Credit Score: Does online gambling affect getting a mortgage?

It’s one of the most common urban legends circulating mortgage applications. Your best mate’s uncle's neighbour has a friend who was turned down for a mortgage because he had used a betting website. So does online gambling affect getting a mortgage?

Well, the explanation is simple enough; banks don’t want to lend to people who might have irresponsible spending habits. But is there any truth to the myth? And could a flutter on your favourite team get in the way of your hopes of homeownership?

The truth is, yes, gambling websites on your bank statements can make lenders nervous.

And when coupled with other factors, this can be enough to see your mortgage application rejected. It isn’t as simple as a single betting transaction making it impossible to secure a mortgage, but it is something to consider if you are hoping to get on the property ladder.

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How do lenders detect gambling?

When you submit a mortgage application, you will be asked to provide 3 months of bank statements. Underwriters will examine these for signs that your earnings and expenses match what you have stated. This is all part of the process for ensuring that your mortgage is affordable.

They are trained to look for the signs of regular gambling, and they may see this in regular transactions to common betting websites.

When does betting not matter?

If you bet small amounts here and there, the lender is unlikely to care about these transactions. When your betting is within your spending money and you aren’t using a credit facility to place the bets, this doesn’t ring any alarm bells to the lender. But if you also have poor credit, a history of late payments, and you’re placing large deposits in online gambling websites that are outside of your budget, this is a different story.

Lenders are only concerned with risk

Just like a gambler, lenders are only concerned with making sure they don’t lose money. To do this, they have to assess the level of risk involved with backing one borrower over another. If one person regularly deposits money into a gambling account, and the other puts their money into savings, then it’s easy to see which borrower will be more attractive to lenders

One of the biggest factors that will deter lenders is borrowing money to place bets. This means you should never be using betting websites when you are in your overdraft or place a bet using a credit card.

You are free to gamble with your earnings, but only if this is money you have in the bank, not money you’re borrowing from the bank. Most people live in their overdraft and don’t see the distinction between their money and the bank’s money, but this isn’t the kind of behaviour that lenders want to see.

Does my credit score show gambling?

Your credit score is not linked to any online gambling, so lenders will not be able to see that you are gambling from your credit score alone. However, if your credit score is poor, you make payments late and your lender can see evidence of gambling on your bank statements, these factors will all add up.

Will gambling debts impact my ability to secure a mortgage?

Any debt will impact your ability to secure a mortgage, and gambling debt is no different. If you now have your gambling under control and are working towards paying off this debt, this shouldn’t be flagged as an issue. It would be difficult for lenders to see the source of the debt, so provided you have stopped making deposits to gambling websites, there is no reason to disclose this.

How can I increase my chances of being approved?

Lenders want to see that you are responsible with your money and make payments on time. In the months running up to your mortgage application, keep your spending in line with your stated expenses. You should also avoid making any credit applications, as these will show as hard searches on your credit report.

Even if you aren’t a regular gambler, a lot of people like to avoid any sense of doubt by stopping gambling for three months before an application. You could use a secondary bank account, like a Monzo account, if you want to participate in gambling but don’t want this to show up on your bank account. (Note that transfers to other bank accounts in your name might raise just as many questions, so it could be better to avoid it entirely.)

Lenders aren’t looking for reasons to rule you out, but they are responsible for more stringent affordability checks. If your mortgage is affordable and you are feeling confident, you should do everything in your power to keep your spending in check to ensure there is no reason to doubt your application. And stopping gambling is one way to give lenders extra confidence.

How to improve your credit score - Guide for the UK

How to improve your credit score?

Your credit score is something you probably don’t have to think about very often. But when the time comes to apply for a mortgage, your credit score will be all you can think about. Credit scores can often derail mortgage applications, so it’s worth getting clued up on yours.

Plenty of companies will offer to improve your credit score for a fee. But unless your credit score is low because of a mistake, there is little that an outside company can do that you can’t do yourself. By taking control of your own credit score, you can improve your chances of getting a good deal on your mortgage.

Read on to learn more about credit scores, why they matter, and how to improve yours. If you suspect your credit score might be holding you back in your mortgage application, get in touch to see how we can help

What is your credit score?

What Is Your Credit Score?

Your credit score is a numerical value attached to your credit report. Financial agencies report your financial behaviour to authorised credit referencing agencies. These companies then organise this information and assign a score based on your behaviour. 

Your credit score is also helpful for confirming your identity. It includes information about your address history and your financial links. If you have ever been bankrupt or have a CCJ against you, this information will appear on your credit score, making it harder for you to evade these checks on credit applications.

How to check your credit score

How to check your credit score

If you are curious about your current credit score, you can sign up to the major credit referencing agencies. There are free subscriptions available that will allow you to get a rough idea of your credit score. Paid subscriptions will allow you to gain a detailed insight and even make changes if the information is incorrect.

Your credit score will differ for each credit reference agency, so it’s worth signing up for each one to get a more complete picture. Lenders will have their own preferences, so you need a complete picture.

The main credit reference agencies in the UK are:

  • Experian – you can sign up directly to Experian with a free account. Experian assigns a score out of 999.
  • Equifax – you can sign up to ClearScore for free to see your Equifax credit score. Equifax assigns a score out of 710, while ClearScore uses a 700 point system.
  • TransUnion – to see your TransUnion credit score, you can sign up to Credit Karma, formerly known as Noddle. TransUnion assigns a score out of 710.

Each of these companies will offer a free and a paid version, the free version should be sufficient for your needs at this time. If there are issues on your report, a paid subscription might be worth investigating.

Who can see your credit score?

Who can see your credit score?

When you apply for credit, you are giving permission for the lender to look at your credit score. Any organisation with an existing financial relationship to you can also check your credit score. Many banks will check your credit score periodically to help them assess if they need to make changes to your account.

When you move house, landlords may ask to check your credit score before deciding if they should allow you to rent from them. Some employers may also ask to see your credit report before hiring you, particularly if you will be handling large sums of money. If you are in a lot of debt, you could be a high-risk hire.

Utility companies, insurance companies, government agencies and debt collectors will also be able to see your credit score. In general, you have to give permission before an organisation can look at your credit report, and only authorised organisations are allowed to see it. Every time an organisation requests to see your credit report, this will appear on your search history.

Your credit report does not include information about your salary or your savings. And it isn’t visible to anyone who cares to search for it. Only authorised companies with permission to check it are allowed to search your credit history.

