Getting a mortgage can be hard these days. Especially since lenders made their requirements stricter after the housing and economic crisis. They used to lend to almost anyone, but now things are much harder. One thing that could impact your ability to get a mortgage is your credit rating. In this article, we’re going to look at a few important tips to help improve your credit rating so that you can start getting the accepted for financial instruments like mortgages. Many of these tips will also help you fix your credit rating for other reasons. So whether you want to start getting a mortgage or you simply want to fix your credit rating, this article can help.
Your credit rating is a measure of how responsible you are for money. It’s what lenders and banks look at to see how risky a proposition lending money to you will be. It’s made up of a lot of different factors and gives them an overall score to let them know how good you are with money. Your credit file might also have other information in it, like if you’ve defaulted on debts or missed many payments. If you have other personal finance disputes, this could also be a problem. You might want to look at getting a settlement in this scenario, so that you can start to move forward.
What affects your credit rating?
All sorts of things affect your credit rating. Every time you apply for a loan, miss a payment and much much more it’ll affect your credit rating. Many people think that you just have a bad credit rating if you’ve been irresponsible with money and loans in the past, but that isn’t the only way. While that’s one major factor, you can also have a poor credit rating if lenders simply don’t know enough about you or if you haven’t got much of a history with loans and debt. If that’s the case for you, fixing it isn’t as difficult as if you’ve got a history of poor money management.
How to check your credit rating
There are loads of online tools these days that’ll allow you to check your credit rating. Many of these are free, so have a look around today.
How to improve your credit rating
Now you know what your credit rating is, and have a bit of an idea about what affects it—you probably want to know how to fix it. If that’s the case, then you’re in the right place. Remember, not all of these are quick fixes. While some poor credit ratings can be fixed quickly, not all of them can be fixed overnight. Some can take months (or even longer. However, you’ve got to start at some point. So let’s start fixing your credit rating…
Check what’s on your file
Before you really get started, you want to know what you’re working with. Checking what’s on your file will give you the information you need and a general idea of how much hard work fixing it is going to be. Some things like payments can become less of a problem the longer ago they were, as long as you’ve built up a more reliable payment history since then. Use one of many online services to check what’s on your credit file so that you know what lenders see when you apply for things, and have a good idea of why you’re getting rejected when you apply for a mortgage or other financial product (like a loan).
Register to vote
One of the quickest and easiest ways to give your credit rating a boost is by getting on the electoral roll. This is something that many people are surprised affects your credit rating.
Pay off more than the minimum
When you have monthly credit card payments or other debts, try paying off more than the minimum amount some months, or as often as you can. This shows that you’re being proactive in tackling your debt and can positively affect your credit rating.
Close unused accounts and cards
If you’ve got loads of unused store and credit cards as well as bank accounts lying dormant, this can have a negative impact on your credit rating. If you don’t need them, and don’t think you’re going to need them—then get rid of them. It could give your rating a boost.
Pay off all your debts
If you can afford it, paying off individual debts in one lump sum can have a massive impact on your credit rating. Lenders love to see this. It can also have a good impact on your finances moving forward.
Never miss a payment
Missed payments are a big no-no if you want to keep your credit rating in check. if you’ve already got missed payments on your file, you’ll have to be even more careful to manage your money well and not miss any more moving forward.
Build a strong financial history
Sometimes, you might have a poor credit rating not because you’re BAD with money but because you simply haven’t built up enough of a payment history. In other words, lenders don’t know enough about you. In this case, you might need to take a bit of time to prove you’ve got what it takes to make payments and manage your money responsibly.
Use prepaid cards
Prepaid credit cards are a good way to show you’ve got what it takes to use similar financial instruments responsibly.
Don’t apply for too many loans
Applying for loans and getting rejected a lot can have a negative impact on your credit score. if you’ve recently been rejected for something, wait a couple of months before applying for something else.
Other tips to help get a mortgage
If your credit rating isn’t the only thing stopping your mortgage, you might want to consider another option. Borrowing slightly less for a smaller property and then moving in a few years could be an option. Obviously earning more can have a big impact. One of the best things you can do if save for a bit longer and have a slightly bigger deposit. This can allow lenders to be more flexible because you’ll be less of a risk.
