There are a few things that you ideally don’t want to be associated with in life. Financially speaking, one of the main ones to avoid is a poor credit score.
A credit score is an important figure that will be used by anybody who is in a position to lend you money. Be this a bank, a payday lender or a building society, a credit score is something that will be factored in.
New research has found that concerns around poor credit scores are putting a significant proportion of people off applying for a home.
So in an attempt to offer advice to contractors and freelancers who may share these concerns, we have taken a look at what is afoot.
What exactly is a credit score?
In our experience, plenty of people know the term credit score, but many aren’t sure exactly what it means.
Put simply, a credit score is a number between X and Y. Differing providers of credit scores use slightly different scales, but lets say they use a scale of 300 to 850. Your score indicates how worthy of financial credit you are to a lender. The closer to 850 a person’s credit score is, the more likely the lender is to proceed with their application.
Factors that influence a person’s credit score include their repayment history, the length of their credit history, the types of loans they have taken in the past or are currently repaying, and the total debt that a person has.
Do I need to know my credit score?
If you have plans to apply for a home in the next year or so, then knowing your credit score is very useful.
Your credit score will be an important statistic throughout the application process, and will be factored in by brokers and lenders to help evaluate what kind of mortgage you might be able to get.
My credit score is not great – Is that a problem?
According to new research from The Mortgage Lender, one in every ten people in Britain has been put off applying for mortgages due to fears about low credit scores.
However, a low credit score is not the end of the world by any means. If you have plans to buy a home in the coming years, there are things you can do to improve your credit score.
Paying your bills on time is an important step to take for certain, while an obvious one is looking to pay off as much debt as you can. This can seem challenging when saving up for a deposit, but will be very beneficial if you are able to do so.
Also look to stay on top of your credit report, and see if there may be any errors contained within it. If something’s been miscalculated, then amending this could see your score move in the right direction quickly.
If you have unused credit card accounts, look to get rid of them as soon as possible. And also aim not to max out on available credit, as this will hamper your attempts to improve your credit score.
It’s all about being more savvy with your money and taking a stable and mature approach to your financial situation.
Is not knowing my credit score a bad thing?
It’s not ideal if you are looking to apply for a mortgage soon. But you certainly are not alone if you find yourself in this boat.
The research from The Mortgage Lender has found that 62% of UK adults surveyed didn’t know their credit score. Interestingly, half of those surveyed who were looking to buy a house in the next year did not know their credit score.
Additionally, only 18% of those surveyed had taken steps to improve their credit score.
So all in all, if this is you then you shouldn’t feel out of the loop. But if you have aspirations to get a property of your own in the near future, getting to grips with your credit score is a very good idea.
Getting on top of your credit score
If you are a contractor or freelancer with ambitions to get on the property ladder, your credit score might not be something you have overly thought about.
If you do not know it, then getting clarity on what it is at present is a great first step. Then following some of the suggestions outlined above to help enhance your credit score is certainly worthwhile.
By improving your credit score sooner rather than later, you give yourself a better chance of securing the home you want.
Another consideration is that there are plenty of products out there in the mortgage market which can meet the requirements of people with low credit scores, so don’t lose hope simply because your credit score is not perfect.
Trusting a contractor mortgage broker or freelance mortgage broker such as Roots Mortgages can be the first step towards finding your dream home with the perfect mortgage.
