What do Mortgage lenders look for in Credit Reports is the million dollar question, and one we can answer.
One of the first things we ask for when talking to new customers is a copy of your credit report. We like to see your credit report(s) at the first opportunity as they have the ability to make or break an application and we can advise accordingly.
There are 3 main Credit Reference agencies:
They all typically offer a 30 day free trial followed by a cost of around £15 a month or you can obtain your statutory report for a one off £2. These agencies also have free versions buy typically these are limited in some way or another, the main 2 are CreditKarma and ClearScore.
There is also a Credit Report service called CheckMyFile which has all 3 credit agencies on there. The good thing about this report is that is shows all 3 reports so we can see how any issues you may have are displayed on all 3 reports as they can differ. The example below is off a credit report and shows the same commitment and how the arrears appear differently on all 3 reports.
There are other examples where the the different credit reports may not show some debts, and that can also sometimes have a positive or negative effect.
What do banks look for on my credit file?
The first thing to mention is IGNORE THE SCORE! The score on your credit report is as useful as a chocolate teapot… less so, at least you can eat the chocolate! When your application is scored, the lender will take the information from your report (which I will go through later in the post) and combine it with the information on your application and then score your application internally.
So when people ask What do Mortgage lenders look for in their credit reports, we always suggest that, like the lenders themselves, applicants should focus more on the details that make up the score, than the score itself.
By “information on your credit report” we mean things like your balances and credit limits. Some Mortgage lenders like to see you using small amounts of available credit, other lenders like to see you having small amounts of credit available.
They are also looking at your payment history. In the image above, you can see that the payments were made on time in 2016 and early 2017. After that however the payments were not being made and so the arrears went to a status 1 (1 month with no payment), then a 2 and so on. Looking at the Credit Report payment history above, you can see that this did not default but it did go around 6 months in to arrears before a payment plan was set up. “AR” means Arrangement to pay and that is effectively how a payment plan appears.
Do you have defaults/CCJs or have you been bankrupt?
Most importantly – Do you fit criteria? You may only have one default, but if it was from last month and it is for £1,000 then it probably rules out a lot of lenders where as you could find someone with 3 defaults over 3 years ago fits criteria with a few more lenders.
What does Mortgage Success do?
When we take a case on, one of the first things we do is to ask for a copy of your credit report. From there we take a look through the file and list all of the issues. We then start to get a picture of how many issues there are, how recent they are, whether they are from a particular time period or scattered over a few years and so on.
With all of that, we can then start to determine the types of lenders we are looking at.
In short What do Mortgage lenders look for depends on the lender. Typically high street lenders will accept some minor historic adverse issues, building societies tend to need to the adverse to be relatively minor and satisfied and the more specialist lenders tend to accept a little more adverse but need a slightly bigger deposit.
We look over your credit report and put our underwriters hat on to try and pre-empt what questions they may ask so we can get that information from you in advance. We can then give you an idea of rates available. If you are one of those cases where it may fall between 2 types of lenders (ie normal and specialist) we will give you a best case and worst case scenario so you know what to expect, the last thing we want to do is to promise normal rates and then find we need to drop down the list – and this is why we ask you to be as open and honest as possible from the outset.