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How To Detox Your Credit Score

Finance|07 January 2019

When it comes to applying for a mortgage to buy your new home, your credit score will have a big impact on your mortgage application. Ensuring your score is high and your credit file is attractive to lenders will improve your chances of getting a mortgage.

What is a credit score?

A credit score is a rating calculated by a lender based on the data available in your credit file. Your credit file is a record of all your financial applications and contracts. It also takes into account how often you’ve moved home, your marital status and whether you own or rent your home.

Maintaining a healthy credit score is vital if you’re going apply for a mortgage to buy your new home, so here’s our tips for detoxing your credit rating and making yourself more attractive to lenders.

Tips for increasing your credit score

1. Proof read your credit file

Mistakes can happen, and on your credit file these mistakes could be the difference between being accepted for a mortgage and being refused. You can view your credit file for free or for a small fee using one of three services: Experian’s Credit Expert, Equifax’s Clear Score or TransUnion’s Noddle.

Go through all the information on your report and ensure it’s accurate. If you come across anything that isn’t correct, for example an old address on a current credit card or bank account, make sure you update this straight away. If you come across any unfair defaults, you need to dispute this with the lender who added this to your file.

2. Disconnect from financial partners

If you took out a joint account or mortgage with an ex-partner, you become financially linked to that person. If they have a bad credit score, this can impact yours. Inform the credit reference agencies that you are no longer associated with this person and ensure that your details are removed from any existing accounts and cards that are still in use by your ex-partner.

3. Register to vote

Whenever you move home, you will need to be added to the electoral roll for your new address. If you haven’t informed Electoral Registration Office of your change of address and you try to apply for credit, this will have a negative impact on your credit rating. Being on the electoral register is a way of proving that you are who you say you are and that your address is correct, so if you haven’t updated it then lenders are likely to think you are trying to commit fraud.

4. Close all unused credit accounts

As part of your mortgage application assessment, lenders will consider how much credit you have access to in addition to how much debt already have against your name. By closing all unused credit accounts such as store cards, mobile phone contracts and credit cards, you are reducing the credit you already have access to, making you more of a sound choice in the eyes of a mortgage lender.

5. Keep up with existing credit payments

Missing a credit payment, such as a minimum monthly credit card payment or not paying your Sky bill on time, will be on your credit file for up to six years. If your missed payment was out of your control, for example the direct debit didn’t set up in time, and your payment was promptly made after then talking to the lender can sometimes get the black mark taken off your credit file.

6. Settle your debts

If you are able to, pay off more than just the minimum payment on credit card and loan debts each month, as this signifies positive behaviour. A mortgage lender seeing you are paying off more than the minimum shows that you are less likely to default on payments in the future and are managing your debt in a healthy way. It will also reduce the amount of short term debt (loans, credit cards, etc.) that you have on your credit file faster; another positive for potential lenders.

7. Build a positive credit history

Having no credit history can be as negative as having a bad credit history in the eyes of a mortgage lender. A mortgage is a significant amount of credit and the lender needs to be able to see your past behaviour towards credit to determine if you can be trusted to repay it on time and in full.  Ways to build up your credit card include taking out a monthly mobile phone contract in your name, and having a credit card which you can use to buy a few things per month and pay the balance in full at the end of the month. Showing you can make regular payments and don’t have any short or long- term debt are good ways to build a positive credit score ahead of your mortgage application.

8. Leave time between your credit applications

While credit reference agencies aren’t told if you are refused for credit, they can see when you’ve applied. If you apply for a credit card and get refused, then immediately apply for another one, and another one, they can connect the dots and assume you didn’t get accepted for the first few you applied for. Leave time between applications for credit, and even try to assess your chances of approval before applying to ensure you don’t have to apply for several.  

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