Credit Scoring & Reports
Lenders will want to know whether you are creditworthy. To help them decide whether you are a suitable applicant, they will almost certainly request a credit report.
Credit Reports - The Basics
Before any lender will give you a mortgage, they will want to know whether you are creditworthy. To help them decide whether you are a suitable applicant, they will almost certainly request a credit report from one of the three major credit reference agencies - Experian, Equifax or CallCredit.
What the credit reference agency tells them will seal your fate as to whether the financial institution will give you a mortgage. Their report could also influence the size of the mortgage offered and the interest rate charged.
What is Credit Scoring
All the credit reference agencies use similar methods to assess an applicant's suitability to receive a loan. The procedure used for this assessment is known as credit scoring.
An application form for a uk mortgage (or other type of loan) contains a range of questions relating to your personal situation. A number of points are allocated to each one of your answers to these questions. Your credit score is the sum of the points from your answers, which the lender uses to decide upon your suitability for being offered a loan.
Criteria that can Affect Credit Scoring
Your credit score can be affected by a number of issues and not all of them are connected to your financial situation. The following factors can can give you an adverse credit score:
if you have lived at your current address for less than three years, particularly if you have lived at several different addresses during that time;
if your name is not on the Electoral Roll;
if you have changed jobs recently, particularly if you have had more than two jobs within the last three years;
If you do not have a current bank account or have only recently opened one;
if you have bad credit history; particularly bankruptcy, County Court Judgements (CCJs) against you and also if you have missed credit card or loan payments;
if you make numerous applications for credit, within a short period of time.
Whatever your situation, avoid the temptation to put untruths on your loan application form. If you are discovered, you will definitely have your application turned down and you could possibly be prosecuted for fraudulent conduct.
If your loan application is rejected because of a low credit score and you want to know why, the credit reference agencies will provide you with a copy of your personal credit report (for a fee).
Obtaining a good credit report is essential to making a successful mortgage application; and
if your credit score is low, you can do things to improve your score, within a relatively short timeframe.
For more information on credit reports and credit scoring, see the following websites: