Getting your house in order

Posted on 9 September 2014

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Getting your house in order

Why your credit score is so important…

If you are planning to apply for a mortgage, loan or a credit card, you should read this now. A successful credit check is essential for a mortgage approval and is the first defining factor of how successful your mortgage application will be. The lenders will carry a credit search covering the last three years. Your credit file holds information for up to six years and will link your addresses and financial history. There is a lot of information there for the banks to see and process and it is a good idea to get a copy of your credit file before you start your mortgage application process.

The three main agencies holding your personal information are Experian, Equifax and Call Credit.

You can take out a subscription to Experian or Equifax which offers ongoing access to your credit record. If you have never applied for a credit file before, you may have the option of a 30-days free trial, however, Call Credit via Noddle offers a free credit report for life and it’s worth exploring. (Although do note that not all lenders accept a Noddle report). You can also apply to Experian or Equifax for a copy of your credit report for a £2 fee but it may take up to 10 working days to receive your file.

When submitting your initial information to the agencies, you will need to make sure the following is correct – your name, date of birth and address history. These three items of personal data are at the core of every application – from sofa finance to a commercial loan. Any discrepancies may create the ‘wrong’ profile for you or may not link some of the accounts you have, thereby jeopardising your chances to get approved.

The credit file is a valuable document and contains information about your address history and electoral roll registrations associated to them – something that is crucial for many lenders as this enables them to verify electronically your address.

In addition, it provides details of your financial arrangements and associations. (A financial association is when you have a joint account with another person). If your partner on a joint account or loan defaults, it will reflect poorly on you too. The agencies update credit reports monthly with status updates for each financial commitment on your record. They apply a traffic light approach to status updates with green meaning the account has no late payments and red showing the account is in default. The file will also reveal the credit limit on your facilities such as credit cards, catalogue accounts etc…

Other information that you may find on your record includes references to County Court Judgments and CIFAS – relating to financial fraud.

The credit file also contains information about any searches carried out in the last 6 years, including searches from mortgage providers. A number of banks apply an initial check know as ‘soft footprint’ which is visible to you but not to third parties. By applying a soft footprint, the bank protects your credit score. Having a ‘hard footprint’ on your file impacts your credit score with a visible reduction. That in turn may lead to a decline if your first lender has refused your application based on any reason, say - insufficient income.

Do not be surprised if you find that your insurance company and your prospective employer have made searches. The credit file is an essential instrument to prove credibility and it only make sense to be one step ahead when applying for a mortgage.

It really helps to have a copy of your credit report when meeting with your mortgage adviser; they will then be fully informed about your financial history, which will help them identify the right lender for you – avoiding any further unsuccessful ‘hard footprints’ on your file.

The blog postings on this site solely reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

Categories: Mortgages London

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The blog postings on this site solely reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them. We may contact you in response to your comment – by submitting your comment, you are consenting to this.

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