If you are a first time buyer and hoping to get a mortgage shortly, what should you do to get the best credit rating? There are actually a few steps that you can take, if you start in advance.
What is a credit score?
Your credit score is an assessment of how well you can handle credit and from that, the bank will make a judgement as to how likely you are to actually pay back the loan in full.
This is important in a few ways. For a start, a poor credit rating could totally prevent you from getting a mortgage at all. Even if it does not go that far, then a poor credit rating can still affect the amount that you can borrow and increase the mortgage rate that you will be charged when you do get a loan.
Can you improve your credit score?
So, what can you do? Well the first thing is to remember that it is calculated based on how well you are handling the credit that you do have. This means that if you have no credit at all or are handling it badly, then you will score badly.
So, if needs – you can use mortgage calculator payment.
If you do have credit then make sure that it is all being paid off on time, every month. A borrower repaying money at the correct rate, or faster, is going to score well and look good.
A good credit score comes from having some credit
But there is a more important step to take and that is for those that do not have credit. Whereas normally it is best to steer clear of unnecessary credit in case it is a huge temptation to buy what you do not need, if you have never had any credit then this can count against you. So it could be very worth while, as long as you are disciplined, taking out a credit card just to build your credit score.
However, if you take this drastic step use the card for nothing more than regular grocery shopping, maybe even cutting the card in half! Although be wary that this too can cause problems if the bank charges you a fee for not using the card!
Check your credit report
Lastly, you should make sure that you check your credit report. Request a copy of it from one of the main credit reference agencies and check over the report very carefully. Make sure that any loans you have had that have been paid off are recorded as being paid off. This means make sure they are there and that they are not shown as outstanding.
Also check other details are correct, that loans that should be there are recorded correctly and there is nothing on the report that does not actually belong there.
Once you have done all of this you should have the best credit score that you can hope for and a good chance of not only getting your first mortgage, but also of being charged a good interest rate rather than a more expensive one.