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How to improve your credit score

When submitting your mortgage application, your lender will consider your credit score. A strong credit score helps to improve the chance of your application being approved.

Don’t know your credit score right now, or nervous it’s too low? We’ve created a simple checklist to help you improve it.

What is a credit score?

A credit score is a three-digit number that is used to demonstrate how financially reliable you are to a lender. It’s based on a number of factors, predominantly your credit history, including how timely you are at paying off your bills. A low score indicates a higher risk to lenders, whereas a higher score indicates a lower risk.

What is a good credit score?

As each credit reference agency uses a different numerical range, there is no set figure for a ‘good’ credit score. There are three credit reference agencies: Experian, Equifax and TransUnion.

Experian’s credit score is out of 999 and they deem a good credit score to be upwards of 881. Equifax’s credit score is out of 700 and upwards of 420 is classed as good. TransUnion’s credit score is out of 710, and a good credit score is classed as 604 and above.

What credit score do I need to buy a house?

As the figure for a good credit score varies between credit reference agencies, there’s no set credit score you need to buy a house. So rather than focusing on one specific number, you should simply do everything you can to improve your credit score to make you, and your application, more appealing to a lender.

It is important to remember that a good credit rating is not enough to guarantee a mortgage offer, affordability and other criteria are key too.

How can I improve my credit score?

Use a credit card and pay it off regularly

It’s often a false assumption that spending money on your credit card can negatively impact your credit score. In fact, the opposite is true. The best way to use a credit card to improve your score is to spend on it little and often, ensuring you pay your credit card bill regularly when it is due. This then signals that you are a reliable investment for a lender, improving your credit score.

Register to vote

Registering on the electoral roll can improve your credit rating as your electoral details are adding to your credit report. This allows lenders to confirm the legitimacy of your name and address details, boosting your credit score as a result.

Pay your bills on time

Paying your bills on time signifies that you can be relied on to return owed credit on time, and therefore boosts your credit score. Missing a payment can be detrimental to your credit score. It is important that you talk to your providers if you are struggling to make payments.

Make sure all the details on your report are correct

Mistakes on your credit report can impact your score, so it’s important that you go through your report to pick up on and amend any errors. Once the mistakes are resolved, your credit rating may improve as a result.

Understand how to use credit

If you have low available credit, prospective lenders may see this as a sign that you’re not successfully managing your finances.

While regular credit card transactions (when paid on time) can improve your credit rating, it’s important to emphasise that this does not mean utilising your entire credit limit each month. In fact, using less of your credit limit makes you appear more trustworthy to lenders and helps lift your credit score.

Pay off debt

Before applying for your mortgage, you may want to pay off any outstanding debt that you may have. This will both improve your credit score and ensure you minimise any chance of a lender deeming you as a risk.

How long does it take to build my credit score?

A credit score can be built in around three to six months. However, if you’re trying to improve a low credit score, it will typically only improve a few points each month. The sooner you can implement some of the suggestions above, the better.

If you are unsure as to how your credit score will impact your lending ability, book an appointment with one of our mortgage advisers. They will help you find a mortgage tailored to your personal circumstances.

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