What’s a credit score?

If you’re looking to borrow money and you need to borrow it from an organisation, like a bank or building society, they have to be confident that you’re going to be paying it back.

So, right at the start of your mortgage application, they’ll have a look at your credit score – that is a number rating that is reached after your financial position has been looked at. The higher the score, the better position you will be in.

Things that may lower your credit score are, for example

• Missing important repayments on credit cards or loans
• Having credit rejected for some reason
• Having lots of outstanding loans already

Remember, a lender needs to be sure the money will be paid back.

Can you see your credit score?

Yes, you can. There are a number of agencies that collate information and calculate a credit score.

You should be able to create an account with a credit agency and have a look at your financial position. It’s the sort of information that lenders will be looking at.

Handily, it will show you all the positives but it will also show you any negatives – for example, a missed payment.

You can usually sign up to an account for free but you will most likely be asked if you want to get regular updates. This will cost a small fee, but you can usually close your account and not accrue any costs.

When you look at your credit score you may spot a couple of things that could lead to a low score and a mortgage offer not being successful.

Different lenders use different agencies so it might be that a little transgression may not affect things. But, you do need to look at what the negatives are.

Get on a rollIf you’re not registered to vote, you’re unlikely to have a good credit score. If this may be a factor, rectify it.

Credit where it’s due

Sounds a bit wrong, but you’re likely to have a low score if you don’t have much credit. The thing is, how can your ability to make repayments be calculated if you’re not making any repayments for anything? Have a think about taking out a credit card – but work out how to use it to your advantage.

Don’t keep applying

If you do get turned down for credit, don’t keep on applying. If the metrics say no, they won’t change overnight. It’s usually around six months that you need to wait before reapplying. During that time, you could have improved your score.

Partner penalties

If you look at a credit score report, you will see that it will link you to a partner. For example, you may have had a previous mortgage with a now ex-wife or husband. That will affect the rating you get so it may be worth asking the credit reference agencies to break that link in your file.

Too many cards

If you have had a couple of credit cards, don’t really use them but you’ve kept them going for a bit “just in case”, think about getting rid of one or two of them. Credit scores will assess them all and this can work against you. having credit cards with zero balances makes it appear that you have access to funds already and the question then is likely to be “why do you need more?” This does not necessarily apply to mortgages but is good to be aware of anyway!