Credit score improvement for mortgage

Daisy2611

Hi,
I'm looking for advice on behalf of my friend. He is Spanish and has lived in the UK for 5 years (not British citizen). He is looking to apply for mortgage at the end of the year / start of next. He was worried about credit score rating as its 354 on Clear Score. However, he has no current or past debt and wondering what the best way is to improve credit score. Can you suggest best way to improve credit score? I had suggested applying for credit card and paying off straight away to show that credit is being built up and being paid off. But not sure if that's the best advice!

Thank you! 

[Deleted User]

The best advice is let him know that credit scores aren't used in the UK. He may not be used to UK lending and how lenders will assess him. So tell him not to worry about his 354.

He'll need to establish a credit history demonstrating low risk for a mortgage - which means being on the ER, address stability, credit card usage, clearing in full each month (not as soon as he makes a transaction), perhaps a phone contract and so on. 

But with a thin file, he'll need a good deposit and a decent broker.

Daisy2611

Deleted_User said:

The best advice is let him know that credit scores aren't used in the UK. He may not be used to UK lending and how lenders will assess him. So tell him not to worry about his 354.

He'll need to establish a credit history demonstrating low risk for a mortgage - which means being on the ER, address stability, credit card usage, clearing in full each month (not as soon as he makes a transaction), perhaps a phone contract and so on. 

But with a thin file, he'll need a good deposit and a decent broker.

Credit score / ratings are used in the UK though? So having a credit card and clearing monthly will definitely help improve credit rating? He has registered to be on electoral role. 

kimwp

Daisy2611 said:

Deleted_User said:

The best advice is let him know that credit scores aren't used in the UK. He may not be used to UK lending and how lenders will assess him. So tell him not to worry about his 354.

He'll need to establish a credit history demonstrating low risk for a mortgage - which means being on the ER, address stability, credit card usage, clearing in full each month (not as soon as he makes a transaction), perhaps a phone contract and so on. 

But with a thin file, he'll need a good deposit and a decent broker.

Credit score / ratings are used in the UK though? So having a credit card and clearing monthly will definitely help improve credit rating? He has registered to be on electoral role. 

The way credit score is talked about on this forum can be a bit misleading I think. Not an expert, but my understanding is that things that improve your credit score will (mostly) improve your chance of getting credit, but that lenders don't use the actual credit score number when they consider an application. And they'll use other information that doesn't get used in calculating the credit score  including information about you (I don't know the nuances) and other things like whether they've sold enough of those products to the profile you present (for example 51%+ of applicants should receive the advertised Apr)- though this won't really matter for a mortgage. 

There's a buying houses board on here that would probably yield the best advice to help your friend.

[Deleted User]

Daisy2611 said:

Deleted_User said:

The best advice is let him know that credit scores aren't used in the UK. He may not be used to UK lending and how lenders will assess him. So tell him not to worry about his 354.

He'll need to establish a credit history demonstrating low risk for a mortgage - which means being on the ER, address stability, credit card usage, clearing in full each month (not as soon as he makes a transaction), perhaps a phone contract and so on. 

But with a thin file, he'll need a good deposit and a decent broker.

Credit score / ratings are used in the UK though? 

No.  They're used in the US, but not here, which is where the confusion tends to come from. 

Lenders will assess you on your credit conduct and other factors and determine your risk levels for themselves.  The CRA scores have an unfortunate habit of heading in the opposite direction to how lenders view you, hence why trying to use it as a measure is very often worse than useless. 

So your friend needs to demonstrate low risk actions, even when his credit scores tell him he's doing the wrong thing - such as getting a credit card or paying off a debt..

Ebe_Scrooge

Daisy2611 said:

Credit score / ratings are used in the UK though?

Follow the advice given by ZX81.

Just to hopefully clarify a little further - or maybe add to the confusion! - regarding credit scoring.  A lender will take the data contained within your credit file, churn it through their algorithms and come up with their own internal credit score.  You, nor I, nor anyone else will ever know what the criteria are, or even what their scoring range is (marks out of 10, marks out of 100, marks out of a thousand, whatever).  Crucially, though, the internal score bears no relation whatsoever to any score dished out by the CRA.  All you can do is build up a history of responsible borrowing and repayment - borrow within your means, always pay back what is owed, on time.  There are many factors that a lender looks at (address stability, being registered on the ER, etc.), but a solid history of paying what is due is one of the major factors.

macman

In summary, what matters is his credit history, not a fictitious score that lenders don't even see.

K_S

Daisy2611 said:

Hi,
I'm looking for advice on behalf of my friend. He is Spanish and has lived in the UK for 5 years (not British citizen). He is looking to apply for mortgage at the end of the year / start of next. He was worried about credit score rating as its 354 on Clear Score. However, he has no current or past debt and wondering what the best way is to improve credit score. Can you suggest best way to improve credit score? I had suggested applying for credit card and paying off straight away to show that credit is being built up and being paid off. But not sure if that's the best advice!
Thank you! 

@daisy2611 Having been UK resident for 5 years, as long as he has had a current account during that period, the account is recorded on his Equifax and Experian files, is on the electoral roll at his address (EU citizens living in the UK should be able to register), and has pre-settled or settled status, his chances of getting a mortgage should be good on those fronts. The Clearscore number is based on a lot of things which aren't necessarily taken into account by lenders when they do their "credit-scoring".