Boost your mortgage chances
Sort your finances before you apply
Getting a mortgage may seem like climbing Everest, but although it's been made even harder by the coronavirus outbreak there are ways you can improve your odds. You'll need to be as attractive as possible to lenders if you want to get the best mortgage deal. Here are our top tips on how to boost your chances of getting the deal you want.
Don't expect every lender to fancy you
Every lender has its own method to decide whether it wants to lend to you. If you fit a lender's criteria, you'll most probably be accepted quickly. If you're far from ideal, you'll most likely be rejected by it.
But for people in the middle, it's more of a grey area and the lender's scorecard will be based on several factors, such as:
- The size of loan you want to take out
- How much you've saved as a deposit
- Your employment status and income
- Your credit rating
- Your outgoings
- Your existing debt
If you pass, it means it's more likely to lend to you but nothing is guaranteed.
The information comes from several different sources including your application form, any past accounts you've had with that lender and anything recorded on your credit file.
Your application form
This will have your personal details, plus information about your other credit commitments. It'll also have details about the property you want to buy.
Go through this with a fine toothcomb. It's not unusual for a mortgage adviser to have taken down your details on the phone as they go through the application form. One slight slip, such as a "£2,000" salary rather than a "£20,000" one, can immediately kibosh any application and possibly future ones too.
Any past accounts you've had with that lender
If you're applying for a mortgage with a lender that you've had dealings with in the past, for example if you've had a credit card with that lender, it'll use this information to add to what it knows about you.
Your credit files
The three credit reference agencies – Experian, Equifax and TransUnion (formerly Callcredit) – compile information, allowing them to send data on any UK individual to prospective lenders. All lenders use at least one agency when assessing your file. This data includes court records, fraud data and any information about any credit cards, utility contracts or bank accounts you've got.
Check your credit report before they do
You need to convince lenders that you've got the financial discipline required to pay back your mortgage. One way they investigate this is by searching your credit report(s) to find out if you've a good repayment history.
Your credit report lists your past credit cards, loans, overdrafts, mortgages and even mobile phone and some utility payments, for all accounts that were open over the past six years.
It used to be that you'd have to pay to get your credit report, but since the introduction of GDPR in May 2018, you can now get them all for free. It is worth checking all of them are up to scratch, as you don't know which one(s) your future mortgage lender will check.
The MoneySavingExpert.com Credit Club gives you your free Experian Credit Report. Just sign up, and you get your credit report and score, as well as a personalised assessment of where your credit profile is strong, and where it might need work.
There are also two other credit reference agencies in the UK, TransUnion and Equifax. You can also see your credit report for each of them for free too:
For more information on how to do this read our Credit Scores guide.
All lenders use at least one agency when assessing your file. Your credit report contains data from five main sources:
- Electoral roll information. This is publicly available and contains address and residence details.
- Court records. County court judgments (CCJs) and bankruptcies indicate if you have a history of debt problems.
- Search, address and linked data. This includes records of other lenders that have searched your file when you've applied for credit, addresses you're linked to or other people you have a financial association with.
- Fraud data. If you've committed a fraud (or someone has stolen your identity and committed fraud) this will be held on your file under the CIFAS section. More info below.
- Account data. Banks, building societies, utility companies and other organisations keep details of all your payments and transactions on credit/store cards, loans, mortgages, bank accounts, energy and mobile phone contracts.
In addition, payday loan data is now normally reported, and 'doorstep lenders' are legally obliged to share the data that they hold on you.
Credit reference agencies will usually know:
- How much you owe
- How long you've had the relationship for
- A record of the last 12 months' payments
- The final outcome and date of any closed financial accounts
- Any defaults or county court judgements in the last six years
- Whether you're bankrupt or in a formal debt relief plan
- Electoral roll information. This is publicly available and contains address and residence details.
There are many myths about what information is held on credit files. Don't be fooled, though. They hold an enormous amount of financial data, but there's lots they don't know about you.
