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Contact Your Local Branch

BELFAST, CITY CENTRE: 028 9013 7392
BELFAST, EAST OFFICE: 028 9560 9410
BELFAST, ORMEAU ROAD: 028 9521 9349
BELFAST, LISBURN ROAD: 028 9521 9351
DROMORE: 028 9210 6060
LISBURN: 028 9279 4300
GLENGORMLEY: 028 9072 7636
ARMAGH: 028 3743 0770
LURGAN: 028 3898 4004
DUNGANNON: 028 8747 0270
COALISLAND: 075 6180 7334
COOKSTOWN: 028 8673 1055

How to Improve Your Credit Score to Secure a Better Mortgage Deal

by | Aug 27, 2023 | Uncategorized | 0 comments

As a team of experienced mortgage advisor on Ormeau Road Belfast, we’ve seen firsthand that a credit score is more than just a numerical value in the home buying process. It’s a reflection of a client’s financial responsibility and can significantly impact their ability to secure a mortgage deal that aligns with their needs.

We’ve observed that an elevated credit score can unlock more advantageous mortgage conditions for our clients. This could potentially translate into savings amounting to thousands of pounds throughout the duration of their loan. But the question we often encounter is – how can clients enhance their credit score to avail these benefits?

In this piece, we aim to share our insights as mortgage advisors in Belfast on the significance of a robust credit score during the mortgage application process. We will offer actionable advice on augmenting a credit score and explain how an improved score can result in more favourable mortgage conditions.

Whether our clients are embarking on the journey of home ownership for the first time or contemplating a remortgage, we always emphasise that understanding and enhancing their credit score is a vital stride towards securing the most beneficial mortgage agreement possible.

As a trusted team of mortgage advisor on Ormeau Road Belfast, we believe that a strong credit score is a powerful tool in navigating the world of home buying.

Understanding Your Credit Score

Your credit score is a quantified measure of your credit reliability, derived from a thorough examination of your credit records. Put simply, it’s a three-digit figure that signals to lenders your probability of fulfilling your debt obligations. Credit scores can vary from 300 to 850, with a higher score signifying a lesser credit risk.

The calculation of credit scores involves the use of data from your credit report, encompassing your track record of bill payments, the quantum of credit at your disposal, the duration of your credit history, the diversity of credit you utilise, and the frequency of your new credit applications.

In the context of obtaining a mortgage, your credit score assumes a pivotal role. Mortgage lenders employ your credit score to determine their willingness to lend to you, the amount to lend, and the applicable interest rate.

A superior credit score can pave the way for more advantageous mortgage terms, encompassing lower interest rates and more adaptable repayment schedules. This is attributed to the fact that a higher score conveys to lenders a lower likelihood of you defaulting on your loan.

Hence, gaining an understanding of your credit score is the initial step towards enhancing it. By being aware of your current standing, you can undertake specific actions to boost your score, thereby augmenting your prospects of securing a more favourable mortgage deal.

How Your Credit Score Affects Your Mortgage Terms

The relationship between your credit score and your mortgage terms is a direct one. The better your credit score, the more attractive you appear to lenders, which can lead to more advantageous mortgage terms. But how does this work in practice?

Firstly, it’s important to understand that your credit score is essentially a measure of trust. It tells lenders how reliable you’ve been in the past at repaying your debts. A high credit score suggests that you’re a low-risk borrower, which can make lenders more willing to offer you a mortgage.

On the other hand, a low credit score can indicate that you’re a higher risk, which might make lenders more hesitant.

One of the most significant ways your credit score affects your mortgage terms is through the interest rate you’re offered. Generally, borrowers with higher credit scores are offered lower interest rates.

This is because they’re seen as less likely to default on the loan, so the lender can afford to charge them less interest. Over the lifetime of a mortgage, a lower interest rate can save you a substantial amount of money.

Your credit score can also influence the size of the loan you’re able to secure. Lenders are typically more willing to lend larger amounts to borrowers with high credit scores, as they’re seen as more likely to repay the loan.

Your credit score can affect the type of mortgage products available to you. Some mortgage products, particularly those with the most favourable terms, are only available to borrowers with high credit scores.

Assessing Your Current Credit Score

Understanding your current financial standing is the first step towards improving your credit score. This involves not only checking your credit score but also comprehending the details of your credit report. Here’s a step-by-step guide to help you navigate this process:

1.Obtain Your Credit Report and Score: There are several credit bureaus that provide free annual credit reports. Some services also offer credit scores either for free or for a small fee. It’s important to check your credit report and score regularly to stay updated on your credit status.

