Mortgages Uncovered

If you’re considering taking out a mortgage, the first thing you really should do before you apply is to check your credit score or credit rating, because lenders will use this to decide whether or not they’ll approve your mortgage application.  Don’t wait until you’ve been refused credit before you find out why.

How To Check Your Credit Score

There are three credit reference agencies in the UK, all of which are listed below:

Equifax – The Equifax Credit Report is priced at the time of writing at £11.95.  It gives an overall summary, organises your accounts by type and indicates any potential risk factors with tips to help you.

Experian – At the time of writing, Experian has a special offer where you can view your credit report online for free, with no indication of prices or when the offer will run out.  To get the free report, you have to accept a free 30 day trial of online, unlimited access to your report – just don’t forget to cancel it unless you intend to take them up on the offer, otherwise it’s £6.99 per month for the service.  To cancel, you just call 0800 656 9000 and choose option 4 at any time during the 30 days.

CallCredit – you can apply to view your report online for just £9.95.  Visit the website and click Buy Now at the bottom of the page

When you purchase a credit report from any of these sites, you will also be offered an optional extra of receiving your ‘credit rating’ as well.  This refers to the National Points Score system that gives you a rating between 0 and 1000.  However, you don’t necessarily need this.  It’s only an indication and different lenders score slightly differently anyway as they don’t all use the same formulae as the agencies have used and often incorporate additional information, so only order this if it is of interest to you in a general capacity.  Otherwise, save the extra £4 – £5 on each report and put it towards your mortgage payments instead.

Statutory Credit Report

You might be looking at the above and thinking ‘wow, I’m going to spend nearly £50 on this alone!’  However, you can just spend £2 and order a Statutory Credit Report – this comes without any organisation or tips, but still shows all the same information.  By law, all the agencies are obliged to provide you with a statutory credit report showing all information they hold about you for just £2.  However, you can’t get it instantly or online – they will send it by post within 7 days and you’ll get no tips to help you so it’s a low-cost, no frills service.  I’ve used it myself and found it quite easy to understand so personally this would be my choice but you might prefer something a little prettier and more user-friendly.  There’s a useful table of differences on the Equifax website to summarise how their complete credit rating report varies from the statutory one.

There’s also a very useful website called CheckMyFile that will allow you to check all three credit reference agencies at once with just the one report, which at the time of writing was priced at just £19.95.  This can be handy and will save you time and money, although there’s no information on the site as to how often their data is updated.

Why Check All Three Agencies?

Each of the three agencies holds different information about you, which is why you can be rated differently depending upon which credit reference agency the lender is using.  For example, Lender A may use Experian, which doesn’t take into account electoral roll history or mortgage repossessions whereas Lender B may use Equifax, which does.  There’s an interesting table on CheckMyFile showing which data each of the agencies use.

Once you’ve got your credit score, there are steps you can take to improve your credit rating.  By improving your score, you’ll be able to negotiate a better interest rate and terms and hence a lower mortgage repayment.  You’ll have a lot more choice when choosing your mortgage deal.

In the next few days, we’ll be telling your how to improve your credit score.