THE IMPORTANCE OF A GOOD CREDIT SCORE
These days lots of credit companies prompt you to find out your credit score or look at your credit file but what does that all mean and how might that affect you owning your own home?
Your credit score is calculated by companies like Experian, Creditsafe or any other credit reference agency based on how good you’ve been at meeting your credit arrangements e.g. paying for any credit cards or finance that you have.
Paying on time and doing what you’ve agreed to do makes your score go up and missing payments makes your score go down. For some purchases like a car or a sofa that score matters and will help the company make a decision whether to give you credit. However, when it comes to a mortgage or Co-Ownership that score on its own isn’t enough.
A mortgage is a big commitment and so is Co-Ownership, and your bank or building society will be looking at all of your finances, understanding your income and your commitments to make sure that your mortgage is affordable even if mortgage rates go up. This is called stress testing. They’ll look at your credit file to make sure you don’t have any items that are unpaid or any payday loans as these are all signs of financial stress. Both your mortgage lender and Co-Ownership will checking that your home purchase is affordable for you.
They will run a series of checks on your credit report and use this information to help them make a decision about your application.
Experian has several video guides that explain what your credit score is and ways to improve it. By doing this, you can improve your overall credit report. Check out their website https://www.experian.co.uk