First Time Buyer? 4 Easy Ways to Improve Your Credit Score

When you take out your first mortgage, as with any financial product, you’ll have to go through a credit check to ensure your credit limits are appropriate. It’s normal to feel apprehensive about this process, as let’s face it, few of us have perfect credit.

That’s why it’s worth trying to improve your credit score in the months before you apply for a mortgage, as a better score within your credit accounts can mean lower rates and a wider choice of lenders.

With this in mind, here are four ways you can improve your credit score.

4 Ways to Improve Credit Scores

1. Get a copy of your credit report

There are lots of free and paid for credit report services in the UK, enabling you to access your information. We recommend you go directly to the three main credit reference agencies; Experian, Equifax and TransUnion (formerly Callcredit).

When running your credit check, your lender or broker will usually use one, or a combination, of these services.

Once you have your credit report, check it carefully for errors. It’s important to do this well in advance of applying for your mortgage, as it can take a while for changes to take effect. Some things that could be dragging down your credit rating include:

• Not being on the electoral register

• Late or missing bill payments

• Taking out a lot of credit in comparison to income

• Being financially linked to someone with bad credit, i.e. an ex-partner

Whilst you can’t erase a bad credit history, you can draw a line under it and become better with money, as well as correcting any mistakes that are bringing down your score.

2. Borrow responsibly

There’s one thing that can be just as worrying to lenders as a bad credit history, and that’s having no credit history at all.

If you live with your parents and have never had a loan, credit card or car payments, then it’s possible you may have barely any credit history.

This may seem like a good thing to you, but the reasons why lenders might find this troublesome is that they don’t know if you’re any good at handling money! If you’ve never had to balance a budget, pay for utilities, or make a credit card payment every month, then how do they know if you can cope with making mortgage payments?

The simplest solution to this is to borrow small amounts and pay them off monthly, before the interest charges kick in. Get a credit card* and use it for your day-to-day expenses, paying it in full each month. This will help you build a credit score. Just be careful not to be tempted to overspend.

3. Don’t max out cards - and do pay more than the monthly minimum

When you apply to borrow money, whether it’s a credit card or car finance, you get a credit limit, which is the maximum amount a lender will be willing to lend you.

It’s important to realise that this is a limit, not a goal, so never go over it. Try to pay down any credit cards and loans as much as possible before you apply for a mortgage, as having cards close to their limit instantly lowers your score.

You should also make sure you pay more than the minimum each month on credit cards. If you pay the minimum, you’re just paying off the interest, so your debt never really goes down.

There are online calculators that you can use to work out how long it will take to pay off your credit cards, so take a look at what a difference an extra payment of £10 or £20 per month can make to your overall balance.

4. Pay on time

If you’re the type who pays their bills 'whenever they remember', and regularly misses payments by a few days, then get out of bad financial habits now.

Draw up a spreadsheet of your outgoings and which day they are due, and make sure that you pay bills a few days before this to allow the payments time to go through.

If making manual payments is a pain, then consider setting up direct debits that leave your account soon after payday, so there’s no excuse to miss any.

Getting a Good Credit Score can Improve Your Chances of Buying Your Dream Home

Getting a better credit score can help you enter the mortgage market as a first-time buyer. It shows that you’re responsible with money and gives you a better opportunity to see the best mortgage deals.

Many first time buyers may only have a small deposit, so may be looking to borrow 90-95% of a property’s value, and to secure these kinds of mortgages, you’ll need a great credit rating and no adverse credit on your file.

Contact the team at The Property Experts on 0330 179 8180 for more first time buyer property advice! We can put you in touch with our experienced team at The Mortgage Experts - specialists in all areas of mortgage advice - or call direct on 0333 1883 480.

In the meantime, we've answered some of your common questions about your credit score.

Frequently Asked Questions About Improving Your Credit Score

Do I need to pay to check my credit report?

No, there are free credit report services in the UK via a credit reference agency. You can access your report directly from the three main credit reference agencies: Experian, Equifax, and Callcredit.

What can negatively impact my credit score?

Missed payments on bills, having a high credit card account balance, and not being registered to vote can all lower your credit score.

How can I build a credit history if I’ve never borrowed money?

Consider getting a secured credit card*. These require a deposit but function like a regular credit card, helping you build a positive credit history.

Will paying my bills a few days late hurt my credit score?

Yes, consistently missing payments or making late payments from your bank accounts can significantly damage your credit score. Set up automatic payments from a bank account or reminders to avoid missed payments.

*The information in this article is for your general information and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by The Property Experts and is not intended to be relied upon by users in making (or refraining from making) any financial decisions. Appropriate independent advice should be obtained before making any such decision. Any arrangement made between you and any third party is at your sole risk and responsibility.