If you’re in the market for a new home, you’ll want to ensure you have the best possible credit score. That’s because your credit score significantly determines whether you’ll be approved for a mortgage and what interest rate you’ll receive. So before consulting your local mortgage broker, here’s how to improve your credit score and secure a better mortgage.
What Is a Credit Score?
Your credit score is a number that shows how reliable you are at paying back borrowed money. It’s determined by your past credit behaviour, such as how often you make payments, how much credit you use, how long you’ve had credit accounts and your credit types. If your credit score is high, you have a greater chance of getting approved for a mortgage at a lower interest rate.
Things That Can Raise Your Credit Score
Check Your Credit Report
Your credit report will show any outstanding debts, missed payments, or other negative marks that could hurt your credit score. If you find any errors, such as a late payment that you know you made on time, dispute them right away.
Pay off Any Outstanding Debts
A high credit utilisation ratio—the amount of credit you use compared to your credit limit—can negatively affect your credit score. Ideally, you’ll want to keep your credit utilisation below 30%. For example, if you have a £10,000 credit limit, aim to keep your balances below £3,000. Paying down your debts can help improve your credit utilisation ratio and boost your credit score.
If you struggle to pay off your debts, consider working with a local mortgage broker. They can analyse your financial situation and suggest ways to pay off your debts more efficiently. They might also suggest alternate financing options, such as a remortgage, to help you merge your debts and lower your monthly payments.
Establish a Solid Credit History
If you’re new to credit or have a limited credit history, consider opening a credit card or taking out a small loan. A new credit history can help establish your creditworthiness and demonstrate your ability to handle credit responsibly. However, be cautious about opening new accounts simultaneously, as this can negatively impact your credit score.
Other Things That Can Get Your Mortgage Approved
You can take other steps to increase your chances of getting mortgage approval. For example, save up for a down payment. Most mortgage lenders require a down payment of at least 5%, but the more you can put down, the lower your monthly payments will be.
You should also refrain from making significant purchases or opening new credit lines. Lenders will analyse your debt-to-income ratio, the proportion of your monthly earnings toward debt payments. Taking on more debt can hurt this ratio, which may lower your chances of being approved for a mortgage.
Final Thoughts
Improving your credit score is crucial if you want a better mortgage deal. It may take some time and dedication, but by doing so, you can increase your chances of getting the home you’ve always wanted.
You can also work with your local mortgage broker to ensure that you’re taking all the necessary steps to improve your credit and increase your chances of approval. Remember to stay patient and persistent, and don’t give up on your dream of owning a home.
Are you searching for a local mortgage broker who can assist you in understanding the intricate aspects of mortgages in the UK? Look no further than Everest Mortgage Services! Our team of experts is here to provide the guidance and support you need to find the perfect mortgage for your needs. Contact us today to learn more!
