Most of the cases we see that get declined could have been approved with a bit of preparation. These are the steps I would take in the three to six months before a mortgage application.
Check your credit report with all three agencies
Lenders use Experian, Equifax and TransUnion, and the reports do not always match. Check all three, fix anything wrong, and make sure there is nothing you have forgotten about. It is free and it is the first thing we ask for.
Get on the electoral register
It costs nothing and helps lenders confirm who you are and where you live. Not being registered at your current address is one of the most common reasons for a weak credit rating.
Bring your credit utilisation down
Pay credit card balances down to well below each credit limit. Using a lot of your available credit, even if you never miss a payment, can lower your credit score and makes lenders wonder how stretched you are.
Six months of on time payments
Late payments in the run up to an application do the most damage. Set up direct debits for everything, so every mortgage payment, rent payment and card payment goes out on time.
Cut existing debt and watch your debt to income ratio
Lenders look at your monthly financial commitments against your income. Clearing a car loan or a credit card can raise how much you can borrow more than a pay rise would, and can bring lower monthly payments on the mortgage too.
Tidy up your bank statements
Lenders read three months of bank statements. Gambling transactions, regular use of an overdraft, returned direct debits and heavy discretionary spending all get noticed. Aim for three months of clean statements before you apply.
Do not take out new credit
Avoid new phones on contract, car finance or store cards in the months before you apply. Each one adds a search to your credit report and a new monthly cost, both of which can work against you.
Save a bigger deposit
A bigger deposit reduces the lender's risk and widens the choice of mortgage deals, especially if you have recent credit problems. Even moving from 10% to 15% can open up better interest rates.
Go to a suitable lender first time
Every lender's criteria are different. One will decline a CCJ that another is happy with. Going straight to a suitable lender keeps your mortgage application process clean and avoids a string of declines that make the next application harder.
Be completely honest on your mortgage application
The lender will see everything on your credit report anyway. Leaving something out is the quickest way to a decline and can be treated as a fraud risk. Tell us everything and let us choose where to apply. That is what we are here for.
We are fee free on over 90% of the mortgages we arrange. Adverse credit cases can carry a fee of up to £995 depending on your circumstances, and we always agree the amount with you before any work starts.
Your home may be repossessed if you do not keep up repayments on your mortgage.
