Getting a mortgage, credit card, loan and even a phone contract can be a nightmare if you don’t have a good credit score. Discover how to improve yours with FOMO’s top tips.
What is a ‘credit score’?
Your credit score is a number between 300–850 that reflects creditworthiness.
A higher score will improve your chances of borrowing money, for everything from mortgages, loans, credit cards and mobile phone contracts.
How is it calculated?
Your credit score is calculated on a number of factors, from your total level of debt, your history of repaying debt, total number of open accounts and more.
The lender uses these factors to determine the likelihood you will repay loans in a timely manner.
It’s important to understand that you don’t have a single credit score. Each lender has their own way of calculating their credit score.
Improving your credit score
Having a good credit score will improve your chances of receiving a mortgage offer.
Here are FOMO Mortgages top tips on improving your credit score:
Register on the electoral roll at your current address –
This is simply to prove where you currently live.
Create a credit history
Lenders assess your suitability for borrowing based on current and historical factors. If you have little or no credit history, it makes it harder for companies to comprehend your situation. If you are young or new to the UK, this may be a problem for you. So it’s worth considering FOMO’s list and how you can improve your credit score.
Make payments on time
Paying your bills and repaying any loans or credit in full each month is a good way to demonstrate you are capable of managing further credit. Be aware that while aged, well-managed and active accounts can be helpful, unused credit cards can impact your credit score – read more about that here.
Keep Credit Utilisation as low as possible
Credit utilisation = the percentage of your credit limit which you use.
Say you have a limit of £1000, if you have used £500 of it, your credit utilisation would be 50%.
Lenders like to see a low credit utilisation percentage. A good rule of thumb is to try to keep yours below 30%, according to Experian.
Fact check your report
Small errors can impact your credit score. Check your credit report thoroughly to ensure everything is correct.
If you see a mistake, contact your provider and ask them to change it. FOMO’s expert mortgage advisers can also help if you’re stuck.
There may also be negative information that is correct but occurred during extenuating circumstances. This might be due to redundancy or ill health. In this scenario, you can ask for a ‘Notice of Correction’ to be added to your credit report to explain the discrepancy.
Opt for stability
Life doesn’t always go according to plan. But lenders like to see stability within your personal circumstances. Those who move home frequently may lead lenders to believe they are having trouble paying rent.
Old accounts
Older credit accounts can demonstrate to lenders that you can successfully manage multiple credit streams. The longer you have achieved this feat for, the better – in the eyes of lenders.
Consider getting a credit builder card
If you need to improve your credit rating you could consider a ‘credit builder’ card. These are cards which usually have low spending limits and high interest rates.
It’s worth noting that when you first get the card it may cause your score to drop. But if you use them for a small amount of spending each month, which you can repay in time, it can help build your credit score.
One way to achieve this is to only use this card for purchases you would be making anyway i.e. groceries or essentials.
Looking for advice
If you would like more hints and tips on getting a mortgage then why not sign up to FOMO Mortgages’ newsletter here?
Alternatively, get in touch with us today to see how we can help!
