Improving my credit file for a mortgage

aob78

For the last few years I've been regularly getting rejected for credit. I never missed a payment but I never really used credit and I move rented accommodation regularly. I have always been on electoral roll although there was a three month gap in 2007. I am given 1 star out of 5 stars on my Call Credit account. I assume its because I move regularly (sometimes to not so great areas) and that I dont own a house.

I'm not trying to change the system, but I wondering what is my best option to improve my credit score so that I can get a competitive mortgage in 6-12months. I just received a large redundancy and my initial reaction is to wipe my debts and close down excess cards. However, I've been in the position before where the fact that I dont have much credit has gone against me in seeking new credit. It has been difficult to get these cards as it is. I don't envisage that I will need much credit now as I want to save for a deposit (I expect a new job quickly), but should I close the accounts or use them and pay them off every month. I want to be attractive to a mortgage lender, not a credit card company so does anyone have any insight into mortgage lending criteria?

My credit file profile is:

1. Current Account: £1200 overdraft. Opened 08/2010
2. Current Account: £1200 overdraft. Opened 10/2005
3. Credit Card: £7300 limit. Opened 12/2010. One late payment.
4. Credit Card: £1450 limit. Opened 10/2006. No late payments.
5. Credit Card: £3000 limit Opened 11/2007. One late payment within 12 months

What should I do as I dont really need any of them apart from the first current account. I am happy to use all my cards and pay off the balance every month. I have an interest free balance on credit card 3 until September.

Any real insight into how mortgage companies think would be appreciated.

[Deleted User]

how any lenders think atm seems to be a mystery,one thing that will improve chances of a mortgage is a large deposit.

chiquito

How much is your deposit? You may have too much available credit. I would look at getting rid of your overdraft and all of the cards but 1. Why do you need all of that credit anyway?

Go to a mortgage advisor and ask for their opinion, there are some very good ones out there who will be happy to help. Your fortunate that you have no bad credit, I have two defaults after major bad luck and although I have a good deposit I can't get a mortgage anyway and am unlikely to be able to do so for many years

Good luck

Tixy

What sort of credit have you been being turned down for?
How much do you earn? Might be that you are being turned down based on afforability because you have a reasonably high credit limits.
Could perhaps close that largest, newest card if you don't use (and you don't expect to need to use in future or expect that they would give you a good promo deal etc).
Then probably try to spend small amounts regularly (doesn't need to be every month) on the cards but ensure it is paid off and no high balances are carried.
Do you regularly use the overdrafts? try to minimise use of these or perhaps get rid of one of them (not necessarily the account but the overdraft).

aob78

Thanks Tixy. That seems sound advice about closing down my newest credit card with the largest credit limit. I will also use the other two cards regularly but make sure to pay off balance every month.

BTW, I have really struggled to get loans. It's bizarre that I couldnt get a 10% APR loan from my bank but they happily give me £7300 credit card with 9months interest free. I guess it's their loss that I will now pay off balance without ever paying a penny in interest.

I know lots of people are struggling to get credit although they have always diligently paid on time. I have a salary of £60k and no debts but I still was only offered loans at 18.9% from the bank I had been with for years. No doubt when I go to buy a property in 6-12months, I will get rejected by all the lenders again.

opinions4u

Has it crossed your mind that two late payments in the last few months looks poor to a firm you want to borrow money from?

aob78

yes Opinions4u, i realise that and I think that is now a major reason why I now have 1 star out of 5.

I have not applied for credit since then so this wasn't a factor in me constantly getting rejected for loans, cards and bank accounts for the past three years (i'm careful not to have to many searches on my credit file). Although I've been told that many lenders will disregard a late payment if it is paid within 30 days, I suspect this isn't true and I now have to wait at least 12 months for this not to be much of a factor. I probably have to wait 6 years for some lenders such as First Direct.

The late payments were a case of me not setting up a direct debit when I thought I had and on one occasion my credit card direct debit was rejected as it was £5 over my arranged overdraft. Annoying how small things can really impact an otherwise impeccable payment history. I think Notice of Corrections are pointless as it is now a case of "Computer Says No" - even for mortgages.

I suspect that regardless of my recent late payments that I would still struggle to get a loan or mortgage at a competitive rate. I think not being a homeowner, moving rented accommodation and living in a rubbish postcode are all big factors in my low credit score. It is really hard to game the system when this is the case and the best I can hope for is an average score. I think Tixy's advice of removing the newest credit card with the largest credit limit and using the other two cards sensibly will help in giving me a few more points.

I will only have a 10-20% deposit for a flat in London so I'm striving for a mortgage rate that at the very least is not extortionate. I guess I will not be eligible for the best rates but then again few of us are.

aob78

I've just been rejected by Three for a £15 a month sim only monthly contract with a one month contract. Damn late payments.

geoffky

The late payments will haunt you for a while and as for mortgage purposes forget it until they are off you credit history..good luck and keep debt free.

cheesymax

How long are late payments on your file? I've not had one for 3 years but had a few before then

aob78

They were both fairly recent (Feb and Mar).

I have a long history of no late payments previously but I still struggled to get credit. The recent two rejections for a pay monthly phone contract suggest that I have made a poor credit file even worse and that I will struggle to gain a decent mortgage rate in the future - even though I debt free.

The annoying thing is I think I am a good credit risk. I was one day late paying one credit card and honestly thought I set up a direct debit for a new credit card. I don't think credit agencies actually do a good job of assessing credit risk. They are lazy in their techniques of only giving high scores to people who own their own homes and lived in the same house for a long time.