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A guide to credit scores

As with any credit agreement, if you’re looking for a mortgage, the lender will want to be comfortable with your ability to repay the loan. Lenders will carry out a credit check resulting in a score that is used to measure your creditworthiness as a borrower. The check will access information on your previous borrowing and your historical repayment history, as well as other factors such as your income and whether you’re on the electoral roll. In theory, a better score can give you access to more deals and cheaper interest rates.

What does a high credit score mean?

There are a number of firms or credit referencing agencies that undertake credit checks.  These agencies work on different scoring scales to reflect what is considered a good credit score.  A high credit score means that lenders will see you as a lower risk to lend to than someone with a low credit score.

Where do I get information on my credit score?

You can obtain the details of your credit score by contacting a credit reference agency directly.  An agency will also outline the steps you can take should you identify any errors on your credit report.

How can I improve my credit score?

You can improve your credit score with some simple tasks and by monitoring your credit use and spending. These are the main factors that can improve your credit score and future applications.

1. Register to vote on the electoral roll
Make sure that you are registered to vote on the electoral roll at your current address, even if you have recently moved., as it helps lenders to confirm your identity. 

2. Minimise credit applications in a short space of time
If you make many applications for credit over a short period of time, for example a few months, this could make you look to lenders as overly reliant on credit and a higher risk. Each application that you do forces a search on your credit report and this is logged against you. 

3. Not missing a payment
Missed payments within the previous six years may have a negative impact on your credit score as it could suggest you are not in control of your finances. 
Missed payments include where you have been named on a bill, for example utility bills or council tax, even if missing the payment wasn't your fault, you will be held accountable as equally as the other person.

4. Make payments on time
Making payments late will give a similar result to missing payments in suggesting you may not be in control of your finances. S
etting up a direct debit to service any credit commitments each month may assist you. 

5. Not using all your credit
The greater the difference between the level of credit you are using and the level of credit available to you, the more positively it will be viewed by lenders.  A greater percentage of available credit used may be viewed by lenders as a reliance on credit by a borrower.

6. Use credit
Not having a credit history at all will be detrimental towards your credit score as lenders won't know how well you can manage credit. 

Although there may be a lowering of your credit score initially, opening a bank account, taking out a credit card or servicing a small form of credit (such as a mobile phone contract) should aid building your credit score.

It should be noted that any actions taken to demonstrate creditworthiness may take up to six months to be reflected on a credit file.

7. Close unused accounts 
Even if you're not using some credit cards that you have and they have no outstanding balance, they still count towards your total credit limit. The total credit limit may be at a level a lender may feel is too high to allow further borrowing, even though a proportion of it is not being used.

8. County Court Judgements (CCJs)
Having a CCJ against you will negatively affect your credit score for up to six years.

It's worth noting, however, that any repaid or 'satisfied' CCJs may drive improvements to your credit score. 

9. Protect yourself from identity fraud

Being a victim of identity fraud can negatively affect your credit score and your applications for credit in the future. You can see if this has happened by checking your credit report. 

Protect yourself from identity fraud with the Take Five initiative. Its aim is to encourage you to stop and think; why am I being asked for personal details, what do they want with my information, could this be a scam?

Get in touch with Nottingham Mortgage Services if you think they can help you with a mortgage application. Their expert advisers will search over 60 lenders to find the right mortgage for you and your circumstances. 


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