When you are applying for a mortgage, there are so many eligibility factors that can work both against you and in your favour.
Crucially important aspects of your finances that can affect a mortgage application include:
- Unpaid debts
- Evidence of high-interest short-term loans, like payday loans, on your bank statement
- How often you use your overdraft
- The number of financial dependents you have
- How many other mortgages you are paying.
All these, and some other factors, can be considered, and are combined in the form of a credit report, often shown to consumers as a credit “score”.
Your credit report has one simple yet vital role: it tells a lender how financially trustworthy you are. “Bad” debt, late repayments, and other financially irresponsible actions in your past can reflect poorly on your score, potentially leading to fewer offers from lenders.
Shockingly, a survey by Royal London found that more than 9 million Brits could have errors on their credit report. This could mean your financial history has been filed incorrectly, and may be painting a false image of your financial circumstances to mortgage lenders.
Read on to find out all you need to know about checking and amending your credit file before applying for a mortgage.
The 3 most commonly spotted credit file errors
After the Royal London study found 29% of adults surveyed had mistakes on their credit report, you could be eager to check yours as soon as possible.
Using an online service like Experian or Equifax, you can view your full credit report. If you are thinking of applying for a mortgage this year, ensuring your credit report is accurate could be one of the first steps you take towards this goal.
Here are the three most commonly spotted credit file errors, according to Royal London.
1. Name and address inaccuracies
Of all the mistakes recorded in the survey, 10% were made up of name and address inaccuracies.
If you have moved home several times in the past few years, or changed your name for any reason, it is essential to update your records to reflect these changes.
2. A default, county court judgement (CCJ), or sequestration that the account holder didn’t have
Shockingly, 8% of errors consisted of CCJs, or sequestrations the report owner did not have.
Those affected by these wrongful claims would likely have a poor credit report compared to what they should have when the information is corrected. If your credit file wrongly states you have had property repossessed or been held at court for unpaid debts, this would undoubtedly work against your chances of receiving the mortgage offer you hope for.
3. A mistakenly listed missed payment
Finally, 6% of mistakes found were missed payments that were wrongly listed.
Once again, if your credit report states you have missed debt repayments, this is bound to have an impact on your overall file, and in turn, any mortgage applications you make.
All in all, correcting mistakes on your credit report is an essential part of the mortgage application process. Giving lenders a clear, correct image of your financial history can help you access the amount you need for your dream home.
Importantly, amending wrong information on your credit report may take some time, as it involves contacting the credit reference agency with a dispute. So, starting the process as soon as you can may be a wise move.
2 easy ways to dispute errors on your credit report and boost your rating
After you’ve viewed your credit file and noticed some errors, it’s time to go through the process of disputing the wrong information that could be damaging your rating.
Indeed, if your credit report does contain errors, it is important to amend these before you start contacting lenders about taking out a mortgage.
Here are two steps to take in order to amend and improve your credit report.
1. Collate evidence of your financial history
Before you dispute the incorrect information in your credit file, it could be prudent to gather up all the financial information you will need first.
These might include:
- Bank statements
- Household bills, or another way to prove a previous address
- Previous mortgage documents
- Credit card bills and statements.
Collating this evidence together can make the dispute process much more efficient – this way, you’ll be able to prove any claims you make and may avoid unnecessary back-and-forth with the credit agency.
2. Dispute the errors with the credit report agency
Once you have all the documentation you need, you can then dispute your credit file errors with the credit agency you are using, such as Experian or Equifax.
Each agency has their own process, but usually you can send an email to their complaints department, or fill in any forms they provide online. In your dispute, you can include:
- Your personal information and account number
- The portion of your credit file containing incorrect information
- Any documentation proving the information is an error, such as bank statements or proof of address
- A written request to have the mistakes changed.
Importantly, the dispute process can take a number of weeks or months to resolve. So, it may be beneficial to do this now, so you can still apply for your mortgage within the time frame you desire.
Get in touch
Applying for a mortgage is a lengthy process with many cogs turning at once. Luckily, working with an experienced broker can help take the stress out of the process.
To discuss improving your credit score, or any other aspect of applying for a mortgage, email enquiry@edinburghmortgageadvice.co.uk or call 0131 339 2281 to speak to us.
Please note
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
Buy-to-let (pure) and commercial mortgages are not regulated by the FCA.
Think carefully before securing other debts against your home.