Factors that impact your credit score

Factors that impact your credit score

Your credit score is made up of many different factors. Each credit checking agency will have their own scoring system, but in general, they all look at the same factors. These include:

  • Your residential history. Most lenders will want to see a residential history of at least 3 years.
  • If you are on the electoral roll.
  • Your current accounts, credit card and personal loans status.
  • Utility records.
  • Financial links to other people.
  • CCJs and bankruptcy.

These are just some of the factors that will be used to create your credit score. Some factors will have more impact than others. For example, a CCJ on your record will be more damaging than a missed credit card payment from 3 years ago. 

And remember, each credit referencing agency will have its own system for scoring your financial performance. So one agency might place more weight on responsible credit card usage than another. This is why it is so important to get the full picture before applying for credit.

Reasons you might want to improve your credit score

Reasons you might want to improve your credit score

The most common reason that individuals seek to improve their credit score is to prepare for a loan application. When lenders look at your credit report, they use the information to determine if you are a high-risk borrower. 

A high-risk borrower might struggle to repay, miss payments and even default on the loan. So if the lender decides to go ahead with an application, they will attach a higher interest rate to the loan. 

When you have a low credit score, it costs more money to borrow money. This means that those with a high credit score will typically have access to the best lending products. So when you are looking for a high-value loan like a mortgage, it can save you tens of thousands in interest payments by simply improving your credit score.

How long will it take to improve your credit score?

How long will it take to improve your credit score

Most credit referencing agencies update your credit score every month. So while you could see small short-term improvements, it’s more likely to be a long-term task. This all depends on the factors that are holding you back. For example, a CCJ on your record is perhaps one of the worst things that can happen to your credit report. This will stay on your credit report for 6 years.

Your entire credit report lasts 6 years, so if you had a period of financial difficulty and struggled to make your credit card payments 5 years ago, you would have to wait 1 year until this period drops from your credit report. However, it’s worth noting that historical blunders will carry less weight than more recent mishaps.

The length of time it takes to clean up your credit report and improve your credit score will depend on the type of issues you are facing. Some of the steps outlined below are short-term fixes and some are long-term goals.

How to improve your credit score

How to improve your credit score

If you suspect your credit score might be holding you back from either securing credit, or securing a good interest rate, there are steps you can take. Remember that changes to your credit report can cause your score to go down as well as up. If you need to start building credit from scratch, you should do this well in advance, as the credit application will still be fresh on your file. If your credit score is holding you back, you should be prepared for the possibility that this could hold up your plans for homeownership by months, or even years. You can use this time to boost your savings, allowing you to lower the LTV amount and secure an even better year.

Get on the electoral roll

Although a small factor to consider, it is nonetheless worth getting this step completed before any credit application. Lenders use the electoral roll to confirm your identity, so this is one of the first steps you should take. It only takes a moment to get on the electoral roll, but it can take much longer for this to appear on your credit report.

Check your address history

When applying for any credit, lenders will want to see that you have 3 years of residential history in the UK. If there are mistakes on your address history, you won’t be able to add them in, but it can help you to spot fraud. 

Look for any addresses you don’t recognise and then determine the financial link. Each address will be linked to some kind of lending, insurance product or utility service. If an account has been left open, or if an account has been opened fraudulently, this will be evident from your address history. 

A common problem that recent graduates face is when utility accounts from their student house are left open in their name. When this happens, any debt accrued on the account will negatively impact your credit score. Identify any outdated accounts and make sure you close them.

Pay down your debts

If possible, use some of your savings to pay down your debts and keep them under the 30% threshold. If you have 2 credit cards and have the choice to pay off one entirely to close the account or pay both partially to bring it under 30% of the credit limit, the latter choice would be better.

Keep your balances low

It’s a common misconception that those with zero debt have the best credit scores. Lenders actually want to see a history of responsible borrowing, as it gives them confidence that you will be able to repay your debt to them. If you have no debt payment history, this can be just as bad as having a history of missed payments.

Lenders typically want to see that you keep your debt under 30% of your threshold. So, if you have a credit card with £1,000 of credit, keep your monthly balance under £300. The same goes for overdrafts and store credit cards.

As you are nearing your mortgage application, avoid applying for further credit. This can make lenders more nervous if you have a large portion of unused credit.

Build a credit history

If you are starting from scratch with no credit history, you need to find a way to start building it. This can be difficult to achieve, as lenders will want to see your credit history before granting any credit. But without a credit facility, you can’t build your credit history.

Many students overcome this by applying for a student credit card. This will change into a normal credit card after graduation. When used responsibly, this can be a great way to build your credit as you start your career. However, if you lack the financial discipline to use the credit in the right way, you might simply end up with debt you struggle to repay.

A prepaid credit card can help you to start building your credit score and can also be helpful for making large purchases online. A credit card will offer additional protections, so you can shop online with confidence. 

After you have built a credit history, you can then apply for a real credit card. The bank you have a current account with is often the best place to start. Banks will typically offer a low credit limit, which may only be around £500. Spend a little on the card every month and then pay it back in full to start building a history of good credit behaviour.

Check for fraudulent behaviour

Your credit report is often the best way to identify fraud. Before making any credit applications, you should always check that fraudulent activity isn’t costing you more in interest payments. If accounts have been opened in your name without your knowledge, this could be negatively impacting your credit score.

If you suspect fraud has taken place, you will need to file a report with Action Fraud. You should also apply a notice of correction password to your credit report. This is a signal to lenders that you have been a victim of fraud in the past. It will trigger them to request your password before granting any line of credit to you.

Sever financial relationships

If you have even held a joint account, you may be financially linked to that person, and their financial behaviour could be dragging your score down. The most common source of financial relationships is one you might have with your partner. 

If you are broken up, make sure any accounts you held in both of your names are closed. Many couples will break up and one will continue using the shared account. This will preserve the financial relationship and could damage your credit score in the future. If your ex-partner were to get into a lot of debt and be unable to repay, this could reflect negatively on your account.

Another common source or financial relationships is student house accounts. If you have set up a shared account to make bill payments during your time at university, you could still be financially linked to those you once lived with. Make sure all accounts are settled and closed to sever this tie.

Make payments on time

One of the simplest ways you can keep your credit score on track is to make sure you make all payments on time. When you look at your credit report, you will see the financial history of each lending facility you have in your name. For each month, you will see a dot that will either be marked as on-track, late or missed. 

Avoid having any missed or late payments on your record, as these can drag your score down. The easiest way to achieve this is to set up direct debits to make payments for you. This will eliminate the risk of missing any payments. If you are struggling to make payments for any reason, always contact the lender as they may be able to arrange a payment holiday which will not be reported as missed payments on your credit report.

