How to perfect your credit score to get the best mortgage

Banks reserve their best lending deals for those borrowers with the highest credit scores.

To give yourself the best chance of getting a top rate, make some time to tidy up your credit file.

Check up on your report

Your credit report contains information from banks, insurers, mobile phone firms and some utility suppliers.

Give yourself the best chance of getting a top rate: make some time to tidy up your credit file

As well as personal information such as your name, address and whether you’re on the electoral roll, it also shows what credit cards, mortgages and bank accounts you have in place, whether you’ve missed any payments, defaulted on debt and even just applied for a credit agreement recently.

This information is held by three credit reference agencies — Experian, Equifax and Callcredit.

They use it to calculate your credit score which tells financial companies how much risk you are likely to pose as a customer.

Each agency may hold different information. They also use different scoring scales.

Experian’s ranges from 0 to 999, Equifax from 0 to 700 and Callcredit from 0 to 710.

Regularly checking your record with all three firms will give you a good idea of how likely you are to be accepted for a new credit card or mortgage.

This means you can avoid applying when you might be rejected, which can damage your credit score further.

You’ll also be able to spot any errors which you can then rectify before making any new applications.

The law says credit agencies must provide you with a £2 copy of your report. You can request it online or write to each agency asking for a copy to be posted to you. 

Equifax and Experian also offer a subscription service where you can see your report for free for the first month but fees jump to £14.99 a month after that.

Noddle, run by Callcredit, provides a free online credit score and report, as does Clearscore, which is based on Equifax data.

Stop debts mounting 

Debt can quickly mount and spiral out of control. The worst thing to do is ignore it.

Debt advice is best sought from a debt charity which can act on your behalf, free of charge. Steer clear of debt help or loan consolidation companies.

They charge for advice and fees only add to your existing debts.

As long as you can prove you have sought help or can show you are trying to repay your debt, collectors won’t contact you for at least 30 days thanks to an agreement between the Government and the Credit Services Association.

Try National Debtline (0808 808 4000), StepChange Debt Charity (0800 138 111), Debt Advice Foundation (0800 043 40 50).

Tricks to get a better score

The average customer’s credit score is ‘fair’, which is in the range of 721-880 with Experian, 380-419 with Equifax or 566-603 with Callcredit.

People with these scores will be offered credit by some lenders but may miss out on the very best deals. But there are simple ways to improve your score instantly. 

One trick is to make sure you are registered on the electoral roll. This can add around 50 Experian points to your total.

Tip: Dump store cards 

Close any store card accounts that you no longer use as having too much available credit relative to your income can damage your score. 

The same goes for forgotten about credit cards that you may have forgotten you even own.

Never use your credit card to withdraw cash at an ATM unless it’s an emergency. 

This can also impact your credit rating because lenders will see it as a sign that you are not living within your means.

Maxing out credit cards can lower your score. If your balance is more than 90 per cent of a card’s limit, for example, you will lose around 50 Experian points.

Reducing the balance to below 30 per cent of the limit on the other hand could earn you 90 points.

Appeal mistakes

Up to 2 per cent of all credit reports contain errors which means one million people are at risk of being rejected for a loan because of mistakes.

If you think there is an error on your report, raise it with the credit reference agency. It can appeal to lenders on your behalf to update their records if a simple mistake has been made, like confusing your data with that of someone else of the same name or date of birth.

If your report contains negative information about something that was not your fault, such as a missed payment because you were in hospital, you can request a note is added to your file. 

By law, lenders must read this before making a decision on whether to accept your application.

Make sure you contact credit reference agencies if you split up with someone you had a joint bank account or mortgage with so they can be unlinked from your credit. This will stop your credit score being affected by their actions in the future.

The average customer’s credit score is ‘fair’, which is in the range of 721-880 with Experian, 380-419 with Equifax or 566-603 with Callcredit

The average customer’s credit score is ‘fair’, which is in the range of 721-880 with Experian, 380-419 with Equifax or 566-603 with Callcredit

Financial footprint 

Somewhat counter-intuitively, if you avoid taking out credit altogether it could mean you are more likely to be rejected for a loan or mortgage in the future. This is because you won’t have a strong history of successful borrowing.

Think of your credit report as being to lenders what a CV is to employers: it tells them what you’ve done in the past and how good you were at it.

However, make sure it is quality experience. Switching around between lenders frequently or making multiple applications at once will put others off as it makes you appear unreliable or desperate. 

If you do not have a credit history, try a specialist score-building credit card. These are available to those with poor credit scores but often have high interest rates so it’s essential to pay off your balance in full each month.

The Aqua Advance card charges 34.9 per cent APR but rewards customers with a £20 Amazon voucher if they use the card for two months, pay on time and stay within their agreed limit.

Improving over time

In some cases, you may just have to sit and wait for your score to improve.

A County Court Judgement (CCJ) or default notice against you for missing payments will clear from your file automatically after six years.

If it was your fault and you can’t add an explanatory note, the best option is to put off making any major loan applications until it’s gone.

Avoid missing payments in future by setting up a direct debit so you always pay off at least the minimum amount on a credit card every month.