Get the best possible start with your mortgage application by following these five simple rules. These tips will help keep your credit score in check and avoid any potential mortgage application pitfalls.
1. Avoid multiple mortgage agreements
When looking for a property it is always wise to obtain a lending decision in order to determine exactly how much you can borrow and to confirm mortgage eligibility.
However, getting a Mortgage Agreement in Principle can leave a big mark on your credit file.
The attraction for many people though is to approach a few lenders to get a decision, often when they see a lower interest rate. This isn’t always the best approach.
Some of the top high street banks and building societies will most likely leave a hard footprint on your credit report if you approach them to obtain a mortgage lending decision. It is very common for any application for credit to appear on your credit file.
Having too many footprints on your credit file for mortgage applications may cause your credit score to drop. That is why using a mortgage broker is beneficial, they know which lenders ‘hard score’ and which lenders ‘soft score’.
2. Soft credit check where possible, avoid hard credit checks
If you wan’t to obtain a lending decision, we always recommend trying a lender who will soft credit check. Halifax are one of the lenders that will carry out a soft credit check, as they say themselves:
“Soft credit checks do not affect your credit rating or ability to borrow from lenders in the future. Soft credit checks are not seen by other lenders and can only be seen by you on your credit report.” (Source: Halifax website)
A hard credit check will appear on your report and is likely to reduce your overall credit score due to the nature of the large mortgage loan enquiry. The application is also likely to appear to other lenders and may influence any decision that they are willing to take.
3. Get your documents in order
Good preparation of documents is key. Good quality colour scans are always received well. When scanning documents, don’t cut any corners. Quite literally, don’t scan a document with missing edges! Make sure that if you provide bank statements that your bank statements cover a full month of transactions.
Self employed? If you haven’t submitted your latest tax return, NOW is the time to do it! Preparing your accounts with HMRC can take several weeks, especially if you need to request an access code to the HMRC website.
Have you started a new job, or do the terms of your job role require further clarification? Be prepared to provide your signed contract of employment as well as your payslips and a P60. Here is a full list of what you may be asked to provide by a mortgage lender.
Please note, lenders might not ask for everything listed.
4. Reign in your spending on Credit
We cannot stress this enough! DO NOT take out loans and credit cards within 3 months of your mortgage application. Do not increase or decrease your credit limits on existing cards or loan accounts. This could cause your credit score to drop and the mortgage lender to panic, even if you are making these changes for the better.
Even credit agreements for sofas, beds and white goods are best left until you have completed your purchase or remortgage.
5. Manage your credit file, check your monthly alerts
In the past, managing your credit report was not something that was really considered. You had to apply for your credit report over the telephone and wait for it to arrive in the post, but you only did this if there was a problem.
Managing your credit report can help you highlight any potential mistakes or incorrectly reported information about you.
Today, many people choose to pay a monthly subscription alongside their broadband and TV services in order to maintain their credit profile. A new market has been created for the credit conscious and credit score preservation is now a top priority.
Who do we recommend for the best credit report?
We recommend using CheckMyFile.com. They are the only credit agency who provide an all-in-one credit report from the four most widely used agencies (Experian, Equifax, CallCredit and Crediva). Their web portal is very advanced and they provide helpful tools and visuals that help you understand your score and credit report in more detail.
Author: Ben, Glow Mortgage Advisor (CeMAP, BSc Hons)
Published: 7th September 2017
Updated: 1st September 2020