid on time. Making payments on time can improve your credit score. If your credit history shows late payments or CCJs, your credit score will be downgraded. A year of keeping your finances in shape can make all the difference in being approved or declined a mortgage.

Register on the electoral roll

Being registered on the electoral roll is crucial in improving your credit score. If you’re a British citizen, this should be pretty straightforward. Being on the electoral roll is a must, as lenders will check to see if your given address is the same as your registered address. It’s also easier for lenders to confirm your identity.

Discrepancies in where you reside can have implications that can be avoided. Registering on the electoral roll is perhaps the easiest and most effective way to control your credit file. Your address history is also important for anti-money laundering regulations.

Show that you’re reliable with credit

If you’re bad with credit, this might sound like a bad idea, but using more credit facilities can help to improve your credit score. This is because active credit enables you to make repayments. Lenders love to see previous borrowing history and how you’ve managed repayments. Don’t overdo it, as too many accounts with a lot of outstanding credit will have an adverse effect.

If your credit is very bad and you can’t take out any more credit, try smaller forms such as mobile phone contracts. You can also try using credit cards designed for adverse credit.

Adverse-specific credit cards will have higher rates if your credit score is low. However, if utilised correctly, they can be a great way to improve your credit score. Ensure your card is used monthly and the balance is repaid on time. The longer you have a well-managed account, the more it indicates you’re responsible for credit.

Close unused accounts

If you have credit cards that you don’t use anymore, close the accounts. Lenders may consider other forms of credit that are available to you. Having multiple credit cards that aren’t managed well won’t help you improve your credit score, but having a few accounts that are squeaky clean will!

If you aim to get another credit card because of adverse credit, it may be a good idea to reshuffle your finances and close unused accounts. Stick to a few well-managed accounts, as the fewer accounts you have, the better.

Be cautious when applying for credit

Making multiple credit applications isn’t healthy for your credit score. It also shows lenders that you’re too reliant on credit, which may portray you to be financially unstable. Credit should only be used to supplement your finances, not dictate them.

Having available credit shows lenders that you don’t need to rely on credit, but it’s there for you to use. If you always maximise your credit allowances, your limit will be restricted. This can be a warning light for lenders and will reflect in your credit history.

Settle any outstanding debt

Settling any outstanding debt can show lenders you’ve taken some financial responsibility. Outstanding debt will stay on your credit report. Although credit history usually reflects the last six years of your financial profile, settling debts can speed this process up. A settled debt shows financial recovery, whereas unsettled debts can cause concern for lenders.

If you’ve lived abroad

If you’ve lived abroad and have more credit history in a different country, you can request your credit history from an overseas credit agency. This can be important if you’ve not been in the UK long and wish to apply for a mortgage. The overseas credit agency can transfer credit information to a UK credit agency.

About the author

Martin Alexander
Senior Mortgage Advisor

Martin is a senior mortgage advisor who has held a CeMAP qualification for over 15 years while completing an MBA in Global Banking and Finance.