Imagine the scene – you’re trawling property websites looking for your next home to buy and you spot the one. The perfect one. You picture a great spot for your sofa here and see your cat purring happily by the fireplace. And as for those integrated uplights – to die for!
Anyone who’s ever moved, or has thought about it, can no doubt relate. The emotional can cloud the practical – and before you know it, you’ve mentally moved into your new home. But it’s wise not to fall hook, line and sinker in love just yet, at least not until you’ve weighed up your finances – and that starts with checking out your credit score.
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The current housing market
Although the housing market hasn’t quite recovered from pre-Pandemic levels, we saw a surge at the start of 2024 and this May has seen several lenders offering reduced interest rates on fixed mortgages.
The housing market at a glance
- The latest Nationwide House Price Index showed average values rose on a monthly basis in May 2024 by 0.4%.
- Across the UK, the average discount from asking price is 3.4%
The current credit conundrum
In recent years, the UK has seen a fluctuating economy that slipped into recession and helped to trigger a cost of living crisis. Things are not all bad – inflation is down and GDP is on the rise, but what we have learned over the past few years is that the price of mortgages can vary drastically from year to year.
So, in the midst of these unstable times, it makes sense to be cautious and take a little time to work out whether you really can afford that new home over the longer term before you take the plunge.
Why being a responsible borrower starts with your credit score
Buying a house is a big financial commitment, so it’s time to do some homework. Put your credit-scoring head on and set aside all those ‘good feels’ for now – it’ll get you ahead of the game. As your mortgage is likely to be the biggest loan you get, you need to understand what your mortgage provider will expect of you. This all starts with your credit history.
First off, check your credit score to see where you’re at (before your lender does). Knowing how healthy your credit score is will give you an indication of how likely a mortgage provider will lend to you and at what rate. Then, if you find any areas that are bringing your score down – like not being on the electoral register or errors on your report you can take steps to improve it before lenders check it out themselves.
And remember, even though the act of moving house itself won’t affect your credit score, any mortgage you apply for will be recorded on your credit report and can subsequently affect your score. So, get up to speed on your score beforehand and increase your chances of getting that mortgage first time round (avoiding multiple applications) and a better rate to boot.
Three credit-healthy steps to get you closer to your new home
- Understand how your credit history affects getting a mortgage
- Take time and check your score before applying for a mortgage, so you know where you stand
- Get credit ready – take steps to improve your credit score
Bottom line
When searching for a home, take a few simple steps to get credit ready before you decide on your budget. Knowing your credit score and the things you can do to get it up to scratch before applying for a mortgage, may very well take the headache out of your mortgage search, get you a better rate and ultimately have you snuggling up with your pet on that sofa in your new home sooner than you think.