Poor credit score can add £262 extra to your mortgage every MONTH – how to boost yours
HAVING a poor credit score can add almost £262 a MONTH to your mortgage repayments – but there are ways you can improve it to get you a better deal.
New figures show that over a 25-year mortgage term, a poor credit score could cost you an extra £78,531 in interest.
Everyone has a credit score calculated based on your credit history that lenders check before deciding whether to give a loan.
It's an indicator of whether or not you're good at borrowing money and paying it back.
But lenders charge borrowers with low scores higher interest rates or shorter interest-free periods, or even refuse a loan at all, because they're seen as more of a risk.
It's not just mortgages that are affected by a poor score.
Tops tips: How to improve your credit score
THERE are lots of ways to get those numbers higher and here we run down solutions to improving credit
- Pay your bills
Late payments, even if only slightly e.g. a few days, can have major negative impacts on your file.
- Stay up to date with payments
Good credit is mainly about consistency, the longer you leave bills unpaid the more points you get knocked off your score – staying up to date with yoru direct debits and bills is key!
- Contact your creditors
If you communicate with your creditors when you are having trouble making ends meet, you might be able to set up payment plans.
- Paying off a collection account will not remove it from your credit report.
It will stay on your credit report for up to seven years.
- Use a credit-builder credit cards
These cards tend to have high interest rates compared to normal cards but if you can show you're a responsible spender with them, it can improve your chances in the eyes of lenders.
The research by credit report provider Totally Money and Moneycomms found that it can add £1,979 in interest on a £3,000 credit card bill paid off over two years.
It could also cost you an extra £7,453 on a personal loan of £7,500 paid off over four years.
Alastair Douglas from TotallyMoney advises borrowers to always check their score before applying for a loan.
He explained: "Being informed about their score can help people to see where to improve and how to get the best deals.
"A report shows customers up to six years of credit history, and how much credit they are currently using."
Wrongly, 23 per cent of people think that checking their score will damage it, according to the research.
In reality, running a "soft" check for free online won't affect it at all – it's the hard checks carried out by lenders that leave a mark.
There are three main credit checkers and they all have a different scoring system – Experian will rate you on a scale of 0-999, Equifax from 0-700 and Call Credit from 0-710.
How to find a mortgage if you've got bad credit
IF you're struggling to secure a home loan due to your poor credit history, then here are some options.
If you have a spotted credit histroy then some high street banks may refuse to lend to you.
As an alternative you can apply for a specialist lender, who is more likely to accept people with poor credit rating.
One thing to note is that these lenders do charge a higher-than-average interest and usually require a larger deposit.
You may need to have at least a 20 per cent deposit saved to apply.
You can use a broker matching service like Online Mortgage Advisor or Just Mortgage Brokers, or go direct to a specialist lender like Accord, Aldermore or Metro Bank.
This article by Which? highlights a number of specialist lenders, how much you will need saved and who they accept.
There is no set calculation but it is based around your payment history, length of history, types of credit used and other criteria.
If your credit score isn't as high as you'd like, there are ways you can improve it such as taking out a credit building credit card.
It can also be boosted by paying your bills on time, staying up to date on payments and making sure you're registered on the electoral roll.
Here's our full guide on how to boost your credit score if you want to buy a house.
If your credit report comes back poor, don't panic – you don't have to give up on your dreams of ever owning property.
We spoke to first-time buyer Ben Link who was rejected for a mortgage because of his bad credit history but now owns a £158,000 two-bed house.
Virgin Money now offers mortgages to people with bad credit scores too.
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