Common misconceptions about credit scores

Misconceptions about your credit score

If you’re planning to buy your first home then you’re probably saving hard for a deposit, researching suitable areas to buy and even visiting show homes.

But there’s another important factor that will affect the kind of mortgage you are able to get, and that’s your credit score.

A mortgage lender will consider your credit history and most will look at your credit score when deciding whether they can lend to you. That's why it’s important to give it some thought now and do what you can to enhance it.

When it comes to credit scores, there can be a lot of misinformation out there. But don’t worry; once you understand credit scores it is actually quite simple to boost yours.

What is my score and why does it matter?

What’s my credit score?

It’s really easy to get hold of your credit score. There are three main credit reference agencies – Experian, CallCredit and Equifax. They will all provide a copy of your credit report for as little as £2, that’s your legal right. There are other options, like Clearscore.com and Noddle.co.uk, that let you check your score and view your report.

Most will also offer a credit monitoring service for a monthly fee. If you have work to do to improve your score then this might be more beneficial  than a one-off report.

Once you know your score it’s time to improve that number so you have the best chance of getting a mortgage. We’ve looked at some of the common myths around credit scores, as well as some top tips on boosting your score.

Why does my score matter?

A good credit score can play a key role in whether or not you qualify for a mortgage, but it’s not the only thing a lender looks at. They will also factor in your income, outgoings, other debts, the value of the property itself and the deposit amount you have available.

Common credit score myths

You might assume that if you’ve never been in debt your credit score will be great. Unfortunately, that’s not always the case. Lenders may sometimes ask for evidence of you managing credit responsibly.

If you’ve not had bills in your name or used a credit card then it might be a good idea to apply for one. You can use the card for purchases that you pay off monthly.

If you are struggling to get credit, it might be worth considering a credit builder credit card. This is a type of card available to people who may not be accepted for mainstream credit. This is usually down to having a bad credit history, or no credit history at all.

Providing you make the repayments on time, this will enable you to prove you can manage credit responsibly thus boosting your credit rating.

The previous tenant has damaged my credit score

People often think their home has been ‘blacklisted’ by the poor borrowing behaviour of the previous tenant. This is is not how it works. Unless they were financially connected to you, i.e. married or with lots of joint financial product, it doesn’t matter what their financial status was.

I can’t see what a lender can see

No lender has the right to see information on you that you can’t see yourself. The information held in your credit report is the information a potential lender will access when you make an application, so you can see it in advance.

If you apply for lots of mortgages then at least one will accept

Don’t apply for several mortgages at once in the hope that at least one lender will agree. In fact, making an application for credit can temporarily depress your credit score. This can mean multiple applications prevent you from qualifying for any loan. A good mortgage broker can help you choose the lenders most likely to accept you.

Previous debts will always show

This is not true. Your credit score and credit history are intended to show lenders how reliable you are now, not whether you made a bad mistake and got into debt when you first turned 18. Information is typically held on your credit file for six years. This means you can take steps to improve your score even if you did have bad credit in the past.

How to improve your credit score

So, you know your credit score and you know you want to buy a house. How can you make your credit score better to impress a lender? Fortunately, there’s a lot you can do:

Clear your debts

While you do need to have used debt to have a decent credit score, you also need to show you can use it responsibly. If you have any outstanding debt, do what you can to pay them off. Clearing debt is a great way to improve a credit score.

Close down unused accounts

Do you have several credit cards or store cards for emergencies? Do you keep a large overdraft offering on your account even though you don’t need it anymore? The more debt you have access to the less lenders will want to lend you. Close down any unused accounts immediately.

Get on the electoral roll

No lender cares whether or not you’re politically active but they do need to know that you live where you say you live. Being on the electoral roll is an easy way to prove that and a quick win for your credit score.

Pay on time

By making payments on time, or even paying them early, you prove you’re a sensible borrower.

Check your file for mistakes

Sometimes errors happen. Don’t let one cost you your mortgage. Check your reports from each of the three credit reference agencies and make sure everything is accurate. If you find a mistake then report it and get it sorted before you apply for a mortgage.

Check your report

Regularly checking your credit score also lets you make sure that an identity thief hasn’t stolen your details and is running up debts in your name. You wouldn’t normally be responsible for a fraudster’s debts, but it could delay a mortgage application while the issue is resolved.

After you have finished checking your credit score, why not look at one of our fantastic developments across the UK, ranging from Scotland (Dunfermline, West Lothian & Inverurie), Wales (Swansea & Llanelli) and England (North Yorkshire, Harrogate & Harlow)