1. Spend regularly on a credit card (but repay in full on time)
If you miss payments on credit cards or loans – especially if it happens regularly - it can be a warning sign that you might have difficulty repaying money. And that’ll put an end to early hopes of an easy application for a mortgage.
To help show you can manage credit, start using a credit card to pay daily expenses. Put your groceries, train fares and lunch on your card, say, and then pay it off in full on time each month. Your card provider will then report the prompt payment history – a big tick– to the credit agencies.
2. Packing lots of unused plastic? Bin what you really don’t need
Beware if your wallet or purse is packed with unused store and credit cards – it could be a big turn-off. Why? Having plenty of credit at your fingertips can put off potential lenders who may worry you choose to use all of the credit at a later date, then struggle to pay it back.
As a rule of thumb, lenders like to see you use financial services on a regular basis; so don’t close all your credit accounts, just the ones collecting the most dust.
3. Make sure you don’t ‘max out’
If you stretch your credit card allowance to its very limit, it could suggest you struggle to curb your spending. This could count heavily against you as lenders look at your credit limits and how much of it you regularly use. Keep your balance low to show you can control your credit and can take care of it sensibly.
4. Make (much) more than minimum payments
You may be tempted by the minimum payment as the most attractive option for your credit card. However, it can have an impact on your credit score. Lenders can interpret this as a sign you’re not able to chip away at your debts, and mark you down. You’ll also pay more in interest, so try to clear as much as you can each month to help improve your score.
5. Monitor for mistakes you didn’t make
Credit reference agencies hold an enormous amount of your financial data, and errors can creep in. Typically, this could be a mobile phone bill marked as late when you paid it on time, or the same debt listed twice. This can damage your score so check once a year to make sure it’s free from errors – especially ahead of your application for a mortgage. Contact the credit-reference agenciesExperian,EquifaxorTransUnionto see a copy of your credit file. If you find a mistake, you can appeal to have it corrected or ask for a note to be added to your file to detail any special circ*mstances.
6. Ensure you’re on the electoral roll
Your name on the electoral roll is usually seen as a sign of stability and dependability. If you’ve recently changed address, left home or university, you may have dropped off. Apply on the government's website; you’ll need your National Insurance number and local authority name to register.
7. Avoid using ATMs with your credit card
It’s late, you need to get home but have no cash – so you use your credit card at the ATM. Ouch. This can be costly as there’s often a fee plus high interest. Lenders can consider these types of withdrawals – especially if made regularly as evidence of poor financial habits.
8. Pay down as much debt as you can
It might seem like a good idea to have an emergency or rainy day savings fund, but if you’ve got hefty credit card debts or an outsized overdraft, it can often pay to prioritise those over your savings. Having too much debt can hurt your credit score, so it can help to pay back as much as you can ahead of a mortgage application.
9. Tread carefully when asking for new credit
Whenever you apply for new credit, you’ll often find your target company runs what’s called a ‘hard credit check’ on you. This scrutinises your credit history for clues about your money habits. However, asking for a new card or loan also shows you need to borrow. If you’re also just about to apply for a mortgage, this may then a raise an extra question mark over whether you can afford future payments – especially if you try two or three different lenders. Try to leave a gap of at least six months (to show you can meet repayments) before you apply.
10. In a flat share or a relationship? It could pay to keep your finances separate
If you’re privately renting a shared flat or house, your flatmates’ credit history could impact yours. If you’re all named on the property’s gas or broadband bills, or have a joint bank account to pay the rent, it's likely there’s a financial link on your credit record.
This means when you alone apply separately for credit, lenders can look at a linked person’s record too – and if it’s not healthy, it could lead to a rejection.
So if you move out from your house or flatshare (or split up from a partner), make sure your finances areno longer linked.
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