Sounds like a cop-out, but the answer is true.
Oh yeah, I know, that really does sound like a cop-out.
What does it depend on?
Well, in the context that I’m the owner of a Mortgage Advice Company, it depends on whether you want to borrow money or not.
If you DO want to borrow money…now, or in the future, the answer may surprise you.
It’s your Credit Profile.
So, not an “asset” in the traditional sense of the word, but in truth, having a good credit profile is one of the most valuable assets you can have.
And it’s something which many people either don’t know about or have never checked.
The reason for that is our education system, but don’t get me started on that massive gap!
Back to the point – YOUR credit profile.
You see, it’s the first thing that lenders check….and if you don’t fit within their algorithms of what’s acceptable, that loan just isn’t going to happen.
There is some really GOOD NEWS though, and it lies in the planning.
The key is to start the process early, talk to experts and understand what you’re looking at, what it means and how to improve it.
Here’s a tried and tested way to maximise your attractiveness to lenders.
- Get a copy of your FULL credit report
There are 3 avenues for this.
The biggest provider is Experian, and you can reach them at www.experian.co.uk . You can subscribe to their “Credit Expert” facility free of charge for 30 days. You can cancel any time before the end of the 30 days, but it’s a one-time trial, so if you go back to them a couple of years later, you’ll get charged.
Next on the list is Equifax, and they can be reached at www.equifax.co.uk . Their set-up is virtually the same as Experian, in that they have a 30-day one-time free trial. Note that you can go to www.clearscore.com and get access to your Equifax score and report for free! It’s relatively new and not many of our clients have used it yet, but it is free!
Next is www.noddle.co.uk which is the front end name for call credit. It’s not as comprehensive as the other more established brands, but again it’s free (for life, apparently).
With the “free” services, you may get served up with adverts that the companies have “matched” you with, based on your profile – you may consider this a price worth paying for a free service – it’s a personal choice.
- Analyse your report & Boost Your Profile
It’s super important that you get your full report rather than just a “score”.
The “score” is merely that providers’ application of their own algorithm.
The important stuff is the detail behind the score…the individual conduct on each account you have, the electoral roll, the financial associates, the number of addresses, the accuracy of the information!
- Check that you’re on the voters roll
- Lenders love it if they can see your recent address history and that you’re registered at that address to vote.
- Note that there are some lenders who like to see stability of addresses too – So if you can show only a few addresses in the lead up to an application, all good.
- If you’re not on the voters roll (electoral roll), call your local council and get registered….do it now!
- Check your address history
- It’s unusual, but not unique, that mistakes are made, and that can have an impact, so check the addresses and dates with a keen eye.
- Check all of your Accounts
- If you have an old account that you don’t use anymore, get it closed off.
- Are you up to date on all payments?
- ********THIS IS A BIGGIE********
- Never, ever, ever, miss a payment on any of your accounts. This one thing has the biggest impact for most people on their ability to secure that loan.
- Are the addresses registered on all accounts correct?
- Make sure your adviser has a copy of your credit report – s/he can then make sure that any application accurately matches what’s on your file – this is super important! We have found that just this one step has reduced refer or worse, decline, decisions massively.
- Scatter Gun approach is dangerous! If you’re looking to secure credit, especially if it’s for a mortgage, the worst thing you can do is to apply “willy-nilly” and hope for the best. We’ve seen many people go from bank to bank to see how much they can borrow, credit footprints are left and any future application is then put in jeopardy! Do the research upfront, BEFORE you make a single application.
- It’s key to note here that when you view your own credit report, it’s only you and the credit bureau that can see that your file has been searched, not the lender, so you can search your own file as much as you like.
- It’s a computer, get over it.
- Sounds harsh, but this is the reality. When you apply for a mortgage, the information that is input into the system is checked against your profile, and if the lenders system likes your profile, it’s all good. If it doesn’t then that could well be your lot. Yes, it’s impersonal, yes, it could be unfair, but it is what it is.
- Nobody is “entitled” to borrow – the lenders make a commercial decision based on your own individual circumstances.
- Be aware of who you’re financially linked to. If you have a joint financial product with someone (mortgage, loan or bank account), then you will be financially linked from a credit perspective and their financial behaviour could affect your ability to secure credit. So, if you’re linked, understand who to, how and whether it is necessary and current. For all former associations, it’s definitely best to get unlinked from them (all the agencies allow you to do this).
- If you’re rejected, try to find out why. Check all of your reports and delve deep. The last thing you want to do is continue applying for alternative credit after a rejection, unless of course you know why the previous application was rejected!
- PAYDAY LOANS – *****ANOTHER BIGGIE******]
- If you have even half an inkling that you may be applying for a mortgage in the next couple of years, just don’t apply for a payday loan! It’s really as simple as that.
- Why? – Lenders will view you as desperate and unable to manage your day-to-day finances.
- Don’t listen to the payday loan companies who say that it rebuilds your credit profile – for the vast majority of people, this is just untrue and normally does way more harm than good.
- Default or bankruptcy on your file? speak to someone who can interpret the situation and guide you through it.
- Protect Your Profile
So, we’ve already established that your profile is up there with your most important assets (certainly if you’re looking to borrow money). We therefore need to look at how to ensure that your profile (asset) is protected.
From a mortgage company perspective, this is relatively straight forward. The key is to ensure that your adviser has a copy of your full profile, upfront, before you even think about any application or decision in principle.
Ensure that your adviser reviews your profile and matches your circumstances with a lender whose criteria fits with your profile.
Unless it’s absolutely necessary, ensure your adviser applies for an initial decision in principle with a lender that leaves a “soft footprint”. This means that it’s only you and that lender that can see you have applied for a decision in principle…no other subsequent lenders will be able to see it.
Now you know the basics of your credit profile and just how valuable an asset it is. We’re here if you have any questions about it – just shout.