Home Buyers Should Consider Spring Cleaning Their Credit Report To Help Get The Best Mortgage Deal

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Equifax highlights how important credit history is for mortgage applications

House for sale.  Mortgage lending off to a good start in 2013

Mortgage lending off to a good start in 2013

Lenders must show that they have taken into account an individual’s affordability before extending new credit.

The Council of Mortgage Lenders recently reported that mortgage lending to home buyers in 2013 has got off to its best start to the year since 2008*. A range of good deals is certainly stimulating the market but leading online credit information provider, Equifax, is urging those looking to take advantage of the mortgage deals on offer, to Spring clean their finances and credit history before they start applying for a new mortgage or plan to remortgage.

Saving for that all important deposit is of course a key focus for those wanting to get onto the property ladder but also essential to any mortgage application is what is on an individual’s credit report. And recent analysis of buyers of Equifax credit reports**, showed that nearly a third (31%) said they did so ahead of applying for a mortgage.

Neil Munroe, External Affairs Director for Equifax believes this highlights a growing understanding of the importance of credit information in the mortgage application process.

“Although the final decision as to whether to lend rests with the lender and they have their own lending criteria, lenders make checks with credit reference agencies to see whether an applicant has kept up to date on repaying their credit. Lenders must show that they have taken into account an individual’s affordability before extending new credit.

“With recent reports showing that the average price for a city home in the UK is £172,556, which is more than five and half times gross annual average earnings***, affordability checks are particularly important for large value loans such as mortgages. So making sure their credit report reflects the financial agreements they already have and how they manage them, is something home buyers should do before they start making applications.”

Having several credit cards with high limits and missing repayments could give the impression an applicant is financially over committed which could result in them being unable to obtain new credit or paying higher interest rates. It is therefore vital consumers keep up to date with repayments, make sure they are registered on the Electoral Roll at their current address and ensure their credit history is in the best possible condition.

To understand what can impact a person’s credit file and what can affect their ability to get the best mortgage deal, Equifax has created the following top tips:

Equifax Top Tips for Home Buyers

1.    Your Credit Report
Before you do anything get a copy of your Credit Report

2.    Credit Agreements
Make sure all current credit agreements are shown as paid up to date. Your credit file will highlight any dormant accounts you might have forgotten about. Closing these will improve your credit status, as will paying off any agreements early.

3.    Are you Registered?
Check you are registered on the electoral roll at your current address – this is a crucial first check carried out by lenders to ensure the applicant is whom they say they are.

4.    Are you Credit Active?
If you haven’t been particularly credit active in the past this may affect your ability to secure a good mortgage deal. Having a 'thin credit file' – where you have no history of other credit agreements – might make it harder for lenders to assess your suitability for new finance. So it’s worth considering opening an account to establish a credit history – even if it is paid off in full at the end of every month.

5.    Shopping Around for a Mortgage
When shopping around ensure enquiries are logged as ‘quotation’ searches rather than ‘application’ otherwise multiple searches in a short space of time could impact on your ability to get credit.

6.    Your Mortgage Application
Don’t be tempted to make untrue statements on your application, such as increasing the amount you earn. Lenders will independently validate what you put on your application form and if they find discrepancies this may jeopardise your chance of getting a mortgage.

7.    County Court Judgments (CCJs)
If you’ve had a CCJ and it is now settled make sure the settlement is recorded on your credit file. If not contact the court to get confirmation details and inform the credit reference agencies.

8.    Avoid a high balance on your credit cards
Avoid carrying a balance that is more than 30% of your credit limit. Lenders may view this as a sign of you having too much credit already and that you therefore may not be able to keep up with any new repayments.

9.    Be Direct
It’s easy to forget a credit payment so setting up direct debits and standing orders with your bank will ensure payments go out on time and avoids any miss payments on your credit report.

The Equifax Credit Report is accessible for 30 days free simply by logging onto http://www.equifax.co.uk. If customers do not cancel before the end of the 30 Day Free Trial, the service will continue at £9.95 per month, giving them unlimited online access to their credit information and weekly alerts on any changes to their credit file. It also includes an online dispute facility to help them correct any errors on their credit file simply and quickly.

The Equifax app is available free from the Apple iTunes Store on iPhone and iPad and from Google Play for Androids.

*Council of Mortgage Lenders March 2013
** Reasons for purchase for 927 Equifax credit report buyers – analysis conducted March 2013
***Lloyds TSB Affordable Cities Review March 2013

About Equifax

Equifax is a global leader in consumer, commercial and workforce information solutions, providing businesses of all sizes and consumers with information they can trust. We organize and assimilate data on more than 500 million consumers and 81 million businesses worldwide, and use advanced analytics and proprietary technology to create and deliver customized insights that enrich both the performance of businesses and the lives of consumers.

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Louise Fowler, Clare Watson, Cecile Stearn or Wendy Harrison
Equifax
0208 977 9132
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