The following things are NOT listed on your report:
- Child Support Agency payments
- Council tax arrears
- Race, religion, colour, medical history or criminal record
- Information on relatives (unless you've a joint financial product with them)
- Parking or driving fines
- Savings accounts
- Student loans (unless taken out pre-1998)
- Old defaults or missed payments (from six+ years ago)
Correct credit score errors pronto
If your credit file info's wrong, you have a right to do something about it - either having the error corrected or, at the very least, having your say.
Your first step should be to check if the error is on your credit file held with other agencies, then talking to the lender. If this doesn't work, the free Financial Ombudsman could step in and order corrections.
Check your file with other agencies. See if your file with them has the same error. If you get it corrected with one agency the information should be sent to the others, but it's better to contact them yourself to ensure your file with all three – TransUnion, Equifax and Experian – have the right details.
Contact the lender. Most will have a system in place to deal with customer disputes, and if you've proof, it should be resolved quickly. Write to it, say you think the error is unfair and ask it to wipe it from your file.
If it's a default and you're prepared to settle with your lender, either in part or in full, you could also try negotiating with it. As part of negotiations, you could make a condition of settlement that the default is wiped off your credit file. Companies can do this for disputed defaults.
Write to all three credit reference agencies. If the lender's not playing ball, write to the three credit reference agencies, and ask them to add a 'notice of correction' to your file.
This is where you get to explain the default. You should write around 200 words that will be included on your report and explains the problem. For example, "It was a joint account and the debt was run up once I had split from my ex-husband/wife."
This will slow future credit applications down, as most companies will look at it manually, but if the error is a substantial default, which is likely to stop you getting credit, that's usually not a problem.
If the lender won't help, complain to the Ombudsman. You have the right to go to the free, independent Financial Ombudsman Service if you believe the error is unfair and writing to the lender hasn't worked. It's the official body for settling disputes between individuals and financial companies, acting as an impartial adjudicator.
It can rule both that the debt is unfair (if it is) and that the default can be wiped.
Register to vote or you'll have no chance
This is a dealbreaker. While you can have a perfect credit score without being on the electoral roll, it's still ALMOST impossible to get a mortgage without it. Lenders use electoral roll data in identity checks (to ensure you are who you say you are, and live where you say you live and that you're not laundering money).
Your credit file will say if you're on the electoral roll or not, but you can also check with your local council. Do this as early as possible. While you can usually be added within a month, in late summer and early autumn it could take longer.
If you're not on it, you can register on the electoral roll for free. If you're not a UK or EU national and thus can't get on the electoral roll to vote, then you can put a notice of correction on your file, saying you have other proofs of address and ID you can offer lenders (assuming that you do).
Your ex partner's score can wreck yours
If you're financially linked to someone else (which only happens when you apply for joint credit, such as a bank account, mortgage or loan) but you're now separated or have nothing to do with them, then de-link yourself.
If not, any late payments or misdemeanour they've committed will reflect badly on you. Write to the credit agencies and ask for a notice of 'disassociation'.
You could still be linked to old flatmates if you had a joint bank account for bills, so it's worth checking that their credit history isn't affecting yours. If it is, de-link yourself quickly.
Even if the person you're linked to has a good history now, you still risk problems in future if they miss payments. The Credit Scores guide has full details of what to do.
Carefully manage your available credit
This is all about how much credit you have available to spend on credit cards and overdrafts. It's the difference between your combined debit balances on your cards and bank accounts and your combined credit limits/overdraft limit.
You need to strike a balance between not having too much – as lenders may think you could rack up more debt by spending it all – and not getting too close to your limits, which makes it seem you're at the edge of your finances.
Credit agency Experian says that if you have debts, lenders prefer that they make up less than half your available credit. So if you've a combined limit of £10,000, they'd rather you use less than £5,000 of it.
