If you need a new mortgage or re-mortgage then you should initially check your credit report.
You can be refused mortgages and re-mortgages on account of your credit score.
It is important that you regularly check what your rating is and work on improving it.
A recent Which? survey of more than a thousand households, 53% said they had never checked their credit score or obtained a credit report.
Credit reference firms including Experian, Equifax and Noddle said the Which? survey highlighted some of the misconceptions surrounding credit reports.
The survey found that 77% of those polled wrongly believed that banks had a uniform credit blacklist which prevented consumers from getting loans anywhere.
And 60% had the erroneous view that credit reference agencies made decisions on whether banks provided credit or not.
So what is a credit score/credit report?
Your credit score is a measure of credit worthiness in the eyes of the banks and building societies with higher scores increasing the chances of being accepted for a mortgage or re-mortgage.
You can get a decent credit score by showing they have a history of paying off debts in full and on time. Generally you must also have shown that they have taken out some sort of credit. If you have never borrowed any money or have paid only by cash then your score may be much lower as there is no track record for the lender to look at.
But even though the banks will prefer if people have a great credit record, it’s no guarantee that they will get that mortgage or re-mortgage.
The lender will look at other factors beyond your credit score when deciding if they will lend to you. Ultimately the lender makes the decision – not the credit reference agencies.
So what do the credit reference agencies do?
Credit reference agencies such as Experian, Equifax and Noddle gather reams of data about nearly every adult in the country.
Every time you make a payment or even apply for credit, these agencies take a note.
If you miss or are late in making a payment for gas, electricity or mobile phone, the Energy Company or mobile operator sends a note of that automatically to the credit reference companies. This payment history can be seen by lenders when they come to making a decision about your credit worthiness.
So a massive amount of very private data is gathered about your personal financial life by companies such as Experian and Equifax with whom you have no contract or any direct links.
This credit history goes towards giving you a credit score – usually between 0 and 999 – depending on the company.
Managing your credit score.
When you apply for a mortgage or re-mortgage the financial institution consults the likes of Experian, Equifax and Noddle, but the decision will not rest solely on that credit rating.
The system normally works well, and those who should be given credit, get it – while those who have been more patchy when it comes to repaying debts tend to struggle.
It is also not unusual to get errors on your credit file. For example late payments for long closed mobile phone accounts mistakenly resurface. And failing to show up on the electoral register can also have a detrimental impact on your score.
Fraud may have driven down your credit score. Fraudsters may have cloned a credit or debit card and run up huge bills. That could seriously affect your credit score.
Whilst having bad credit on your credit file will not stop you from gaining a new mortgage or Remortgage if may well limit your options. If you do need a bad credit mortgage or re-mortgage you are generally best placed to speak with a qualified mortgage broker who can assess your credit file and make approaches to the most appropriate lender who may be able to help you.
Just Remortgages as expertly placed to complete this review for you and establish the best deal to suit your circumstances.
The message is simple: you should know your credit score and not ignore any discrepancies because it may affect the next time you want to re-mortgage or buy a new property.