Securing a mortgage can, at times, be challenging as lenders will refer to a borrower’s credit report to help determine how reliable a borrower you are and if you can afford to repay the money you borrow. Here are some steps you can consider to assist with improving your credit rating.
Check and improve your credit score: Obtain a copy of your credit report from checkmyfile. This provider checks data from Equifax, Experian, and TransUnion. Review your credit report for errors and dispute any inaccuracies. Pay off any outstanding debts and make sure all your bills are up to date. Establish a plan to improve your credit score over time by making timely payments.
Save for a larger down payment: A large down payment can help improve your chances of securing a mortgage. It shows the lender that you have a significant stake in the property and are less likely to default on the loan.
Shop around for lenders: Different lenders have different criteria for approving mortgages when taking your credit score into account, so it’s important to shop around and compare.
Shared ownership: The Shared Ownership scheme in the UK is a government initiative designed to help people, typically first-time buyers, get onto the property ladder. The scheme allows individuals to buy a share of a property (usually between 25% and 75%) and pay rent on the remaining share. Over time, individuals have the option to buy additional shares in the property, a process known as ‘staircasing’, until they eventually own the property outright.
Get a guarantor: A guarantor mortgage is for people who don’t have enough income to qualify for a mortgage on their own. The guarantor essentially acts as a co-signer for the mortgage, taking on the responsibility to repay the loan if the primary borrower defaults. It’s important to note that becoming a mortgage guarantor is a significant financial commitment, as the guarantor is legally obliged to repay the loan if the borrower fails to do so. Guarantors are typically required to have a strong credit history and financial stability to reassure the lender that they can fulfil the responsibility.
Provide a larger income and stable employment history: Demonstrating a stable income and employment history can make you a more attractive borrower and display to the lender financial stability.
Everyone’s financial situation is unique, and the success of these strategies may vary. It’s crucial to carefully evaluate your options and, if possible, seek professional guidance to navigate the mortgage application process.
Frequently Asked Questions
Why does my credit report matter when applying for a mortgage?
Lenders use your credit report to judge how reliable a borrower you are and whether you can afford to repay what you borrow, which is why improving your credit rating can help your mortgage application.
How can I check my credit report before applying for a mortgage?
You can get a copy of your credit report from a provider such as checkmyfile, which shows data from Equifax, Experian and TransUnion. Review it for errors and dispute anything inaccurate, pay off outstanding debts, keep your bills up to date and make timely payments to improve your score over time.
Does a bigger deposit improve my chances of getting a mortgage?
Yes. A larger deposit shows the lender you have a significant stake in the property and are less likely to default, which can improve your chances of being approved.
Why should I compare lenders if I have a low credit score?
Different lenders have different criteria for how they take your credit score into account, so one lender may approve you even if another doesn’t. Shopping around, or using a broker, helps you find a lender suited to your circumstances.
How does a guarantor mortgage work?
A guarantor mortgage is for people who don’t earn enough to qualify on their own. The guarantor acts as a co-signer and is legally responsible for repaying the loan if the borrower can’t. It’s a significant financial commitment, so guarantors usually need a strong credit history and financial stability.
Can shared ownership help if I can’t get a full mortgage?
Yes. Shared ownership lets you buy a share of a property and pay rent on the remaining share. Over time you can buy more shares, known as staircasing, until you own the property outright.
At 3mc, we have a team of expert advisers who can discuss all your mortgage requirements. If you would like to discuss your options, give the 3mc team a call on 0161 962 7800.
All calls are recorded for training and monitoring purposes. 3mc for intermediaries only.
*Your home may be repossessed if you do not keep up repayments on your mortgage. 3mc (UK) Ltd is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register https://register.fca.org.uk/s/ under reference 302992. Please note: The FCA do not regulate Business Buy to Let Mortgages.
About the Author: Doug Hall, Director at 3mc
This article was written by Doug Hall, a Director at 3mc, one of the UK’s leading mortgage packagers, distributors and brokers. Doug has over 35 years of experience in the mortgage and specialist lending industry, giving him an unparalleled understanding of the challenges and opportunities facing landlords, brokers, and property investors across the UK. A recognised voice in the industry, Doug regularly speaks at major industry events and is widely respected by lenders, intermediaries, and fellow professionals alike. His insight is shaped by three decades on the front line of mortgage distribution, working closely with the brokers and lenders who keep the UK property market moving.