Guest post by Zoe Price
Investing in the property market in London is a lucrative option, but it is best to improve your credit score first. This can give you the best options when getting a mortgage with payments that are affordable and lower on interest. Luckily in 2022, there are lots of ways you can enhance your credit score. Below is a 2022 guide on how to improve your credit score before investing in property in London.
Checking Your Credit Score
Before delving in deeper, you should take a look at your current credit score, so you know where it currently stands. There are lots of free apps that let you check without having to sign up for a membership. They all have a slightly different idea of what qualifies as a good or excellent credit score though, so don’t read too much into the numbers.
You should also check for any mistakes in your credit report and get in touch with the relevant companies to get these removed straight away. With fraud on the rise, the last thing you want is a poor credit score through no fault of your own. You can also see a timeline of your score, including anything that may be bringing it down, such as a CCJ (county court judgment).
If you do have a poor credit score but want to invest in property this year, you can still get a mortgage. Money Nest can help people who have bad credit to get mortgages. With no impact on your credit score, you can see what lenders you may qualify for through their website, even with a CCJ.
Ensure Lenders Are Performing Soft Searches On Your Credit File
The lender will investigate your credit file whenever you apply for a loan, mortgage, or credit card. If they do a soft search, this can still provide them with enough information, without the need to leave a “footprint” on your profile. If other lenders can see that you have tried to get loans elsewhere that have not gone through, you are less likely to be able to find a loan.
A hard search will leave this visible to other lenders in the future. Luckily in 2022, many lenders now do soft searches first. If you aren’t sure, make sure to speak with the lender before continuing the process. Although this will not improve your credit score, it will protect it.
Make Sure You Are Registered To Vote
Did you know that being on the electoral roll can impact your credit? If you have not already registered, you should do this as soon as possible for your current address in London. When investing in a property, any potential lender will perform a credit check and without being registered to the electoral roll, you may come into trouble.
Registering to vote can increase your score and ensure that lenders can find your information easily. This is something that can be done in just a few minutes online, through the government’s register to vote website.
Do Not Miss Repayments
Showing lenders that you can repay current agreements on time will help boost your credit score and show that you are a reliable borrower. If you are struggling with loan repayments, it is always best to speak directly to the company you are lending from, rather than repeatedly missing or being late for repayments with no explanations. They may be able to set up a different repayment scheme for you or give you a relief break.
Even one late or missed repayment will reflect on your credit score report the next month. According to Experian, one of the leading credit report companies, just one late payment can reduce your credit score by as much as 130. This will also be shown on your report for 6 years, although the amount it lowers your score will reduce over time. Missing just a single payment will take between 6 months and a year to recover from.
Use Credit Score Sites To Your Advantage
You can view credit score sites that analyse your current credit score. This can help you find out where you are and what you need to change. There will be services that can be used to boost your credit score. This can be done quickly and works if you are signed up for services like Netflix and pay monthly subscriptions or are responsible for the council tax on your property. The service uses an open banking tool, which means you would need to give it access to your bank account information to pull the data. This will only be used by credit score sites and is a trustworthy site, so is worth the effort.
Credit score sites can provide salary information, saving habits, paid subscriptions, and council tax payments to credit lenders. This means they can view a better overall picture of your credit. It can also improve your score by around 66 points, which is great news if you are just under the margin for a good or excellent score.
Avoid Applying To Multiple Lenders
It may seem like the best option to apply for anything you can and see what the best loan comes through, but the more credit cards or loans you apply for in a short space of time, the more likely lenders will assume you are in financial difficulty.
This can negatively impact your credit, as lenders can see how many lenders you have applied to over the last year. If you want a mortgage now but have been refused by others recently, it is best to find a bad credit mortgage broker or wait at least 3 months before applying elsewhere.
Get A Credit Card
If you have just moved to London or have never borrowed any money before, this can impact your credit score. Although you would assume that your credit score would be good because you have not borrowed or missed payments, the opposite is actually true. When a lender searches your account, they will have no information to go off regarding whether you are a reliable borrower or not, as you have never borrowed or repaid. One way to quickly counteract this is by getting a credit builder credit card.
Many people are turned away from mortgages if they have no information on lending and borrowing, so it is best to apply for one as soon as you can. These types of credit cards usually have a high APR, so don’t borrow with them- just use them to purchase a one-off item and pay it back in the same month. Bear in mind it might take about a year to better your credit score this way if you’ve never borrowed.
When improving your credit, always start with checking your credit score. You can then correct any mistakes and see how far you are off your wanted score. When making applications for credit cards or loans, make sure lenders are performing soft searches and avoid applying to multiple lenders. Register to vote, try not to miss a repayment, and get a credit card. Don’t forget to use credit rating sites and you are on your way to improving your credit score before investing in property in London in 2022.