If you are using a decent proportion of your available credit, avoid lowering your limits so you're suddenly close to the edge. Similarly, don't have tens of thousands of pounds of available credit unnecessarily – new lenders get twitchy that you could suddenly be far more indebted than you currently are.
This is an art, not a science, and all lenders' views of how much credit you 'should' have differ. Try to stay below 50% in all cases. Of course, if you can pay off debt, you should do so.
Close old, inactive accounts or they can kill your application
If you're not using an account, it may be worth closing it. Leaving it open could not only be a fraud risk, but could also mean some of your details may need to be updated.
However, if applying for a mortgage, longer, stable credit relationships are a positive. So, if you've two credit cards, one recently opened and an older one, it's probably not worth closing the older one before the mortgage application as you could lose the credit score boost it gives you.
See the Should I Cancel? guide for full information on why you should (and shouldn't) close old accounts. If you are closing an account, just cutting up the card isn't good enough - you must tell the bank you want it closed.
Want a mortgage? ALWAYS pay ALL your bills on time
It's obvious – so do it.
All missed payments count against you on your credit file, so it's vital to keep up all repayments on ALL your outgoings.
Defaults count against you for at least a year, and they'll stay on your file for the next six years. Miss just one mobile phone payment and it could be the difference between getting a mortgage and not.
Set up a direct debit on all accounts to make sure payments are made on time.
Don't apply for credit shortly before a mortgage
Try to avoid applying for credit in the three months before getting a mortgage - it could hinder your score and lead to rejection. Some recommend at least a six-month gap, to be absolutely safe. The Credit Scores guide has full info.
This is because lenders will search your credit file every time you apply for a loan, credit card, overdraft, or even a mobile phone or utility contract. This search is registered on your file even if you don't take out the contract.
The more searches you have in a short time, the less likely you are to be granted credit, as you could be viewed as desperately seeking borrowing.
If you NEED to apply for credit, it's unlikely that one application will hurt all that much, provided it's affordable.
BUT - if it's a payday loan, some lenders will decline you for a mortgage if you've had one in the past year. See our Payday Loans guide for more info.
Cut back on spending before you make your mortgage move
Lenders will ask for a lot of detail about your outgoings, and may even want to see bank statements to verify what you've told them. This is because new rules brought in in April 2014 mean the lender has to 'stress test' you.
Don't worry, this isn't hooking you up to wires checking if you're telling the truth – it's checking you'd still afford your mortgage if rates went up to 6% or even 7%.
The lender may ask for your latest three months' bank statements before you apply. It will use these to check your income matches what's on your payslips and examine your recent spending.
It's worth tightening your belt in the months before you apply. Don't go getting a round in for everyone in the local, online betting or spending every Saturday night in a casino – especially if you're applying for a large mortgage that will put some pressure on your monthly budget.
It also makes sense to live a little frugally in the run-up to buying your first home. Moving costs are high, so every penny you save means a bigger budget to meet unexpected costs. See the Mortgage Deposit Calculator and How to Budget.
Stay out of your overdraft
If you're constantly in your overdraft, this could be seen as living close to the edge of your finances, so avoid it if possible. In fact, some lenders may not tolerate you being in your overdraft at all in the last three months.
And if you've no choice but to be in your overdraft, should you really be getting a mortgage?
To get a cheaper overdraft (if you really need it) see our Best Bank Accounts guide, but always budget to clear the debt as soon as possible.
Make paying your rent boost your credit score
Do you pay your rent on time? If so, there's a free scheme which millions of private renters and those in social housing can use to make paying rent build the credit history and boost their rating.
Launched in March 2016 by Experian and The Big Issue Group, opting in to the Rental Exchange Initiative means your rental payment information is recorded in your Experian credit file.
If you know you'll be able to pay on time and you're trying to improve your credit rating or build up a credit history, this can be a clever way to make your rental payments count towards that. Of course, if there's a risk you're going to miss payments it could harm your rating.