Stop applying for credit

Repeat applications for credit can negatively impact your credit score. If you have been rejected for credit from one lender, don’t immediately turn to another lender. When applying for a mortgage, lenders will not see if your credit applications have been successful, just that they happened. These will show up in your credit search history, and it will state if the search was a soft search (speculative) or a hard search.

A lender might be concerned that after granting you a mortgage, you could go on a spending spree on multiple credit cards and be unable to repay your debts. In the run-up to applying for a mortgage, you should stop applying for credit and give it time for recent applications to fall down in your credit history. An application made 6 months ago is less damaging than an application from 2 weeks ago.

While your credit report might take months to update, searches can show up immediately, so it’s not worth running the risk that this could derail your application. Remember that some things that might not seem like credit facilities will be seen as such on your application. This includes mobile phone contracts and insurance products. Many insurance providers will offer an interest-free loan which covers a full year of premiums, allowing you to pay monthly instead of up-front. As such, this will be considered a type of borrowing and will therefore show up on your credit report.

Use rental payments to improve your credit

If you don’t own your house, chances are you rent a home. A common complaint that many renters have is that they are able to make rental payments every month, and yet lenders still doubt their ability to make regular payments.

Changes in 2018 mean that you can now have your rental payments added to your credit report. This can help to boost your credit score and show a history of making payments on time. You can use CreditLadder to report your rental payments to the credit checking agencies, allowing you to build credit while you pay for one of your biggest monthly expenses.

Use savings to improve your credit

If you are hoping to get on the property ladder, you will probably want to build up your savings. The good news is that you can also use your monthly savings to improve your credit score. We stated above that your savings accounts are not declared on your credit report, but specialist lenders are now offering a unique workaround.

LOQBOX is a unique savings account provider that allows you to determine how much you are able to save each month. This annual amount is taken as a 0.0% interest loan and placed in a locked savings account. You will be unable to access the savings until the end of the term. Instead, you make regular monthly payments to “pay back” the loan. 

At the end of the year, the money is yours, and you have a history of regular loan repayments to help bolster your credit report. For those who struggle to save money and need a little added incentive, this can be a great way to stay motivated.

Closing thoughts

Your credit report might never be perfect, but the steps above should help to keep you on track. Remember that even those with low credit scores will be able to secure credit, it will just cost more money. So by improving your credit score, you could decrease your interest rate and save money in the long-term. Being aware of how your credit score impacts your borrowing position is one of the best ways to stay one step ahead and secure a good deal. If you need help finding a lender who will work with you, get in touch to find out how we can help.

Guide to getting a mortgage

In this guide, we are going to look at how to secure a mortgage, common mistakes to avoid along the way, and what to do if you aren’t accepted the first time. Read on to discover the Niche Mortgage Info guide to getting a mortgage.

The boring stuff

A mortgage is a large loan from a lender to purchase a property. Since the average house price in the UK is now £237,963 and most people don’t have this kind of money lying around, the majority of people turn to mortgage providers to secure the funding.

There are a few different factors you need to know when applying for a mortgage. The amount of deposit you can provide will help to secure a better deal. The length of the mortgage term will also change the mortgage application. And finally, the interest rate structure will determine how your interest rate is determined.

Before the 2008 financial crash, it was common for lenders to offer 100% mortgages. This meant that anyone could approach a bank with proof of income and apply for a mortgage to buy a property, often without the adequate checks.

If a bank has to repossess a home because of missed mortgage payments, they will have to sell the property. If the value of the property has fallen, as many did, they are unable to recoup the full value of the home. This is one of the contributing factors that led to the financial crash. And this is why lenders now ask for a deposit and carry out stringent checks. Our Guide to getting a mortgage will now break all the stages down in more detail.

Guide to getting a mortgage

Deposits explained

The biggest obstacle for homeownership is often the deposit. Lenders will typically want borrowers to provide at least 5% of the property value as a deposit. Though Covid has led to most lenders only accepting deposits of at least 10%. With a smaller deposit, you can expect higher interest rates. Ideally, you should aim to save a deposit that is 20-25% of the property value.

If you are unable to save this amount of money, you could get help from a Government Help to Buy scheme. These schemes are intended for first-time buyers. The government tops up your 5% deposit with a low-interest loan. This allows you to secure a better deal on your mortgage. However, you will then need to pay your loan and mortgage payments, so this could drive up your monthly expenses until the loan is repaid.

Unfortunately, with 100% mortgages now a thing of the past, it has become more difficult for individuals to get on the property ladder. Setting your sights on a smaller property is one way to boost the value of your deposit. Once you have built some equity in your home, you could upgrade to a bigger home.

credit score

Your credit score and how it impacts a mortgage decision

Your credit score is a key factor that helps lenders to make a decision. A good credit score and a healthy deposit will give you access to the best rates and mortgage products available. But a poor credit score combined with a smaller deposit might hold you back.

Your credit score will be different according to different credit checking agencies. The three main agencies are TransUnion, Experian and Equifax. Different lenders may use different agencies, and some will look at all three, so it’s important to get a complete picture.

Your credit score takes into consideration the amount of credit available to you, how well you make repayments and other key financial information. Some lenders will automatically reject your application if they see signs of financial instability such as going beyond your agreed overdraft or transactions from betting websites.

Keep a close eye on your finances on the run-up to your mortgage application. You need to make sure you are spending within your means, making all payments on time and avoiding asking friends or family for money.

Lenders will also ask to see the last three months of bank statements. This will not only help to prove that the income you have stated is correct, but it also helps them to spot signs of instability. Avoid extravagant or outlandish purchases during this time. You can get a free check here.

Your income and your mortgage application

Above all else, lenders want to know that your mortgage is affordable. The best way they can confirm this is by looking at your income. Those in full-time salaried employment will have an easier time proving their income. 

You may be asked to provide a P60 or your last few payslips. If you have recently started a new job, it may be helpful to wait until you have passed the probationary period before you submit your mortgage application. This will give the lender more reassurance that your income is steady.

If you are self-employed, the process of proving your income is altogether more complicated. Many lenders will ask to see the last three years of your trading accounts. If you cannot provide this – because you have recently switched to self-employment, for example – then you may have to shop around for a lender that understands your situation.

The self-employed may have to jump through more hoops to be able to secure a mortgage, but once approved, they will have access to all of the same lending products. In this sense, there is no such thing as a “self-employed mortgage” only a self-employed applicant.

Understanding brokers

Understanding brokers

When navigating the mortgage market for the first time, you might be overwhelmed by the options available to you. Many first time buyers make the mistake of going straight to their bank for a mortgage. They assume that the existing relationship they have with the bank will give them some kind of preferential treatment. This isn’t always the case.