2. Review Your Credit Score: Once you have your credit score, understand what it means. Credit scores usually range from 300 to 850, with higher scores indicating better creditworthiness. Knowing where you stand can help you set realistic goals for improvement.

3. Understand Your Credit Report: Your credit report contains detailed information about your credit history, including your open and closed accounts, payment history, credit inquiries, and any public records like bankruptcies or tax liens. Take the time to review each section carefully.

4. Check for Errors: Mistakes on your credit report can negatively impact your credit score. If you find any inaccuracies, such as payments marked late when you paid on time or accounts you don’t recognise, dispute them with the credit bureau immediately.

5. Identify Areas for Improvement: Look for patterns or recurring issues in your credit report that might be lowering your score. This could be late payments, high credit utilisation, or applying for new credit too frequently. Once you’ve identified these areas, you can start working on strategies to improve them.

By following these steps, you can gain a comprehensive understanding of your current credit status and start taking informed steps towards improving your credit score.

Factors That Influence Your Credit Score

Your credit score isn’t a random number. It’s a calculated measure that’s influenced by several key factors, each contributing to the overall picture of your creditworthiness.

Understanding these factors can provide you with the insight needed to improve your credit score. Let’s break down these elements:

  • Record of Payments: This is among the most crucial elements. It mirrors your punctuality in settling previous credit accounts. Delays or omissions in payments can adversely affect your credit score.
  • Credit Utilisation Ratio: This is the percentage of your available credit that you’re currently using. A lower credit utilisation ratio is better for your credit score. It’s generally recommended to keep this ratio below 30%.
  • Length of Credit History: This refers to how long you’ve been using credit. A longer credit history can positively influence your credit score, as it provides more information about your long-term financial behaviour.
  • Credit Mix: This refers to the different types of credit you have, such as credit cards, mortgages, or auto loans. A diverse mix of credit can be beneficial for your credit score, as it shows you can handle different types of credit responsibly.
  • New Credit Inquiries: Each time you apply for new credit, an inquiry is made on your credit report. Too many inquiries in a short period can lower your credit score, as it may indicate that you’re a higher-risk borrower.

By understanding these factors, you can take targeted actions to improve your credit score. For instance, you might focus on making all your payments on time, reducing your credit utilisation ratio, or diversifying your credit mix.

The Long-Term Benefits of a Good Credit Score

As mortgage advisor on Ormeau Road Belfast, we can attest that a strong credit score is not merely a stepping stone to a favourable mortgage agreement. It’s a financial tool that opens up a wide array of opportunities and benefits over an extended period.

One of the most notable benefits is the possibility of securing lower interest rates on loans and credit cards. A higher credit score can qualify you for decreased rates on various forms of credit, resulting in significant savings in the long run.

Additionally, a solid credit score can boost your chances of rental approval. In a competitive rental market, landlords often review potential tenants’ credit scores, and a high score can make you stand out as a desirable candidate.

Your credit score can also impact your car insurance rates. Some insurance companies factor in credit scores when determining premiums, and a higher score could potentially lead to more cost-effective rates.

Moreover, a robust credit score can facilitate the process of obtaining higher credit limits. This not only grants you increased financial flexibility but also aids in maintaining a low credit utilisation rate.

A commendable credit score also provides you with an advantage when negotiating interest rates with lenders. As a borrower with a low risk profile, you’re in a stronger position to negotiate for more favourable rates.

For those with entrepreneurial aspirations, a good personal credit score can simplify the process of starting your own business by assisting you in securing business loans or credit.

Lastly, a good credit score can offer a sense of financial security. It symbolises financial freedom and the capacity to make choices that align with your lifestyle and goals.

As mortgage advisor on Ormeau Road Belfast, we believe that the benefits of a good credit score extend far beyond securing a better mortgage deal. It’s a vital component of your financial health, influencing various aspects of your financial life. The effort invested in improving and maintaining your credit score is indeed a valuable investment for the long-term rewards.

Helmut Elstner

Managing Director – Independent Mortgage Broker and Insurance Advisor

Helmut started working in financial services in early 2012 and founded The Mortgage Clinic in Belfast in early 2015. He specialises in all types of mortgages from First Time Buyer, Co-ownership, Self Build, Home Movers, Remortgages, Debt consolidation, to Buy to Let.

Three Best Rated Winner 2021
Winner Mortgage Broker of the year 2020
Top Rated Advisor 2021 on Vouchedfor