A guide to credit checks with The Mortgage Society

The information a lender is required to find as part of their credit checks can be crucial with regards to your borrowing abilities. Particularly when looking to obtain a mortgage deal and the kind of interest rate you might be offered.

At The Mortgage Society, we understand that credit reports can be confusing and a Royal London survey confirming that a third of Brits have never looked at their credit report.

Luckily, we are on hand to help you understand the different types of credit checks and how you can potentially improve the outcome, in order to feel more at ease it comes to your finances.

Lenders and Credit Checks

Lenders typically perform a credit check to assess your financial stability and reliability before agreeing to lend you a lumps sum. Your credit report includes:

• Personal details such as your name and address.
• Details of people you are currently or have previously been financially associated with e.g. a partner or spouse.
• Borrowing and repayment history
• Current borrowing amounts and credit limits.

Types of Credit Checks

Hard vs Soft Credit Checks

There are two types of credit checks: hard and soft.

Soft Credit Check: This type of credit check happens when you review your credit report yourself, or a lender checks your eligibility for offers. This kind of check doesn’t show up on your report.

Hard Credit Check: This type of credit check occurs when you apply for credit such as a mortgage or credit card, and the lender takes a detailed look at your report and creditworthiness – this type of check requires your permission. These checks can stay on your report for up to two years and are visible to other lenders.

Multiple hard credit checks in a short period of time can affect your ability to borrow, as it may suggest financial difficulty. It can be advantageous to take the time to understand which lenders suit your historical and current financial situation with the help of mortgage broker to reduce the number of hard checks.

Steps to Improve Your Credit Check Outcome

Reviewing your credit report and score before applying for credit can help you improve how lenders view you. Here are six steps you can take:

1. Search your credit report for mistakes before the credit checks take place. This gives you the opportunity to correct any inaccuracies that could be damaging.
2. Reduce your outstanding credit. Assess whether there are any debt payments you could easily make to help clear the overall amount.
3. If manageable, pay more than the minimum payment on loans or credit cards. This can show willingness to lenders in repaying money owed.
4. Avoid late payments by automating bills and ensure each bill is in your name.
5. Be cautious when applying for new credit or loans. Avoid applying for multiple credit cards or loans as this could demonstrate to lenders that you are experiencing financial difficulties.

Speak to an Adviser

If you have questions about your overall credit report or are worried about your future borrowing ability, get in touch to find out how we can help you take the next steps in taking control of your finances.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

Approved by The Openwork Partnership on 07.10.2024

The Mortgage Society is a trading name of Just Mortgages Direct Limited which is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited, which is authorised and regulated by the Financial Conduct Authority.​

References:

https://www.royallondon.com/about-us/media/media-centre/press-releases/press-releases-2023/january/over-nine-million-uk-adults-could-have-mistakes-on-their-credit-files/