We recommend working with a mortgage broker to help navigate the best deals available to you. Having a mortgage application rejected can be distressing to first-time buyers. This is why we recommend working with a broker who will help you to find the kind of deal you are most likely to be accepted for.

A broker can look at the whole market and match you with lenders and mortgage products that suit your lifestyle and financial goals. If you’re determined to pay off your loan as quickly as possible, a broker can help you find a lender that accepts overpayment without a fee. And if you want lower payments at the start of the term, a broker will be able to match you with a great introductory deal.

While a broker will cost money in the beginning, working with one could save you a significant amount in the lifetime of your mortgage. And the expertise they bring to the table could help you to avoid making a significant mistake. Not to mention, it can be helpful to be able to outsource this time-consuming part of the mortgage application process. (please see the list of top questions to ask a broker)

Mortgage timescales

Mortgage timescales

The average time to secure a mortgage from start to finish is only around 30 days, but the actual home-buying process might take much longer. It can be risky to wait until you have found a property you love before applying for a mortgage. Instead, you should apply for something known as a ‘mortgage in principle’. 

This is a stripped-back mortgage application that doesn’t go into too much depth. This allows you to start your search in the confidence that the bank is likely to lend you the funds, provided the property valuation is in order and you pass the final checks. A mortgage may be rejected once the mortgage in principle has been granted, but this doesn’t happen often.

As with all administrative tasks, the quicker you can respond with the required documents, the quicker the process will be. This is why it is helpful to be responsive during the mortgage application to keep things moving along. Working with a broker can help to speed up the process, but sometimes the checks and processes take longer.

Common reasons for a declined application

When a mortgage is declined, it’s stressful, but not the end of the road. Being declined by one lender does not mean that you can never secure a mortgage, it may simply mean that you need to wait a while, clean up your credit score and try with a different lender.

The most common reason that a lender will decline a mortgage is that they have uncovered something in your financial history that makes them nervous. This might be a discrepancy in your income, a transaction that hints at irresponsible spending, or late payments. Even something as simple as too many credit applications in a short space of time can be enough for a lender to turn you down.

If your mortgage is declined, try to find out the reason so you can fix it. If the reason is something like a CCJ that hasn’t been removed from your record yet, you can quickly amend this before making a new application.

If possible, try to avoid having any hard credit checks on your record before you resubmit your application. This could mean waiting around three months to submit another application. It might be stressful and you might have to say goodbye to a home you love, but this will increase your chances of being accepted the next time.

Fixed vs variable rate interest

Choosing your mortgage rates

There are a few ways you can control the amount you repay every month. Your repayments will be determined by your deposit, your mortgage term and the interest rate. Increasing the mortgage term will lower your monthly repayments but increase the amount you pay back overall. The best way to secure a better deal is to shop around for the best interest rates.

Fixed vs variable rate interest

When you start your mortgage journey, you will notice that mortgages fall into one of two categories: fixed and variable rate. With a fixed-rate mortgage, your interest rate will stay the same for the duration of your mortgage. The only thing that will change it will be if you remortgage, but this would be an entirely new mortgage product. 

A fixed-rate mortgage will typically be higher than the Bank Of England base rate (currently at 0.1% in October 2020). This is because lenders need to account for increases to the interest rates. A fixed-rate mortgage will make it easier to budget and could allow you to make regular overpayments to reduce the term and cost of your mortgage.

With a variable rate mortgage, your monthly repayments will depend on the interest rate set by your lender. Often, they will be linked to the Bank Of England base rate, but not always. A tracker mortgage will often be set at a percentage above the base rate. So, if interest rates go up, your monthly payments will increase. But if they go down, they will decrease. Many variable rate mortgage interest rates are set by the lender, so they can increase or decrease without notice. Only choose this type of mortgage if you are confident you will be able to make up the difference if the interest rate goes up.

A note on introductory offers

When shopping for a mortgage, you might feel like you are pleading for scraps, but you hold more power than you think. Lenders are keen to get your business, as there is no shortage of lenders out there. Provided you have a secure income and a healthy-sized deposit, there is no reason you shouldn’t be able to secure a mortgage.

With this in mind, think about how you can make your status work to your advantage. Some lenders will offer a fixed term as long as 10 years, which should give you plenty of time to budget, make plenty of overpayments and then remortgage when you hold a greater portion of the equity. You may also find lenders willing to cover things like conveyancing fees to help convince you to sign with them.

With all mortgage products, always think about the lifetime value of the offer and how this will shape your finances in the next 5, 10 or 20 years. Understanding the lifetime value of your interest rates and repayment term will help you to make a rational and sound choice.

We hope you found this guide to getting a mortgage helpful. If you need any help with getting a mortgage then please try our mortgage qualifier via the button below.   

What Do UK Mortgage Underwriters Look for On Bank Statements?

When you are applying for a mortgage, you may be asked to supply your bank statements as part of the application process. This is common for self-employed applicants as well as salaried employees. While this may seem daunting, it’s an essential part of the mortgage process.

A mortgage underwriter will examine these statements and use the information to help inform their decision to grant you a mortgage. If you’re getting ready to apply for a mortgage and want to make sure your application is in the best possible shape, you may want to keep an eye on your spending.

What is an underwriter?

Mortgage underwriting is the process used by banks to determine how much of a risk it will be to lend money to an applicant. If you have a steady income, responsible finances and pay your bills on time, this will look a lot better than someone who is in debt and persistently late with their payments.

The underwriting process is all about deciding if the risk of lending to you is worth the reward (the interest you pay). It might not be a fun subject, but you need to understand this before going forward with an application.

Why do they look at your bank statements?

Lenders look at your bank statements as these are a window into your finances. It helps them to see patterns in your spending, your level of fiscal responsibility and helps to confirm if your income is what you’ve said it is.

If you have told the bank your monthly expenses are much lower than they actually are, your bank statements could be used to dispute this. This is why it’s important to be honest and accurate in your financial disclosures in the earlier stages of your application.

Trying to reduce your monthly expenses to be able to borrow more money will backfire unless you can show that you have actually reduced your monthly expenses.

What do mortgage underwriters look for?

  • Proof of income. The first thing a lender will look for is a regular source of income. If possible, this should arrive in your bank on the same day each month and it should be the same amount. While you might think an increase in income is a good thing, fluctuating income is seen as a sign of financial instability. This is particularly true for the self-employed who may have different income levels every month.
  • Regular savings. Transferring money to a savings account can also make you look like a responsible borrower. However, dipping into your savings for small amounts could have the opposite impact.
  • Responsible overdraft use. An overdraft is considered a good thing, provided you are using it correctly. Your salary should bring you above your overdraft every month, and you should never exceed your agreed amount. Bank charges outside of your overdraft interest could be considered a bad thing.

