If you’re looking to secure the best mortgage rates, one thing can make all the difference: your credit score. Whether you’re planning to buy your first home or re mortgage, improving your credit score could save you thousands in the long run.
In this Blog, we’ll share practical tips to help you boost your credit score and increase your chances of being approved for the best deals.
Why Does Your Credit Score Matter?
Your credit score is a snapshot of how well you manage debt and repayment, and mortgage lenders use it to assess your reliability as a borrower. A higher score signals lower risk to lenders, which means you could qualify for better interest rates, larger loan amounts, or more flexible repayment terms.
So, how can you give your credit score a boost? Let’s explore a few steps you can take.
1. Check Your Credit Report Regularly
The first step is understanding where you stand. Make sure to review your credit report regularly with agencies like Experian, Equifax, or TransUnion. Look for any errors or inaccuracies, such as out dated information or accounts that don’t belong to you. Dispute any errors you find—they can significantly impact your score!
Tip: Some credit agencies offer free reports, so you can check your credit history without paying a fee.
2. Keep Your Credit Utilization Low
One of the key factors affecting your credit score is your credit utilization ratio, which is the percentage of your available credit you’re using. Ideally, you should aim to use no more than 30% of your credit limit. For example, if you have a credit card with a £10,000 limit, try to keep the balance below £3,000.
Keeping your utilization low shows lenders that you aren’t overly reliant on credit, which can improve your score.
3. Pay Your Bills on Time
It sounds simple, but paying your bills on time, every time, is crucial. Missed or late payments can negatively affect your credit score and stay on your report for up to six years. Setting up automatic payments or reminders can help you stay on top of due dates and avoid late payment fees.
Remember, consistency is key here—the longer your record of on-time payments, the better your score will become.
4. Reduce Outstanding Debt
If you have multiple credit cards or loans, prioritizing debt repayment is a great way to improve your credit score. Focus on paying down high-interest debts first or consider using the snowball method, where you pay off smaller balances to eliminate debts one by one.
Reducing the amount of debt you owe improves your debt-to-income ratio, which is another factor lenders consider when reviewing your mortgage application.
5. Avoid Making Too Many Credit Applications
Every time you apply for credit, it results in a “hard inquiry” on your credit report, which can slightly lower your score. Multiple applications in a short period may signal financial stress to lenders. So, before applying for new credit cards, loans, or even additional financing, make sure it’s necessary and beneficial.
Tip: If you’re rate shopping for a mortgage, multiple credit checks within a short period (usually 30 days) may count as one inquiry, depending on the credit agency—so don’t be afraid to compare offers!
6. Keep Old Credit Accounts Open
The length of your credit history accounts for a portion of your credit score. If you have old, unused credit accounts with a good repayment history, consider keeping them open. Closing older accounts could shorten your credit history, potentially lowering your score.
7. Register on the Electoral Roll
Did you know that being on the electoral roll can boost your credit score? It helps lenders verify your identity and address, making you appear more stable and less risky as a borrower. If you’re not already registered, it’s a quick win that could help improve your score.
8. Consider a Credit-Building Card
If you’re struggling with a low credit score or have limited credit history, you might consider a credit-building card. These card shave higher interest rates, but by using them responsibly—making small purchases and paying off the balance in full each month—you can demonstrate positive credit behaviour and boost your score over time.
What to Expect as Your Credit Score Improves
Improving your credit score doesn’t happen overnight, but with consistent effort, you’ll start to see results within a few months. As your score rises, you may notice better mortgage offers with lower interest rates, which can save you significant amounts over the term of your loan.
Need Help with Your Mortgage Plans?
At Hoskin Financial Planning, we’re here to help you through every step of your mortgage journey. Whether you’re looking to re mortgage or buy a new home, we can guide you on how your credit score impacts your options—and help you find the best deals for your situation.
If you’d like more personalized advice on improving your credit score or want to explore your mortgage options, don’t hesitate to reach out. We’re always happy to help.
