Over two thirds of people considering applying for a mortgage don’t know their current credit score

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Research from Mortgage Advice Bureau (MAB) has found that over two thirds of people who are considering applying for a mortgage or remortgage don’t know what their credit score is.

The survey found that consumer awareness around credit scores differed by age group, suggesting that the older the respondent, the less likely they were to know their current credit score.

Overall, MAB’s research found 61 per cent, of the 1,000 surveyed participants, didn’t know how to find out what their credit score is. Over half (57 per cent) of 25 to 34 year olds polled - who are most likely to be first time buyers - didn’t know what their current credit score is, and 62 per cent of 35 to 44 year olds, likely to be moving to their second home and with aspirations to climb up the housing ladder, weren’t aware of their current credit rating either.

Two thirds of respondents aged 45 to 54, the group most likely to be applying for a remortgage, were also unaware of what their credit score was.

Why is your credit score important for applying for a mortgage?

Legislation around mortgage lending changed significantly in 2014 and as a result, lenders now have introduced stringent affordability calculations and criteria for borrowers.  As part of the mortgage application process, lenders review potential customers credit scores; simply put, those with a better credit score are seen as a lower borrowing risk and potentially means that more competitive rates could be available.

In practical terms, those with a good or excellent credit score are able to apply for some of the lowest mortgage rates available, whilst those with a poor credit score or adverse credit history are likely to pay a higher interest rate, and may potentially also need a larger deposit to secure a mortgage, if indeed they are able to successfully apply for one at all.

Brian Murphy, head of lending for Mortgage Advice Bureau, comments on the findings of the survey, “The importance of a credit score when applying for a mortgage shouldn’t be underestimated, as alongside income, it’s one of the first things that many lenders look at when processing application.”

Credit Score top tips

Lenders understandably exercise caution when it comes to assessing potential borrowers for a mortgage, and financial histories are always reviewed as part of the lending process.

Companies including Experian, Equifax, CallCredit and Clearscore will be able to provide you with a thorough report of all your credit accounts, including outstanding loans and any missed or late payments over the last six years. 

There are some simple ways you can improve and nurture your credit score, for example:

  • Ensure that you’re registered on the Electoral Roll at the correct address
  • Use any credit or store cards responsibly; don’t just make the minimum payment every month to service the interest, ensure that you’re taking steps to clear any outstanding balances as soon as possible.
  • Always make your repayments for any personal loans, credit cards, utility bills and mobile phone bills on time; if you fall into arrears or make late payments, these may impact your credit rating
  • Avoid using ‘Payday Loans’ as these are a red flag for many lenders that you’re unable to manage your personal finances effectively, even if you’ve paid the debt back in full within the timescales agreed
  • If you have a poor credit score, stop applying for more credit and take professional advice as to how to work towards repairing your credit score
  • Don’t keep unused credit and store cards; if you’ve got a credit or store card in your wallet that you don’t use, cancel it.  Lenders are wary of borrowers having access to too much credit, even if they aren’t using it at the moment, as it can mean that they rack up debt at a later date, which may impair their ability to service their mortgage payments.

 

About Mortgage Advice Bureau

Mortgage Advice Bureau is the UK’s most recognised mortgage intermediary brand*, winning over 70 national awards for the quality of its advice and service during the last five years.

It has over 1,350 advisers offering expert mortgage and protection advice on a local, regional and national level to consumers, both face to face and over the phone. Mortgage Advice Bureau handles over £14bn of loans annually, and was the first – and is currently the only – mortgage intermediary to have floated on the London Stock Exchange, having joined the Alternative Investment Market (AIM) in November 2014.

For more information visit mortgageadvicebureau.com or join the conversation on social media @MABCentral

 

*Based on Opinium consumer research, Summer 2019.