How to clean up your credit file when applying for a mortgage

If you are thinking about applying for a mortgage, it makes sense to be sure that your credit profile is as good as it can be. By following the tips we have put together here, you can be sure that there will be no surprises for you or your lender.

• Check your credit file. This is something you should do regularly anyway, but it is even more important before you apply for a mortgage. For a very small fee, you can obtain copies of your file from the credit reference agencies, Equifax, Experian and Callcredit. This will let you check that the details they hold are up to date and correct. If any details are wrong, such as showing that you have missed a payment when you haven’t, ask for the file to be corrected.
• Set up direct debits. If you have regular outgoings, such as mortgage payments or utility bills, set up direct debits to pay them. Not only will this make it easier for you to manage your money and reduce the chances of you missing any payments, it lets lenders see that you are organised and committed when it comes to paying bills on time.
• Settle outstanding debts. If you have missed any payments for anything, get the account up to date as soon as possible. If your credit file shows that you haven’t stuck to an agreement, your credit score could well be reduced as the lender may see you as a higher risk.
• Get on the electoral register. Make sure you are properly registered at your current address, as all lenders have to verify your identity in order to comply with money laundering regulations and prevent identity theft. If you aren’t on the electoral role when you apply for a mortgage, the lender may reduce your credit score or even reject your application altogether.
• Don’t make lots of applications. In the months or weeks before you apply for your mortgage, make sure that you don’t apply for lots of other things, like loans or credit cards, which require credit checks. Every time you are credit scored it is recorded on your file, and lenders may see a lot of credit checks in a short time as a sign of someone who might be struggling to manage their money. If you see credit checks on your file that you don’t remember, ask for them to be removed.
• Check any related accounts. Your own credit file might be clean, but it is important that your partner or anyone else who is applying with you checks their file in the same way as any adverse information will also affect your application.

How to clean up your credit profile when applying for a mortgage

In order to maximize your ability to get the best interest rate possible, you need to know how to clean up your credit profile when applying for a mortgage. Improving your credit rating can make a tremendous difference in your ability to get a good interest rate and good terms on a mortgage. Your credit profile is the picture of your credit risk used by lenders to determine your likelihood of repaying a loan. There are some simple things that you can do, even in the waning moments before buying a home, to clean up your credit profile.

First, check your credit file for anomalies. There are actually three main credit agencies that are commonly used by lenders and other entities who want to know your credit rating. The items in your credit, such as your loan balances, repayment history, late payments, and other factors are reported on and updated by creditors you have been involved with. Some creditors are more prompt than others at updating records. Additionally, there are mistakes that do occur. Perhaps a false late payment was reported. Maybe there are loan balances still showing on your credit profile that you no longer have. It is important for anyone wanting to get the best mortgage rate to be sure to check your credit to make sure you are getting the rate you deserve.

Another important and often overlooked factor that contributes to your credit score is your placement on the electoral roll. To some people, properly registering to vote is more of a political and civic responsibility. However, lenders want to be sure, just as you do, that your credit profile is accurate and up to date. This means that it shows your current address and provides proof that your profile is current. The three credit agencies purchase the updated lists of the electoral role at the end of each year to create the current snapshot for your profile. Some lenders will decline a mortgage application simply because the applicant is not listed on the current electoral role. Their feeling is that your credit profile may not be current if you are not on the role.

The most important thing to keep in mind is that the credit reporting process is not without flaws. Although it serves as a fairly reliable method for creditors to assess your credit risk, there is potential for errors in reporting. Ultimately, you want to get the full benefit of the work you have performed in establishing good credit. A good general rule is to take a look at your credit report at least once a year and make sure that all of the information is accurate and current.

Remember these key points to understand how to clean up your credit profile when applying for a mortgage:

• Check your file for anomalies
• Make sure all of your information is accurate and updated
• Make sure you are on the electoral role as lender’s consider this factor

Clean Up Your Credit Rating

When applying for a mortgage, you’ll have to become intimately familiar with the contents of your credit report. If it’s not up to date, it can be a real headache to try and get things sorted, and may stop you from getting the mortgage you want.

Here are seven tips to help you clean up your credit rating before you apply for a big loan:

1. Get your file.
First and foremost, you need to know what your credit rating says before you can try to improve it. You have a legal right to get a copy of your report from the three big bureaus (Experian, Call Credit and Equifax), so get in touch and make sure you’re well-informed about how you stand – it costs around £2, so it’s not a big outlay. Remember that each of the major rating companies uses a different system, so you won’t end up with just one universal score.

2. Make sure your details are correct.
Once you’ve got your file, go through it and make sure everything is up to date. This stops you being negatively affected (in case of an error not in your favour) or accused of fraud (if you don’t declare a false piece of information that would improve your credit rating).

3. Know what is and isn’t included.
Generally speaking, your credit profile is based on how well you’ve paid off loans you’ve had in the past, the amount and type of credit you currently have, and whether or not you’ve applied for credit at other institutions that are still pending. It’s very rare for your credit score to be affected by your age, race, gender, how long you’ve spent at your current job, your current income, your level of education, your marital status, geographic location, how long you’ve lived at your current address, and whether you own or rent the property you currently call home. That’s not to say that lending companies won’t look at these separately, of course, but the details that actually make up your credit report should be a top priority.

4. Make sure you’re on the electoral roll.
This is how credit reference agencies get your address. If you aren’t on the roll, this can cause a great deal of unnecessary fuss, which could slow your application down considerably.

5. Close any credit accounts you don’t use.
You credit rating is based partly on the amount of credit you have available, not the amount of credit you’ve actually used. If you have a credit card with a maximum balance of £2,000, it doesn’t matter if you’ve only used £50 of that credit – it counts as £2,000 worth of credit. Pay off any accounts you don’t use before you apply for a mortgage, and your credit report will look a lot cleaner.

6. Dissociate yourself from bad influences.
If a relative of yours has a bad credit rating, this can occasionally impact on you. If you have no legitimate financial connection to them (for example, parents to a grown child), you can ask to be dissociated from them. This can have a positive knock-on effect.

7. Pay bills on time.
This is one to make sure you’ve got sorted a while before you apply. When moving house, debts can sometimes mount up – but it’s important that you keep on top of them. Just one missed bill can have a negative effect on your credit report and, while there’s not a lot you can do if it’s already passed, but it’s one to watch out for. The same goes for making sure you don’t get an unauthorised overdraft, or anything else that might incur bank fees.