What are the common red flags?

These are just some of the things lenders may consider to be poor spending habits. If possible, you should avoid the following:

  • Gambling sites. There have been cases where lenders have rejected applications because an applicant has too many gambling-related transactions on their bank statements. Gambling websites are an obvious red flag, as it could show an out-of-control gambling habit.
  • Regular borrowing. They will also look for other sources of income. If you regularly receive cash gifts from an unspecified source, such as your parents, this could hint that you are financially irresponsible and often need to be bailed out. This is why managing your income and expenses is vital in the months running up to a mortgage application.
  • Have you accurately represented your spending habits? If you’ve stated on your application that your entertainment expenses are just £50 a month, but the lender can clearly see that you are spending more than £300 a month on entertainment, this could bring your application into question. Make sure you are accurate in your representation of your spending habits.

What can I do to improve my bank statements?

When you are getting close to applying for a mortgage, it’s time to start thinking about getting your bank statements in shape. You will likely be asked for 3 months of statements, so you need 3 months to prepare. If you want help getting your finances in order, working with a mortgage broker through Niche Mortgage Info can help.

During this time, do the following to keep your spending in check:

  • Avoid gambling websites, even for withdrawals. You don’t want any gambling websites to appear on your bank statements at all.
  • Stay within your overdraft limit. If possible, don’t dip into it at all.
  • Avoid borrowing money for any reason. If a friend or family member owes you money, get it in cash or ask them to wait to return it.
  • Make all payments on time to avoid late payment fees.
  • Make sure you always have enough money to cover your bills so you don’t have any payment reversals due to insufficient funds.

Clean up credit file after bankruptcy

Cleaning up your credit file after Bankruptcy

Whilst going bankrupt can feel pretty final, it is, in fact, a new start and the beginning of your new financial life. The path to recovery can be a long one, but there are plenty of things that you can do to speed the process up. When you go bankrupt, the mark will be left there for at least 6 years from the point it started and whilst you won’t be able to fully get going until it’s expunged, operating your finances in the right way will stand you in good stead for the future.

It’s really important to ensure that your default dates are showing as no later than the date of your bankruptcy, as it can cause issues for your future credit applications. Should they be showing as incorrect, it’s imperative that you tell the creditor in question, as to tell anyone else would just be elongating the process

Verifying your information with all of the UK credit agencies is also vital, as they might not all have the same information and very often their details are different, due to the fact that not all creditors report to the same agencies. When you do contact creditors to make them aware of the discrepancy, make sure it’s in writing, as if you call them, you’re just going to be asked to write in.

Get yourself some new credit

Getting a credit card so soon after money issues might feel a bit….well…wrong, but it’s one of the most helpful things you can do to rebuild your credit status. We’re not suggesting that you go and get one and start spending again, rather we’re recommending that you go for a low limit credit card like the Vanquis Card that’s designed for this kind of scenario.

The best way to operate this card is to only use between 10-15% of the maximum limit each month and pay it promptly, without fail. This shows that you can be trusted to manage credit properly and the longer you do it for, the more your score will rise. You might take a bit of a hit to begin with, as applying for credit is going to hit your overall score, but managing it in this way after that will more than makeup for it.

Don’t however apply for several, thinking that this will increase your chances of success, as multiple applications can really knock you back and completely take away the purpose of what you’re trying to achieve.

Avoid high cost credit

Whilst obtaining low cost, low maintenance credit will help you build your credit score, taking out high cost credit, like payday loans and doorstep loans are not only hard to manage (due to the high level of interest), but they actually hurt your cause. High cost credit is deemed as an emergency option which actually knocks your score down, so you should stay away from it.

Live within your means

You should try to live within your means, even with this new line of credit at your disposal. If you start behaving in the same way that led to your problems in the first place, it won’t be long until you’re having money problems again. Try to stick to the principle of only buying what you’ve saved up for or what you can realistically afford. DON’T start relying on credit to get you through.

Also, always pay on time, every time, as even late payment can show up on your file, even if you are just a few days late.

Put these measures into place and you can put your bankruptcy well and truly into your rearview mirror and start increasing your credit status in a meaningful and long-lasting way.

How can I obtain my credit file?

There are four credit reference agencies (CRAs). Experian, Equifax, Transunion and Crediva. You can check all 4 using Check My File.

Credit file clean up

Repair your credit file post IVA

Whether it’s already occurred or it’s just about to, the day you complete your IVA is a joyous one. Aside from being extremely proud of yourself, it’s time to start thinking about managing your money again, now that it’s all your own. And no one could possibly blame you!

However, the likelihood is that your IVA will have some long lasting effects over your credit, which could take some time and effort to remove. There may be a time in the future when you need credit to realise your plans, such as to buy a new home or car. So, if you don’t want to be restricted financially in the years after your IVA is completed, you need to take measures to improve your credit score.

There may be a time in the future when you need credit to realise your plans, such as to buy a new home or car. So, if you don’t want to be restricted financially in the years after your IVA is completed, you need to take measures to improve your credit score.

So, what’s the next step?

The first thing that will happen after you make your last payment is that you’ll get an official signed IVA completion certificate. This is the document that proves that your IVA has finished – congratulations to you!
Next, the records held by the insolvency service concerning your financial status will be updated to reflect your new debt free status.

Removing yourself from the Insolvency Register

Once the paperwork is all completed, you should get yourself a copy of your credit file, which is easier than ever in this digital, online world we live in. There are four credit reference agencies (CRAs). Experian, Equifax, Transunion and Crediva. You can check all 4 using Check My File. Each one offers online access to your credit file, completely free of charge.

If you want to obtain a complete image of your credit status, you will need to get one of these copies from each of the four agencies, as creditors aren’t always in the habit of registering your debt with all of them.

Comprehending your credit file

When you try and gain an understanding of what’s actually on your credit file, it can feel like a mixture of science and magic. We promise, once you know what you’re doing, it’s pretty easy to grasp.

What muddies the waters a little is the fact that each agency has its own unique system for credit scores (e.g. Experian scores range between 0 and 999). Don’t get too hung up on these figures, however, as all you really need to understand is that when you manage your personal credit well, your score will rise.

