Building Credit Score for Mortgage

D924

My situation:

£30,000 in a LISA for deposit (family can match another £30k if needed, no problems here)

Long term unemployed (2 years since graduation)

No credit cards, ever

No loans, ever

No mobile phone plans, ever

No utility bills, ever

"999" credit rating on Experian (aka: no credit rating, unknown)

I want to buy my first property with this LISA once I have an income again, but I am concerned due to my lack of credit history I will be charged punitive and extortionate interest rates.

What steps can I take right now to improve my credit file, bearing in mind I've no declarable income (plenty of savings though)?
What steps could I take immediately after I find a job and have some declarable income?

How long roughly would it take of "grinding credit" before I can access the best interest rates?

ACG

You will be on the voters roll and presumably have a bank account, you do not need to really do anything else. That should be enough, but a credit card might help. Although it might take 3-6 months of getting the card, using it and paying it off before it is of any actual benefit as you will likely lose points applying for a card in the first place - but the credit score is worthless, its a guide at best. 

However, you need an income before you can get a mortgage. I think that is the bigger issue. 

K_S

@D924 I'll echo what ACG said. If you have a bank account, you have a credit history.

When I was working in London, I did plenty of mortgages for clients who had nothing but a bank account, were relatively recent (3-5 years) arrivals to the UK and often weren't even eligible to register on the electoral roll due to their country of origin. None of that on its own ever stopped them getting a mortgage.

D924

Thanks for input so far.

I checked my credit score on the other two agencies - 620 on Transunion - 520 on Equifax. So below average on Equifax and "Excellent" on Transunion.

True I need an income before I can get a mortage. It basically comes down to three factors where the first three are in favour of buying as soon as I get a job, and the third is in favour of waiting for a year or so and trying to improve my credit using cards during that year.

1. House prices will rise over time.

2. Mortgage rates will go up over time due to BoE (and globally) tightening policy.

3. If I wait a year it's another year of paying rent.

4. My credit score will get better over time if I grind it, and give me access to better interest rates.

I just don't have the background knowledge to say whether the benefits of waiting and grinding credit would outweight the cons. Or whether it would be realistic to buy immediately, then remortgage at a lower rate a few years in once my credit is good, without paying some huge early closure fees.

Also: Would being in debit with an energy provider for a couple of months (even though it's their fault for not adjusting your direct debit up yet) be enough to wreck your credit score? My girlfriend has a score in the 300's on Equifax and it's the only negative thing I could see on her report, she's never had credit cards, missed payments, overdrawn etc.

GentleGiant01

D924 said:

Thanks for input so far.

I checked my credit score on the other two agencies - 620 on Transunion - 520 on Equifax. So below average on Equifax and "Excellent" on Transunion.

True I need an income before I can get a mortage. It basically comes down to three factors where the first three are in favour of buying as soon as I get a job, and the third is in favour of waiting for a year or so and trying to improve my credit using cards during that year.

1. House prices will rise over time.

2. Mortgage rates will go up over time due to BoE (and globally) tightening policy.

3. If I wait a year it's another year of paying rent.

4. My credit score will get better over time if I grind it, and give me access to better interest rates.

I just don't have the background knowledge to say whether the benefits of waiting and grinding credit would outweight the cons. Or whether it would be realistic to buy immediately, then remortgage at a lower rate a few years in once my credit is good, without paying some huge early closure fees.

Also: Would being in debit with an energy provider for a couple of months (even though it's their fault for not adjusting your direct debit up yet) be enough to wreck your credit score? My girlfriend has a score in the 300's on Equifax and it's the only negative thing I could see on her report, she's never had credit cards, missed payments, overdrawn etc.

I see no benefit in waiting - as soon as you have a job I would advise both you and your girlfriend to get the free trial of “check my file” - send these through to a whole of mortgage broker and get some affordability idea as to how much you are able to borrow and what rates you’ll get but there are high street lenders who would give you a good deal. 

If you mean your girlfriend is in debit I don’t know how this is a bad thing? If you mean she is in debt, this will need to be cleared as soon as she can. Is it showing on her credit reports? If it isn’t, then get it back under control and don’t worry. If it is; get it back under control and don’t worry - a good mortgage broker will be able to match you with a lender who will offer you the best rates which are almost guaranteed to be better than anything you’ll get this time next year if you wait. 

ACG

IGNORE THE CREDIT SCORE! It is very frustrating how people get fixated on some imaginary score that is absolutely useless. It plays no part in whether or not you get a mortgage, not in the slightest. 

There are 3 credit agencies, they all score you differently based on their own algorithm and the information they hold. 
There are 80-90 lenders, the ones who score you, score you using their own algorithm. But there are also lenders who do not credit score you, little building societies for example. 

The credit agency has no idea how much your deposit is, they have no idea where it has come from - you will get more points for example if you have a saved deposit than if it is gifted. If you are a solicitor on £100k a year, you will probably get more points than someone on zero hours contract labouring. 

Concentrate on getting a job, then speak to a broker.