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Article by Janice Morley 

So your New Year resolution is to buy your first home for which you need a mortgage, and you cannot obtain a mortgage until you have a sound credit rating.

Before a bank, mortgage lender or finance company will lend money to you, they will look at how much of a risk you are. What they want to know is simple – will you pay them back?  Your credit information shows them how you’ve managed credit in the past and so helps them predict whether you will make your repayments in the future.

If you haven’t established a credit history, potential lenders can’t see if you are reliable with money. This can lead to your application being refused.

Your credit score is based on several factors including how quickly you pay back money you have borrowed, if you have any outstanding debit and whether you have any missed or made late payments in your past.

Familiar ways to build your credit rating are:

To open a bank account and prove you are a reliable UK resident with a good relationship with your bank.

Use a credit card and pay off the balance in full each month to create a good credit history. It helps your credit score to be keep your spending below 30% of the agreed credit limit.

Get a mobile phone contract. This can help you establish credit. Pay your bills on time and it will show potential lenders that you are organised and reliable.

The hidden traps that damage your credit rating.

It is so easy to slip down the credit rating ladder without realising it. January is a bleak month. It is also a month when all those jolly Christmas spending bills roll in. It is very tempting to pay your credit card debt late. Maybe you want to just wait until your salary comes in then pay it – don’t. You will slip down the credit rating ladder. A mortgage lender will know. He thinks – if you pay your credit card late, you will probably pay your mortgage payments late.

Renters are vulnerable as they move more often than home owners. Weston Homes Mortgage Adviser Tim O’Hanlon advises that you ensure all your standing orders, insurances, bank, vehicle leasing companies etc are informed of your moves. Even an unpaid parking ticket will get you into trouble and if not paid, you will end up in court. For a small fee the postal service will redirect your mail for up to six months.

Separated couples can fall into traps too. It is the little things that cause the trouble. The ‘once shared’  standing orders on gym payments, insurances, social clubs that have not been cancelled and are not being paid. If you apply for your credit rating score and discover these errors you can apply to get them removed.

Who do you apply to for a credit rating score? Two popular sites are Experian and Equifax Credit Report & Score. A free trial and a small fee will get you a membership and an offer of a whole host of money management advice. A good score is to be above 800 points out of 1000.

And when you move into your new home do not forget to get yourself on to the electoral register.  It improves your credit rating as well as allowing you to vote on local issues.  Companies use the electoral roll to check you are giving them the correct name and address. It is a sign of reliability and stability and a quick and easy way to boost your credit score.