Conversely, if you don’t manage it well, your score will drop and the lower it goes, the harder it will be to get the best finance deals or even get credit at all. When you get credit, the details of the arrangement will be held on your credit file. Information like the date you applied, who you borrowed from and your payment history will all be held there. If you settle your bills using credit, these utility accounts will also show up on your file. The following will be displayed:

  • Car Insurance (when paid monthly)
  • Utility accounts credit (e.g. gas and electric)
  • Mobile Phone contracts

Six years

When you first began your IVA, it marked the beginning of the six year period that it stays on your credit file. So, should your IVA have been for a duration of 5 years, it will still remain for a year after it has finished. Even if you complete your IVA early it will still remain on your file for 6 years from the start date. Once your IVA drops off your file you will see a large improvement in your score. But only if any defaults drop off along with the IVA, for this to happen you need to ensure your default dates on your credit files are correct. They should dated no later than the IVA start date.

Checking your default dates

Another detail that needs to be checked that none of your default dates are shown to be later than the date your IVA started. If any of your listed defaults are displayed as being after the date of your IVA registration, it could cause you problems obtaining credit longer than it should.

We’d seriously recommend checking with all four credit reference agencies to make sure everything’s as it should be and reporting any discrepancies directly to the appropriate creditor. Telling the credit agencies is not going to achieve much, as they’re going just going to pass a message to the same people.

The letter can be wording like the bellow;

re: [account/reference xxxxxxxxxxxxxxx] I started an Individual Voluntary Arrangement (IVA) on dd/mm/yyyy.

You can confirm this by checking the Insolvency Register at  Insolvencydirect

I am writing to ask you to correct my credit file for [details of your debt with the creditor, including the account number or reference number].

This debt is included in my IVA. At the moment [there is no default date shown / the default date is shown as dd/mm/yyyy].

This is incorrect and a breach of the Information Commissioners Office guidelines and the Data Protection Act 1998.

How to improve your credit score post IVA

Your credit report is a constantly evolving thing, as it is a snapshot of a six year period in your financial history. The good thing about this fact is that it can be healed. Once you hit the six year point from when you took out your IVA, you should have something of a clean slate to work with.

That said, you almost certainly won’t have the best credit score when you exit your IVA. As previously mentioned, what you’ll need to do is show the credit agencies that you are able to manage your money well. If you can do that, you’ll be rewarded with a better credit score.

In order to do this, you more than likely have to take out new loans or credit to help build up your score. If this accurately describes you, we have 4 tips you should follow:

  • Never pay late or miss a payment
  • Stay within the agreed bounds of your agreement
  • Only use small quantities of credit (10-15% of available credit)
  • Try to avoid interest being paid, by paying the entire balance every month

It might seem like the last thing you want to do after the money issues you’ve had, but one of the most effective ways to assist your financial recovery is by operating a low limit credit card making sure to only use 10-15% of the available credit and pay the balance in full each month.

Vanquis Credit Card

A lot of people find that having a Vanquis Credit Card (a financial product designed to help you rebuild your score) can accelerate the upward trajectory of your credit status.

As mentioned it’s best to only use 10-15% of your available credit each month so that it shows that you can manage your credit correctly and consistently which will help your score improve. It must be said that applying for a credit card will initially impact your credit score, but as you pay it off each month, this will gradually improve.

Save money to get a better score

If the road that took you to needing an IVA has left you with a bad taste in your mouth when it comes to borrowing money, there are other ways to improve your score without taking out credit. Companies like Loqbox can help you build your credit score back up, whilst putting money aside for a rainy day.

You can save between £20 and £500 each month, which is put into a virtual savings pot that’s worth 12x what’s in it. Rather than paying for your Loqbox, you are given finance to pay for it on an interest free basis, the payments for which are equal the amount you agree to put into it each month.

Each one of these payments shows up with all 3 credit referencing agencies, illustrating to lenders everywhere that you’re able to manage credit. By the end of the 12 month period, you will have completely paid for your Loqbox, which can then be opened, making all of your savings available to you.

However, nothing is set in stone and if your circumstances change, your Loqbox can be opened whenever you want it to be, with all of your money being returned to you without any penalties or fees. This is a much better option than missing a payment, as doing so will have a negative impact on your credit score.

We have no affiliation with Loqbox, nor do we receive any commissions for recommending them, but we feel that their service is a good one to those trying to boost their credit status.
Take a look at our guide to getting a mortgage after an IVA

Clean up credit file after bad credit

Cleaning Up Your Credit File after Bad Credit

Having money problems can be traumatic, especially when it comes to bankruptcy and everything associated with it. It is probably one of the most stressful things that can happen to a person, but the good new is that nothing is forever and there is a way back, as there are a number of things that you can do to help the process along.

An IVA or a bankruptcy notice is going to sit on your credit file for a minimum of 6 years from the point it started, so the job of rebuilding your credit status isn’t going to start until it’s completed. However, it doesn’t hurt to start employing the right financial habits, even before you’ve settled your debts. The 6 year point is the magic figure though, as even if you clear monies owed before that point, this is when it will disappear from your credit file for good.

Points of note: It’s important that you check that none of your credit defaults are incorrectly dated after your DMP, bankruptcy or IVA started, as this will cause you problems. If they’re wrong, tell your creditors to amend their records. Also, if you’ve completed your IVA and as yet haven’t received your completion certificate, it might be worth checking with your IVA company as to its likely date of arrival.

Checking with all three UK credit reference agencies that your correct status is showing is important too, as some creditors don’t report to all of them. For example, if you’ve been discharged from bankruptcy or you’ve finished your IVA or DMP plan, it should be shown on your file. There’s no point raising the issue with Equifax, TransUnion or Experian, as they will just contact your creditors to rectify the issue. The quickest way is to contact the offending creditors directly – in writing.

Get Some New Credit

Whilst it might seem counterintuitive, one of the first and most important things you can do is to start new credit accounts, like perhaps a low credit card with a nominal credit limit. Many people recovering from bad credit issues swear blind that they’ll never EVER have a credit card again, but this position only means that it will take longer to rebuild their credit rating. Managing your credit the right way illustrates an ability to use it wisely and responsibly and it can really boost your score.

You’ll probably have issues getting a major credit card if you have a low credit rating, but that doesn’t mean that you’ll get refused by them all. There are other options, such as:

  • A secured credit card
  • A retail store card
  • Specialist credit cards for people with bad credit e.g. Vanquis Bank

If you’d prefer to stay away from traditional types of credit card, there is another savings based product that will work just as well at building your credit score. The product is called Loqbox and you basically pay into it for a year and get your money back at the end. It’s that simple and as it’s technically a form of credit, each payment you make into it will illustrate your ability to make regular payments.

You shouldn’t go crazy with applications for credit, thinking that it improves your chances, as it does you no good at all to keep applying. Each application for credit leaves its mark on your credit file. Too many and it can worsen your chances of getting accepted with anyone.

