How to improve your credit score

If a bank is to consider offering you a mortgage, they will want to know that you’re in a position to pay it back over the agreed timescales.

To establish this, they will want to check your bank accounts, credit cards, savings accounts, ISAs etc. to get an understanding of your spending patterns. But they’ll also want to know your credit score.

As you make rent payments, use credit facilities such as credit cards or store cards, and as you take out loans and make subsequent repayments, it builds a picture of your behaviour around money. And that picture is known as your creditworthiness, or credit score.

A good credit score says to a lender that you are trustworthy, you can manage your finances in a responsible way, and that ultimately there is a good chance you will pay back what you owe them as agreed.

Can you check your credit score?

If you’re not sure how healthy your credit rating is looking, you can check your score yourself. There are various companies, such as Experian, Equifax and Callcredit, who can all help. They will provide a detailed report of your credit accounts. This will include any outstanding loans or missed / late payments over the last six years. All of which could count against you.

So what if the report turns up a problem, you know you’ve had issues with credit in the past, or if you’ve never really used credit facilities at all?

Well, then it might be worth doing some work to tidy up your finances and improve that credit rating. That way you’ll stand a better chance of being offered the mortgage deal you want. And your ability to borrow money won’t stand in the way of you buying the house of your dreams.

Tips to help improve your credit score

Make sure you consistently use the correct address

One of the first things lenders will ask for is your name and address. But in order to check you are who you say you are, they’ll want to confirm those details. Make sure you are registered on your local electoral roll, as that’s one of the first places they’ll check. And then try to ensure that the same name and address appears on all bills and statements you receive. Your potential lender may ask for utility bills, bank statements, mobile phone bills or other proof that you live where you say you do.

Use a credit card. But use it responsibly.

While it may sound counterintuitive, making payments on a credit card is actually good for your credit rating, as by paying them off regularly, you’re proving you can manage your money well.

The most important thing though, even if you can’t pay everything off at the end of the month is that you don’t miss repayments entirely and that you try to retain a good amount of available credit. Available credit is the difference between your total credit limit and the balance that is currently sitting on your card. Having low credit available would indicate that you’re maxing out your spending and you do not have much wriggle room in your finances.

One important tip: avoid withdrawing cash from your credit card. This will count as a negative when it comes to your credit score as it will look like you have no money left in your own bank account, even if this is not the case.

When to stop using credit cards

If you have bad credit you should stop using your credit cards immediately. Showing you cannot make timely payments on your credit card will demonstrate to a potential lender that they may not be able to trust you to pay back any loan. Which unfortunately may mean your mortgage application is unsuccessful.

Also, if you have credit cards that you no longer use it’s important that you cancel the accounts, cut up the cards and throw them away. Not only could holding on to these cards open you up as a target for potential fraud, but the amount of available credit you have can be misleading.

Worried you won’t get a mortgage because you have a low credit score? Don’t panic! Our expert advisers can help you work out a route forward. Find out more about adverse credit mortgages

Your home may be repossessed if you do not keep up repayments on your mortgage.