For more information on how it works, see our news story.
Put down £100 extra on top of your deposit if you're on the border of a deposit band
Putting down a little bit more than the minimum deposit required can boost your attractiveness to the lender, or at the very least cut the amount of documentation it wants to see.
For example, instead of applying for a £75,000 mortgage on a £100,000 property (where the loan is 75% of the property value), apply for £74,900 if you can afford the extra £100 deposit.
All mortgages have a maximum loan-to-value (the amount you borrow compared to what the property's worth) but it's best to borrow just under this, if you can.
Sort your paperwork to speed things up
Lenders now have to see proof of your income before they can offer mortgages, so it makes sense to get your paperwork together in advance. Sending all the paperwork in one batch speeds up the proceess as it reduces the chances of your application being reviewed by more people.
Many lenders won't accept printed internet bank statements so you may need your bank(s) to send you original copies. Ask for these a few weeks in advance in case you need to wait for the originals to arrive.
Your lender may want to see any or all of:
- Your last three months' bank statements
- Your last three months' payslips
- Proof of bonuses/commission
- Your latest P60 tax form (showing income and tax paid from each tax year)
- Your last three years' accounts or tax returns
- Proof of deposits (eg, savings account statements)
- ID documents (usually a passport)
- Proof of address (eg, utility bills or credit card bills)
- A gift letter. If you're getting deposit help, the lender needs to know it is a gift (not a loan), and that the giver won't part own the home.
Avoid delays - fill out the application form correctly
Here are our top five tips for filling in the paperwork. Even if you end up getting a broker to help you, it’s normal for you to be asked to check it first so make sure you:
DO state your income exactly. Don’t round up.
DO give your FULL NAME – even middle names are necessary.
DO declare ALL your debts. The lender will find them anyway and withholding the info can mean a quick decline.
DO get your three-year address history exactly right, including postcodes.
DO give honest answers when asked about how much you spend.
Test drive your mortgage chances
Once you've done all the steps above, your finances should be in great shape. To test this, a mortgage agreement in principle (AIP), offered by many lenders, is the acid test.
It's a conditional offer saying you may be accepted, based on a quick check of your income and, probably, your credit file. But it offers no guarantees and it's not compulsory. But for first-time buyers especially, it boosts estate agents' or sellers' confidence that you'll be able to complete the sale, so may up your chances of having an offer accepted.
It's worth benchmarking a top deal with the MoneySavingExpert Mortgage Best Buys, and asking the lender (or your broker) to see if you pass the checks for their AIP. Don't worry – just as it doesn't tie them in to lending to you, it doesn't mean you have to borrow from that lender if you spot a better deal further down the line.
Beware – too many of these checks in a short space of time could harm your credit rating if the lender does a credit check and marks it on your file. This could damage your mortgage application later on.
Some lenders offer a 'soft' search option, which won't be visible to other lenders (but will show up for you). Find out from the lender which it is before agreeing to one.
Ready to get a mortgage? We’ve lots more guides, tools & tips to help…
Rejected? Stop before you make another move
If you're rejected – FREEZE! Don't automatically apply again with a different lender. Too many applications will mess up your credit score, so don't do it. Instead, the first thing to do is to check your credit file again. Could you have missed something?
At all costs, avoid the rejection spiral. The nightmare example works like this:
- You apply
- You get rejected (sometimes falsely, due to an error)
- You apply elsewhere
- You get rejected again
This continues, until finally you check your files and get the error corrected. So...
- You apply again
- You're rejected because of recent 'searches'
If you're rejected once, immediately go to the top of this guide and follow the steps we've set out, or you may mess up your score as more applications mean more searches, which will compound the problem.
If you haven't missed anything and your credit file's still looking good, it could just be that the lender you applied to had its own reason for turning you down. It's worth asking the lender why.
It should indicate to you the main reason you were turned down – and will tell you if that was your credit file.
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