We would recommend avoiding the payday loan market, as it is known for charging exorbitant rates of interest that can quickly push you back into the cycle of bad credit. Another reason is that the three major credit agencies TransUnion, Equifax and Experian view high cost lending dimly, so have accounts like these actually do more harm than good.

Carry On as You Mean to Go On

If you don’t change your spending habits, you can’t hope to expect a different outcome, so you should try and continue the habits you’ve had to follow since your money problems began. It’s the foundations upon which your future financial stability is going to built, so it’s a bit of a must.

Getting into the habit of buying only the things you can afford and living within your means is the best way way to make sure that old routines don’t set back in.

Pay on the Dot, Every Month

If you’re operating a credit card or store card after your money problems, it’s vital that you pay everything on time, without fail. Credit scores are quite easily influenced with even a missed payment showing up, so it’s important that you don’t allow that to happen. Even though you might think “just one won’t hurt”, it could, so it’s better to be safe than sorry and winding up back where you started.

So, there you go. To help your application for bankruptcy mortgagesIVA mortgages and mortgages after CCJs, employ these basic measures and you improve your chances of a good credit score and a successful mortgage application.

Mortgage after an IVA, but partner has good credit?

An IVA is a kind of debt management solution that can help you to take back control of your spending. It is seen as a preferable option to bankruptcy for both creditor and debtor. It’s also easier to mend your credit report after you have cleared an IVA. Securing a mortgage after an IVA might be a little more difficult, but it is in no way impossible. Just because one lender has said no, it doesn't mean that all lenders will say no.

An IVA will stay on your credit report for six years, regardless of how long your agreement is. So, if your agreement is five years long, the IVA will still be on your report for 12 months after completion. After this, it will drop from your credit report and you can begin to build your credit score again. If you would like to take out a mortgage in this time, it may be possible to do so if your partner has good credit.

Your credit score is just one factor that lenders will look at when making a mortgage decision. In some cases, a lender will immediately reject you if you have an IVA on your record, even if you have successfully completed. Others will look at your entire profile, including evidence of earnings and the size of your deposit. You should always shop around for a lender that will work with individuals with an IVA. Your partner’s good credit score may even be enough to allow them to secure a mortgage on their own.

How to get a mortgage if you’re struggling

Getting rejected for a mortgage can be very distressing. Every lender has their own hoops you need to jump through, and sometimes you might fall short of their key requirements.

It’s important to remember that being rejected by one lender doesn’t mean that you will be rejected by all lenders. If you’ve recently been rejected for a mortgage, consider if any of the following situations apply to you.

  • I have a poor credit score
  • My income is low
  • I only have a small deposit
  • I moved to the UK less than three years ago
  • I’m self-employed

Read on to discover how you can work around these common problems and finally get on the property ladder.

My credit score is holding me back

Your credit score is usually the first thing that mortgage providers will consider. Your credit score can differ depending on the credit scoring agency.

There are three main credit scoring agencies in the UK. They are Equifax, Experian and Call Credit. Your chosen lender might look at one, two or all three of them to asses the strength of your application.

A credit score helps lenders to understand your past relationship with money and borrowing. They can see things like your total amount of debt, missed credit card payments, utility bill arrears and even adverse credit history like CCJs. They can also check that your address history matches the information you provide.

If you have a poor credit score, this can impact your chances of being accepted for a mortgage. Before making an application to another lender, check your credit score with all available agencies.

Make sure the following details are correct and up-to-date.

  • Your name and address
  • Electoral roll details
  • Your current accounts
  • Closed accounts
  • Satisfied CCJs are removed if 6 years have passed.

If there are mistakes on your credit report, this can impact your ability to secure credit.

The following steps will help to improve your credit score.

  • Keep your details up-to-date.
  • Make sure you never use more than 50% of your total credit limit.
  • Avoid too many hard credit searches in a short space of time. This usually means waiting at least 90 days after every failed credit application.

When your credit score is improved, you can try applying for a mortgage again.

My income is low

Mortgage providers make their lending decisions based on affordability. If they have concerns that you won’t be able to afford the repayments on your existing wage, then they may reject your application.

Lenders also consider things like future affordability. If you lost your job and it took a few months to find a new one, would you be financially stable enough to keep up with payments? Or if interest rates increase, will the higher payments make your loan unaffordable?

Padding your income or being overly optimistic with your expenses is another warning sign to lenders.

A help-to-buy scheme might be more suited to your situation. You should also look at shared ownership as a way onto the property ladder.

I only have a small deposit

A mortgage lending decision is based entirely on risk. This is why house hunters with a big deposit are seen as more attractive. The large deposit helps to reduce the risk for the lender.

If you think you have been rejected because your deposit is too small, there are a few steps you can take.

  • Look for a lower valued property. This will mean that your loan to value is higher.
  • Save more money to increase your deposit value.
  • Look for a help-to-buy scheme that could boost the value of your deposit.
  • Use a shared ownership scheme to get on the property ladder with a smaller deposit.

I moved to the UK less than three years ago

One of the things that lenders look for is a history of ties to the UK. If you moved to the UK less than three years ago, you may struggle to secure a mortgage.

When filling in a mortgage application, you will often be asked for your address history for the past three years. If any of these addresses are outside the UK, you may struggle to secure a mortgage.

In many cases, you may simply need to wait until you have a history and evidence of living in the UK for more than three years before making your application.

Some lenders will be more inclined to accept applications from those with less history in the UK. Only by working with a specialist broker can you get access to these lenders.

I’m self-employed

The self-employed often struggle to prove their earnings and convince mortgage providers that they are a safe bet. Unlike a monthly salaried job, freelance work is considered to be high risk. Your earnings might fluctuate, so you could struggle to make the payments.

If you are self-employed, you will typically need to provide two-year’s of accounts as evidence of your earnings. Lenders might take an average of your last two year’s earnings, or they could look at the most recent tax year as evidence of future earning potential.

Being self-employed doesn’t have to mean the end of your mortgage journey. While some high street lenders might be reluctant to give you a mortgage, an increasing number of specialist lenders see the benefits of self-employed workers.

As the self-employed sector is growing, the mortgage industry is taking a little longer to catch up. By working with a specialist mortgage broker, you’ll be able to navigate the mortgage process with ease.

If you’re ready to make your homeowner dreams a reality, get in touch with Niche Mortgage Info to find out how we can help you get a mortgage if you’re struggling.

Getting A Mortgage When Self Employed

It might be harder to get a mortgage when self-employed, but it isn’t impossible! Self-employment brings lots of perks, but unfortunately, many self-employed individuals will tell you that getting a mortgage easily is not one of them. If you work for yourself and are looking to get on the property ladder or remortgage an existing property, this guide will help you to navigate the mortgage process with ease.

