For most people, a mortgage is the biggest financial transaction of their lives. This quick guide is designed to help you check your credit status before you apply.
Mortgages are big business. Britons borrowed more than £21 billion against property every month between June 2005 and June 2006, peaking at more than £29 billion in May of this year.
For borrowers, the process is nerve-racking and often stressful. Will you be able to repay early? Can you defer payments if times get tough? How do you get the lowest interest rates? Is a repayment mortgage better than one backed by investments?
But 10 simple steps can help you to make the right decisions – and get the keys to your dream home. And remember to plan ahead and start doing this as soon as possible.
1. Find out what lenders know about you
Your first step is to view your credit report that details your recent loans, credit cards, mobile accounts and mortgages and contains your repayment history, showing whether you are up to date or behind with repayments. It also shows whether there are any court judgments against you or if you have been bankrupt.
Lenders look at this when you apply for credit and they are deciding whether to make you an offer and what conditions to set, such as the amount of interest you’ll pay. A good credit report is likely to result in a better offer, so it pays to be certain that all the information is up to date and that it accurately reflects your situation.
Check your credit report for free.
2. If you’re buying with somebody else, get them to check their credit report too
If you’re making a joint application, or are financially linked to a partner, it’s no good having one clean report and one that’s full of missed repayments or even court judgments. Lenders look at all the evidence to assess whether you’re likely to repay what you owe and you will both suffer if one of you has a poor credit history.
Even if you are buying alone lenders will check out your financial associate’s status too. So, it’s a good idea to take a look at all the credit reports that lenders will see before you even start the hunt for your mortgage.
3. Set the record straight
If there’s anything in your credit report that you disagree with, contact the lender that supplied the information and ask them to amend it.
If something needs further explanation, then you can add a short notice to your credit report. For example, you might have missed a couple of repayments on a loan because you were ill, but have never had a problem before or since.
4. Register to vote
As a precaution against fraud, lenders use the electoral roll to check that you are who you say you are and live where you say you live. If you aren’t registered, they may ask for further proof of identity and residence or even reject your credit application. Find out more about why you need to register to vote. You can download a voter registration form at www.aboutmyvote.co.uk
5. See if you can improve your report
Lenders usually look for evidence that you are managing any credit commitments you already have but they don't want to take on people who might already be over-extended. If you do have adverse information on your credit report, avoid credit repair organisations - if information on your credit report can be removed or altered, the credit reference agency will do it for free. And don't forget to pay your bills and credit cards on time - missed or late payments can damage your credit report.
6. Calculate the real cost
When you're calculating the cost of moving house, remember to include Stamp duty, solicitor's fees, search fees, Land Registry fees, mortgage indemnity guarantee, lender's valuation, a survey fee and buildings insurance. You should also plan ahead for bills, maintenance and taxes.
7. Do your homework
Find out what types of mortgage are available from the personal finance pages
of newspapers, specialist magazines and websites. Check out If you find the choice confusing, you can approach a mortgage broker, who will
give you informed advice. We can help you find
a mortgage professional 8. Don't leave footprints Make sure that if you are simply enquiring about a mortgage, the lender realises
you are not making a full application. If there is confusion, they could make
an application search of your credit report – and if more than one or
two lenders does this, your chances of getting a good offer might be affected.
You should ask them to do a quotation search, which will not affect your credit
status. Each full application search is recorded on your credit report – known
as leaving a footprint. If lenders see lots of them, they may think that you
are desperate for money or even that a fraud is being planned. It’s a good idea to check your credit report after making mortgage enquiries
and applications. If a lender has misunderstood and made an application search
when you only wanted information – a quotation search – then you
can ask them to set the record straight. 9. Protect your identity Your ID is vulnerable when you move house, so take every precaution. You should: 10. Keep checking your credit report Give yourself peace of mind during and after your move by checking your credit
report regularly. That way you’ll know that your ID is safe. Check your credit
report for free.
