Credit history and mortgage applications

June 16, 2012

Landlords Insurance

Spring and summer is a classic time for people to start looking for buy to let and other forms of mortgage.

You may though, have heard a few things about credit history making a difference.  What does that mean?

Typically:

  • essentially, any lender will want to try and understand the risks they face in lending to someone.  The higher they see the risks being, the more you may typically have to pay for the loan;
  • if they see the risks as being particularly high, they may decline to lend to you at all;
  • one way they assess the risks involved is to look at a credit history report relating to the applicant;
  • the credit history basically contains information about aspects of your financial position. It is provided to potential lenders by a number of external organisations who collect and consolidate information about you and your previous financial dealings;
  • for example, if you have previously taken out and successful repaid a loan, this may sit on your credit history report as a plus point.  By contrast, if you have defaulted on a loan, it would be recorded as a significant negative point.  Late credit card payments and many other issues, may be noted;
  • all this information is statistically analysed and weighted against each other.  Out of that process will come what is called a credit score – something a potential lender will use to assess their position on your loan application;
  • you have a legal right to ask for a copy of your own credit history information and that might be something that helps you understand your position;
  • every time you apply for a loan of some form, that fact is noted on your records.  If you are refused finance, it might be advisable to try and find out why rather than simply make multiple applications to different potential lenders.  Things such as cheap landlords insurance purchases might not be considered to be a request for finance in some circumstances.

As a general rule, if you have been out of the country for some years and don’t have a long-term residence history, it might be a good idea to check your credit report before starting to apply for buy-to-let mortgages.

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