Tips from the top of the Pagoda
1. Understand your credit score
Your credit score is a number that tells mortgage lenders how well you manage your money – and therefore how likely you are to pay up each month (which is ultimately their key interest). A good credit score is a sign that you’re using a mix of credit types and making repayments on time.
You can quickly and easily check your credit score using a website like Checkmyfile.com, which collates data from Experian, Equifax and TransUnion (the three main credit reference agencies) and gives you a number between 0 and 999 – the higher your number, the better. All three credit reference agencies have different numbering systems, but wherever you check it, very roughly, a score of over 620 is solid. In any case, seeing the number with your own eyes is the easy bit. The trick to getting a mortgage is understanding what you’re seeing, and acting accordingly. There’s always room for improvement.
2. Swiftly sort your ‘critical factors’
Wherever you’re checking in – either through a comprehensive credit score website or directly through individual agencies – you’ll usually get some guidance on areas of improvement and any ‘critical factors’ affecting your score.
The quickest, easiest ones to sort out are:
- Get on the electoral roll! The whole thing simply doesn’t work properly without it. Head here to register; it takes five minutes.
- If you have any missed or late payments on your report, there’s nothing you can do about those, but do focus on making full repayments on time from hereon in. Bit by bit, it’ll help!
- Get to know – and manage – your CUR (credit utilisation rate). More on this shortly.
3. Get a shiny new credit card (or, definitely do not)
Most of us have heard stories about people who had low credit scores and were denied mortgages, even though they’d never had any credit card debt before. It seems counterintuitive of course, but lenders simply need to see that you know how to borrow money sensibly. So, if you don’t have a credit card, you may want to consider getting one. However, if you’re close to making an application for a mortgage, do not get a new credit card! The hard searches on your file will send your credit score down, not up. And the impact will last for a good year.
4. Carefully manage your credit
Back to that CUR then. Lenders are very interested in your credit utilisation rate: how much of the credit available to you are you using? Keep that below 30% at all times. So, If you have a credit card with a £2,000 limit and a balance of £500, your utilisation rate is 25%, which is great (as long as you keep making those repayments on time). You may not even have paid that much attention to the credit limits on your cards before, simply because you haven’t needed to, so now’s a good moment to do that.
5. Do your own sums
Knowledge is power! Do the sum and do the sum again. The more you know about what exactly you can afford to borrow, the better. Lenders care about everything – how much deposit you have, how much debt you have, how stable your job is, and, yes, potentially, how many oat flat whites you buy on your way back from tennis. Lenders’ affordability checks can be tricky beasts, involving anything from requests for additional documentation to a full interview, so you need to be ready. You want to make as few killer, well-informed mortgage applications as possible, not 15 average ones. But that’s what we’re here for! If you’re at this stage, it is not too soon to reach out – let’s gather your ducks, and force them into a row together.
6. Stay in your job (unless the move is worth it)
A new job is absolutely not a deal breaker – we know lenders that will be perfectly happy with a contract and one single payslip, but it is worth bearing in mind how much lenders love stability. If you are in a new job, they’re likely to want you to have been in it for six months before you make an application, so they can be sure you’ve passed your probation. Just bear all this in mind when you’re making decisions – but do give us a ring for no-obligation mortgage advice if you have any specific concerns about new jobs and timings.
7. Talk to Pagoda – sooner rather than later
Of course, the best way to be mortgage-ready is to have a really good mortgage broker who can help you through all of the above and more. The earlier in the process you get in touch with Pagoda, the more likely we can make a beautiful, frictionless mortgage application together. Shall we?
*This blog contains information that was correct at the time of publication, but is subject to change.