This week’s podcast is all about the importance of getting your credit file together when you’re looking to apply for a mortgage. Craig is joined by resident mortgage broker, Anthony Randall.
When should I get my credit file? At what point in the mortgage process?
The sooner the better. If you are at a stage where you want to get a mortgage, or you might want to do so in the next six months, then start the process. It means that you have time to potentially address any problems with that credit file and rectify any errors.
Things can appear on credit files that you might not necessarily be aware of. So it’s very helpful to have time to ensure it’s as correct as possible for your mortgage application.
What sort of things should I look out for on a credit report?
The main thing that you should look out for is any kind of adverse credit. Bad credit is basically things like defaults, missed payments, CCJs or IVAs.
These will be glaringly obvious on most credit reports. They’re generally colour coded as well as showing letters and numbers. Anything coloured red or black, for example, is usually something you need to look into.
Generally we are looking out for anything that could impact the mortgage application in a negative way. If something appears there that you weren’t aware of, it’s a case of finding out why they’re there. And that six month timescale gives you enough time to then try to rectify the issue.
Will there be things I don’t recognise on my credit report?
There will be all sorts of things on there. Even someone who keeps track of their finances is likely to find things in different names than they might expect, even potentially different providers named on the report.
So, it’s a case of checking that and making sure you’ve got a good picture of what your credit score looks like. At the end of the day, that’s what a lender is going to be looking at. Your credit file is one of the main deciding factors in whether they will be happy to give you a mortgage or not.
By having a good idea of what they will be looking at, you can see why they might not say yes, and if there may be an issue. Perhaps you will be able to rectify that, and if not, at least you’re now aware. You and your broker can look for a lender that would potentially accept your situation, rather than trying with a provider that is likely to reject your application based on your credit report.
Different lenders each have their own criteria in terms of how long ago a default can be registered, how long it has to have been satisfied, or how many missed payments you can have, for example. So as a broker, having that credit file and being able to see exactly when things have happened gives us a great head start in finding the correct lender for you.
Are there any other benefits to viewing my credit file?
Absolutely. The credit file doesn’t just show the negative side of things. It will also show whether you’re registered at your current address on the electoral roll. If not, then that’s something to look at doing because it can impact whether a provider would lend to you or not.
It will show financial links that you potentially have to family members or other people. It will show previous addresses and other credit searches as well, including who has performed searches on your account in the past.
You might want to find out why they’ve taken place if you’re not aware of them. So there are all sorts of other benefits to getting your credit file before you look at applying for a mortgage.
What’s the benefit to a broker of seeing my credit file?
It’s a big time saver. I can see not just whether you have adverse credit, but also what credit you currently have. That might be outstanding loans, mortgages, credit cards… those sort of things. I can see the amount owed at that time.
It means I don’t have to go through all the exact figures, dates – it will tell me all the lending opened, how much is currently owed on it and what the monthly payments are. It will give me a good overview of your current financial situation. It will also give me any negatives – which is what lenders always want specifics on.
If, for example, you have a default. The lender will automatically want to know the date it was registered, the exact amount, who it’s with, if it was satisfied and if so, the date it was satisfied. Even if you were aware that you had a default, you wouldn’t know the exact dates and amounts specifically. But your credit file puts all that in front of us.
What details will the lenders use from a credit search?
There are multiple different credit reference agencies and each lender will use at least one of those. Some use two of them, some use all three. Again, that is lender specific.
But if we have an overview of what your credit file looks like as a broker, we can look at it as a lender would. That gives us the best chances of getting you approved – not only by making sure we put the right information in, but also making sure that we approach a lender that will likely accept whatever that information is.
Who do I approach to get my credit file and which service do you recommend?
At the moment there are three different credit reference agencies: Experian, Equifax and TransUnion. They’re the ones that will hold information on you. Lenders will use a different combination of those three.
If you went to Experian directly and got a credit file from them, that will only show the information that Experian holds on you. If you then go to a lender that uses one of the other two, you’re potentially still not getting the full picture. You might expect that all three would have the same information, but that’s not always the case.
So the best way forward is to ensure that you’ve got a picture of all three, which is the reason we use Checkmyfile. Checkmyfile gives you all three of those providers on one credit score. You can see it as a combined score, you can see all the defaults, you can see everything that all three of those providers hold.
By making sure that the information is correct will prevent issues further down the line. When the lender starts asking for more paperwork, it can all unravel if what you’ve input doesn’t match what they’ve got on your credit file. So making sure everything aligns correctly avoids any potential hiccups further down the line.
What does it cost to get your credit file?
It does depend on who you use. A lot of clients use Clear Score, which does give you an overview, but it’s not in depth enough to be used by a mortgage broker. It doesn’t give you the exact story of what your credit file looks like.
We do recommend Checkmyfile, which is £14.99 a month. We also have links that give you a 30 day free trial. So you could use those and download the credit file as a PDF, which is what your broker will ask for. Then, even if you’re doing your research six months in advance, you’ve still got your credit file as a PDF to provide to your broker. That will give them a good overview of your situation, even if it’s six months out of date.
How can a broker help me with this?
So as we’ve said, it’s very important to make sure you get your file, have a look at it and make sure you’re comfortable with the information on there. Having an advisor or a broker on hand is really helpful because it’s quite a complicated document to look at if you’ve never seen one before.
If you can go through that with your broker, we can explain all the information back. We see credit files day in, day out, so we’ll be very comfortable in deciphering the details. So get hold of that credit file and we’ll do the rest.