We all know that a good credit rating opens doors for us. From getting a good mobile phone contract to a new car, it’s important to demonstrate that we’re “good for the money”. Fewer of us realise, however, that a poor credit rating can sink our chances of a decent mortgage deal before we even start.
A survey conducted by credit provider Vanquis, aimed at finding out how much the UK understands about credit, also found that 20% of the UK populace has been refused credit. Half of these people will go on to be declined for a mortgage. When it comes to the 24-35 age group, around 25% have been denied credit.
Eyes off the prize
This younger demographic doesn’t check its credit rating enough, with more than half never checking it. The national average for never having checked is 43%.
A significant proportion of the people denied credit in the past – 10-16% – will go on to fail in their mortgage applications. The real shame is that had they checked their rating, they could have taken steps to improve it, and their chances, before it was too late.
The myths around credit
The survey found that many people didn’t want to check their rating as they believed it would make it worse. Others believed that not having any credit ever would improve their rating. Both of these beliefs are wrong!
Another persistent myth is that applicants can’t ask why they’ve been refused credit – they can.
Many people think that being on the electoral roll doesn’t affect your credit rating when it does, and others think that utility bills and mobile phone contracts don’t count, when they do.
How to fix it
First things first – do you need to improve your credit rating? Many people only find out about their poor rating when their dream house slips through their fingers, so don’t be one of them! Find out what your score is and if it needs upping, get on the case.
Get yourself on the electoral roll if you’re not already, pay all your bills on time or even before and pay down any existing debts. Potential creditors like to see people who pay their debts on time and regularly, even if it’s in small increments.
Mortgage lenders want to see that you have not just the means, but the will, to meet your monthly payments and having a good credit rating helps to give that impression.
If you need any help or advice, then an independent mortgage broker can provide this and may prove invaluable if your circumstances are challenging.« Back to Latest News