Tips for building your credit for a mortgage

Published on
July 02, 2024

A good credit score goes a long way towards getting accepted for a mortgage. Good credit indicates to lenders that you are a reliable borrower and, therefore, that you’re likely to make monthly mortgage payments on time. With the different obstacles there are currently to getting on the property ladder, building your credit score is one of the easiest things within your control to increase your chances. Here are some tips for building your credit for your mortgage.

1. Register To Vote

This is perhaps the easiest step to building your credit score. Registering to vote means you are tied to an address, and lenders can verify your identity. Essentially, it’s a sign of stability. Registering to vote can add as much as 50 points to your credit score.

This could mean the difference between a good and excellent credit score for some people, which could, therefore, open up more options for better loan rates, credit cards, and mortgages. This all helps you get approved to mortgage a property.

On top of this, applying to join the electoral roll can be completed quickly online.

2. Pay Bills By Direct Debit

Missing bill payments can negatively impact your credit score by pushing it to lower. One way to avoid missing any bill payments is to pay by direct debit. Simply select this option for all your regular bills, and you won’t have to worry about manually paying each month. 

3. Review Your Credit Report

bills and debt graphic

The best way to see the health of your credit is by using a credit reference agency. Experian, Equifax, and TransUnion are the three main ones that offer this service. Regularly checking your credit report, especially before making big decisions like applying for a mortgage, will help you monitor your credit rating and understand if there are any more adjustments you need to make to boost it.

Performing a credit check is also very quick and free of charge online. 

4. Show You Can Manage Debt

Lenders like to see that you are able to manage debt responsibly. But if you have never borrowed money before, you won’t have any evidence to prove this, which could cause you to have a low credit score.

One of the best ways to prove that you are a responsible borrower is by getting a credit card. It could be for something as low as making regular petrol payments with this credit card and paying it back on time every month.

It may take a few months to start building up your credit, but as long as you’re consistent with paying back the balance each month, it will positively impact your credit rating. You’ll really know your credit score is growing when your bank offers to extend your credit limit.

However, you should always be cautious of how you use your credit cards. Misusing them can negatively impact your credit score. You’ll also need to carefully read the terms and conditions of the credit card you choose to take out. For example, some credit cards have very high interest rates. But if you ensure you pay back your card in full each month, you won’t be subject to paying the interest.

When taking out a credit card, you should accurately assess what you can afford. You should avoid borrowing more than you can manage to pay back, as that could damage your credit rating.

5. Keep Your Credit Utilisation Low

Your credit utilisation is the percentage you use for your credit limit. To illustrate this with an example, if your credit limit is £2,000 and you have used half of it at £1,000, your credit utilisation is 50%.

Just because you have a particular credit limit, it doesn’t mean you have to use it to the max. In fact, a lower credit utilisation percentage is usually a good sign to lenders and is therefore more likely to impact positively on your credit score. 

6. Check Your Financial Links

couple looking at credit card

Having a joint account open with someone else can also impact your personal credit score – both positively and negatively. For example, when taking out a mortgage with someone, you should be aware that the person’s credit score may be checked in the process and when you may be applying for credit in the future.

You should check if you are still financially associated with someone you shouldn’t be, such as an ex-partner. Ask to break any outdated links so you are confident that anyone you are currently financially associated with at the time of applying for a mortgage is the right person.

The Homebuyers Club is a community of home buyers. Connecting with other like-minded people can provide you with the support you need on your journey for tips for building your credit for a mortgage. For example, you will get access to an “understand & improve your credit score” guide. Join the Homebuyers Club here. 

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