While the choice of mortgage deals is as wide as it has been for several years, there are lots of reasons why a lender may still decline your mortgage application. One common problem that many borrowers have faced is failing a lender's credit score.
While each lender assesses your creditworthiness in a different way, almost all use information held on your credit file as part of their decision making process. So, ensuring your credit file is good is key to being approved for a home loan. Here, we give you five tips to improving your credit record.
Use credit wisely
A common myth is that lenders want to see that you have no outstanding credit. Actually, having a small amount of credit that you manage responsibly can actually increase your chances of being approved for a mortgage.
"It can help for you to use small amounts of credit regularly and manage it well," says Keith Osborne, editor of Whathouse.co.uk. "If you stay within your credit limit and make all repayments on time a mortgage company will be able to see that you're a responsible person who manages their finances well."
Make sure you're on the voter's roll
If you are not registered on the electoral roll at your current address you will find it tough to be approved. Lenders need to verify your identity and it can be very difficult to prove an address history without official records.
Don't take out a payday loan
Payday loans have been in the news this year and many mortgage brokers have evidence that lenders are blacklisting borrowers who have taken out payday loans.
The Independent reports that "mortgage advisers have warned would-be borrowers that lenders are rejecting applications or significantly reducing the amount they will lend to people who have taken out payday loans, even when paid on time and in full."
Don't apply for credit just before applying for a mortgage
It can help you if you don't make any other applications for credit immediately prior to going for a mortgage. Although rejections for credit are not recorded, each time you apply for credit it leaves a ‘footprint' on your report and making several applications over a short period can signal financial stress.
James Jones from Experian, a credit reference agency, says: "It's really important to not apply for other credit just before you submit a mortgage application. The lender might think you're trying to borrow your deposit from another lender, which will do you no favours."
Don't miss any payments
The simplest way to make sure your credit file is clean is to make sure you manage your borrowing responsibly and not to miss any payments on loans, credit cards or hire purchase agreements.
Neil Munroe of Equifax says: "People are often surprised by the depth and breadth of data on their report. It includes information on mobile phone accounts, mail order accounts, even Sky subscriptions, so be mindful that these could have impact if they haven't been paid properly."
Click here to find out more about how Whathouse.co.uk can help you find the right mortgage.