Avg credit score/rating

cgphillips8

Hi,

My son is splitting with his wife and is looking for a mortgage on his own after selling their current house and going thier seperate ways.
Looking at his credit rating on Clear score and credit karma its not brilliant but we cannot see why its avg.
He has a decent job earning over £30k, has had a mortgage (joint) for nearly 3yrs and not missed any payments. All bills are paid in full by direct debit. he doesnt have a credit card as he likes to pay for items with the money he has in the bank. He has been with his bank for about 8 years.
Only other loan he has is a student loan which is paid out of his wages.

I suggested he get a credit card to get some more credit info on files but the ones he is offered are not that good, even his bank declined him online even though he never goes overdrawn.

Just trying to improve things before he looks for a new mortgae once he finds a house.

Rgds
Carl

Voyager2002

Your advice is good... a poor-quality credit card would help to build his record, and so long as he did not use it for borrowing the high interest rate would not affect him.

However, it is not a good idea to apply for credit immediately before applying for a mortgage.

Hoenir

If he's had a mortgage and paid it  without issues. That's a sign of good personal financial management. 

born_again

cgphillips8 said:

Hi,

My son is splitting with his wife and is looking for a mortgage on his own after selling their current house and going thier seperate ways.
Looking at his credit rating on Clear score and credit karma its not brilliant but we cannot see why its avg.
He has a decent job earning over £30k, has had a mortgage (joint) for nearly 3yrs and not missed any payments. All bills are paid in full by direct debit. he doesnt have a credit card as he likes to pay for items with the money he has in the bank. He has been with his bank for about 8 years.
Only other loan he has is a student loan which is paid out of his wages.

I suggested he get a credit card to get some more credit info on files but the ones he is offered are not that good, even his bank declined him online even though he never goes overdrawn.

Just trying to improve things before he looks for a new mortgae once he finds a house.

Rgds
Carl

Ignore the scores. They are made up by the CRA's.

Taking out a credit card if they do not need one, is going to effect any potential mortgage amount.

What is important is credit history. Such as no missed payments.
So looking at what you have said about mortgage & utility bills. The only issue for a mortgage is going to be affordability.

Speak to a broker & see what they say they maybe able to get.

cgphillips8

Thanks for all the comments.

Isnt his scores and credit history linked? Why would his history be poor if he hasnt missed payments?

Voyager2002 said:

Your advice is good... a poor-quality credit card would help to build his record, and so long as he did not use it for borrowing the high interest rate would not affect him.

However, it is not a good idea to apply for credit immediately before applying for a mortgage.

He is looking to apply for credit card now to hopefully help his history and it will be a few months before he applies for his mortgage (depending on when they sell the current house)

Taking out a credit card if they do not need one, is going to effect any potential mortgage amount.
Even if it has a low limit and he pays it off every month?

CliveOfIndia

cgphillips8 said:

Isnt his scores and credit history linked?

Your credit history is simply a factual record of how you've managed credit in the past.  How much debt you've got, how much available credit you've got, whether you've been making all contractual payments on time, that sort of thing.  It's this data that a lender will be looking at.

The score issued by the CRAs is meaningless - not least because they are not privy to each individual lender's particular criteria.  A lender will calculate their own internal score, using their own proprietary algorithms.  Each lender will have different criteria and a different target customer base.  Since their lending criteria are confidential and commercially sensitive, no-one outside of their risk management department will know what those criteria are, nor what internal score they give you.

cgphillips8 said:

Taking out a credit card if they do not need one, is going to effect any potential mortgage amount.
Even if it has a low limit and he pays it off every month?

It's a bit of a balancing act, to be honest.  On the one hand, using a credit card responsibly does help to build up a positive history.  On the flip side, a lender will look at the available credit you have (i.e. what the limit on your card is), and has to take a worst-case view that you'll run the card up to its maximum and then struggle to repay it.

Arguably if you have a very low credit limit it may not be a big issue.  It's never a good idea to take on more credit shortly before a mortgage application - but if the mortgage application is several months away, then the fact that you've built up several months of good history may well outweigh the negative aspect of a relatively new line of credit.