HOW YOUR CREDIT REPORT AFFECTS MORTGAGES
financial history.
Your credit report is your personal financial history. It includes a wide range of information on your credit
behaviour, from your credit cards and loans to your repayment record, previous mortgages and details of
overdrafts.
The report also confirms whether or not your name is on the electoral roll at your current address and how many times your credit report has been searched.
Credit reference agencies – Experian is the UK’s largest hold this data on more than 40 million people and 24million households.
So it’s likely that they have information about you.
When deciding whether or not to give you a mortgage, the mortgage lenders look first at the details on your
application form. If you don’t fit their criteria for being offered a loan, they are unlikely to search your credit
report.
Typical deal-breakers include being too young, insufficient current earnings or too short a self-employment
history.
They may then look at any previous relationship that you may have had with them and how you conducted it.
The next step is to search your credit report. A lender may use this information to help create your credit score, by comparing you to past customers with similar characteristics. The result is a numerical assessment of how good a credit risk you appear to be. Normally, the higher your rating, the more likely the company is to lend you the money you want.
Getting a copy of your report before you apply for a mortgage will allow you to check that the information it
contains is accurate and up-to-date.
For example, if you had a court judgment against you but have paid the debt, you should make sure the record reflects this. Equally, if you paid off the debt within one month, the judgment can be removed from your report.
Or perhaps the fact that you registered to vote has been missed and your name has not been confirmed on the electoral roll. In this case, you should let Experian know.
They will investigate and amend their records accordingly.
If you believe that some of the information on your credit report needs further explanation, Experian will help you to add a brief statement or Notice of Correction to your report.
This will be seen and may be taken into account by any lender using the information to which it relates.
Lenders turn down roughly one-third of all mortgage applicants. If you are one of the unlucky ones, you should be given an explanation. If not, ask for some guidance.
For example, you may not be offering enough deposit or appear to be carrying too much debt from other sources.
It may be that your credit report rang alarm bells, perhaps because you had missed some payments on a previous loan.
You can always appeal against the decision and ask the lender to look at your application again. This may give you chance to provide further information. For example, your poor credit record may stem from a one-off event that no longer applies, such as a serious illness or enforced redundancy.
Finally, there’s nothing to prevent you applying for a mortgage from another company. Different lenders may
take a different view.
But be careful how many applications for credit you make in the short term.
If you allow a significant number of companies to search your credit report, this could damage your credit rating as it could be interpreted to mean that you are desperate for money or possibly that someone is trying to commit fraud.
If you know that you have been refused credit because of your credit report, it is always sensible to check it before making any further applications.
Following all the above tips could turn your dream home into a reality.
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