How can I improve my credit score?

So, you’ve set your sights on a housewarming party and a mortgage is the key that unlocks the door. But a less-than-perfect credit score might be dimming the lights on your dream home. Fear not! Here are some superhero moves you can make to improve your credit score and increase your chances of mortgage approval.

1. Check Your Credit Report: Knowledge is Power

The first step is understanding where you stand. You’re usually entitled to one free credit report a year from each of the three major credit reference agencies in the UK: Experian, Equifax, and TransUnion. Scrutinise these reports for any errors – incorrect information can bring down your score. If you find mistakes, contact the relevant creditor and credit reference agency to get them rectified.

2. Pay Your Bills on Time: Be a Payment Superhero

This might seem like a no-brainer, but late payments are kryptonite to your credit score. Set up direct debits or standing orders to ensure your bills are paid consistently and on time. Every month of on-time payments counts towards points earned in the credit score game.

3. Don’t Max Out Your Credit Cards: Keep Your Borrowing in Check

While credit cards can be convenient, using them to their limit can be a red flag to lenders. Ideally, aim to utilise less than 30% of your available credit limit. This shows you can manage credit responsibly and aren’t living beyond your means.

4. Become a Credit Card Master (if Used Wisely):

Using a credit card responsibly can actually improve your credit score. Here’s the trick: Make small purchases throughout the month which you have the cash for and would normally pay upfront. Then pay them off in full before the statement arrives. This demonstrates your ability to handle credit and repay what you borrow.

5. Register on the Electoral Roll: Be Credit Score Savvy

Being registered on the electoral roll shows lenders you’re a responsible citizen with a stable address. It might seem like a small step, but it can give your credit score a little boost.

6. Get Help from a Responsible Credit User: Team Up for Success

If you have a limited credit history, becoming an authorised user on someone else’s credit card (with their permission of course!) can sometimes be a good strategy. Just make sure it’s someone with a good credit history who pays their bills on time. Their positive credit behaviour can reflect on your own report.

7. Patience is a Virtue: Building Credit Takes Time

Improving your credit score takes time and dedication. Don’t get discouraged if you don’t see a dramatic change overnight. Keep at it with these responsible credit habits, and you’ll gradually see that score climb.

Can You Get a Mortgage with Bad Credit? Here’s the Honest Truth

Let’s address the elephant in the room: it is possible to get a mortgage with bad credit. While lenders prefer borrowers with a strong credit history, there are mortgage options available for those with less-than-perfect scores.

Here’s the catch:

Higher Interest Rates: Mortgages for bad credit typically come with higher interest rates, because lenders deem you to be a higher risk borrower based on your credit history. This means you’ll pay more in interest compared to an applicant with a better credit history.
Limited Availability: The selection of mortgage products for bad credit might be smaller compared to those with good credit scores. It doesn’t mean there will be no options – just fewer.
Larger Deposit: You might need a larger deposit (around 20-30%) to qualify for a mortgage with bad credit. This won’t be the case with all lenders, though a larger deposit may help towards alleviating lenders of the risk they think you pose.

Getting Your Foot on the Property Ladder – Even with Imperfect Credit

While a bad credit score might not land you the best mortgage deal straightaway, it doesn’t have to stop your homeownership dream entirely. Here’s why:

Building a Positive Payment History: Once you get a mortgage, make sure to prioritise your monthly repayments. On-time mortgage payments are a fantastic way to demonstrate your creditworthiness and improve your credit score over time.
Refinancing for a Better Deal: As your credit score improves, you can explore refinancing your mortgage to a product with a lower interest rate. This can save you a significant amount of money in the long run.

Don’t Let Credit Score Discouragement Hold You Back!

At The Invested Mortgage Broker, we understand that everyone’s financial journey is unique. We can help you explore all your mortgage options, including those for bad credit. We’ll work with you to develop a plan to improve your credit score and potentially secure a better mortgage deal down the line.

Don’t wait for a perfect credit score to start your homeownership journey. Contact us today for a free, no-obligation chat! Together, we can turn your dream of homeownership into a reality.

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