Before the credit crunch, it was easy enough for the self-employed to get on the property ladder because of self-certification mortgages. These were aimed at freelancers and contractors and offered a way for them to get on the property ladder without having to share years and years worth of accounts. For those hoping to get on the property ladder while self-employed, the self-cert mortgage allowed applicants to simply tell the lender their income without providing evidence.

Unfortunately, this led to some people lying about their income in order to secure a bigger mortgage. These have now been banned in the UK following the credit crunch as they were prone to abuse. With this type of mortgage banned, it has never been more difficult for the self-employed to get a mortgage. Company directors will often have a hard time getting a mortgage while their employees will enjoy a much more straight-forward process.

If you are looking to get on the property ladder, this guide will tell you everything you need to know about getting a mortgage when self-employed. From choosing the structure of your business to preparing your accounts, getting a mortgage when self-employed might not be easy, but it isn’t impossible.

Couple- self-employed mortgage

There’s no such thing as a self-employed mortgage

When applying for a mortgage as a freelancer or sole trader, you aren’t applying for a special type of mortgage. You are applying for the same type of mortgage as everyone else, you just need to jump through more hoops in order to verify your income. If you are being sold a special type of self-employed mortgage, this is often just a business loan which can be used as a mortgage. These will often cost more than a traditional mortgage and you may require substantial collateral.

Once you have jumped through the hoops for a traditional mortgage provider, you will be treated like any other lender. You will likely be able to borrow around four to five times your annual income. If you are applying with a partner, the process may be easier if they are in full-time employment.

accounts or tax returns

What you need to get a mortgage

The key to a successful mortgage application for the self-employed is evidence. You need to show evidence of your income, usually in the form of accounts from the past two years, or your past two tax returns. The more evidence you can provide, the better. In general, you will need:

  • Two year’s worth of accounts or tax returns
  • An accountant
  • Evidence of regular work
  • A deposit
  • A strong credit score

Lenders will usually base their decisions on your average profit for the past two years. Some lenders will also request that you have an accountant prepare your accounts. Some will also request that the accountant is certified or chartered, so bear this in mind if you choose to hire an accountant.

A good accountant will know what lenders are looking for and will be able to help you prepare up-to-date accounts before you apply for a mortgage.

If you don’t have two-year’s worth of accounts yet, it doesn’t mean that you can’t get a mortgage. Some lenders will also consider things like evidence of regular work, previous full-time employment or if you can show guaranteed future work. If you already have a mortgage, your existing lender may be able to help. They are far more likely to offer you a mortgage if you have an existing relationship. If you don’t already have a mortgage, one of the best ways to increase your chances of being accepted is to ensure you have a large deposit. At least 10% of the total value of the property is advisable.

How does your business setup change your mortgage application?

There are three main types of business structure and they will all have a different impact on the way your mortgage application is considered.

Sole trader

If you work alone then you will be classed as a sole trader. Keeping accurate records will be fairly straightforward as all of the company profits will be yours. Lenders will often look at your self-assessment tax return when making a lending decision. You should get a form called a SA302 which shows your income, expenses and tax due once you file your tax return. Make sure you provide this alongside your accounts.


If you started your business with another person, you may have a partnership. Mortgage providers will want to look at your share of the profit from the business. It’s important that your accounts clearly show your share of the income.

Limited company

Setting up a limited company means that your personal affairs are completely separate from the business. A limited company will have to have at least one director and often a company secretary. Sole traders can also choose to set up as a limited company.

Directors often pay themselves a salary plus dividend payments. It’s important that you make this clear to the lender so that they can take both portions of your income into consideration.

man proving income

How to prove your income

When you meet with a mortgage advisor, they will want to see your accounts for the past two years. These should be compiled by a chartered accountant who can advise you on how to make sure everything is up-to-date. You should make an effort to ensure you understand everything from your accounts. It makes a far better impression on your mortgage advisor if you can help to explain dips in income or any seasonal trends.

It’s common for self-employed individuals and their accountants to look for ways to legally reduce their tax liability. However, when it comes to applying for a mortgage, you suddenly want to prove that you have a much higher income. If you are planning to apply for a mortgage in the next few years, it would be advisable to speak to your accountant about how best to handle this. They will be able to advise you on the best ways to keep your tax bill down while still ensuring that you have evidence of healthy income.

Another common problem faced is for directors or limited companies. Some directors choose to leave profits in their business rather than take everything is salary or dividends. This is a very common practice and some mortgage lenders will take retained profits into consideration when making a lending decision.

In some ways, it can be more difficult for company directors to get a mortgage than it is for the people they employ. If you are concerned about your income status, a mortgage broker will be able to help you find a lender that will take these things into consideration.

If you are hoping to borrow more than £500,000 then you should ask your mortgage broker to consider private banks as an option. These will often have far more flexible terms and can take a full range of income sources into consideration.

Credit for a Mortgage

Cleaning up your credit score

When applying for a mortgage, your credit score is one factor that features heavily in the lending decision. If you aren’t sure what your credit score is, there are plenty of free sites that will allow you to see your credit report for free. There are three different credit scoring bureaus in the UK, and each of them will have different criteria. In order to get a more complete picture of your credit score, sign up to each of them.

There are some simple steps you can take to help clean up your credit score in advance of applying for a mortgage. To start with, make sure that all of your accounts are up-to-date and that you don’t miss any payments. Next, make sure that you are using less than 50% of your overall credit limit. Paying off your credit card in full every month is a great way to boost your credit score. And finally, make sure your name is on the electoral register and that your address details are up-to-date.

Your credit score is one part of the mortgage application process that doesn’t take into consideration your self-employed status. However, it’s a good way to show that your income allows you to keep your accounts up-to-date so it’s worth paying attention to this.


Finding the right mortgage

Before you start your search for a new home, it’s important to speak to lenders in order to find out if they will give you a mortgage and how much you can expect to be able to borrow. A mortgage broker can be invaluable for the self-employed as they will have vast knowledge and experience of the industry. They will be able to tell you which mortgages you are more likely to be accepted for and what information you will need to provide for each lender.

A mortgage broker can also help identify which lenders will accept less than two year’s worth of accounts, which ones will consider retained profits, and perhaps most importantly, which will give you the best rate.

Before you start looking for a mortgage, you should make sure that your accounts are up-to-date and that you have your deposit secured. The bigger the deposit you can get, the more likely you are to get a better rate on your mortgage.

property search

Starting your property search

If you have found a mortgage provider that you are happy with and they are happy to proceed, they may offer you something known as an “Agreement In Principle”. This is a statement from the lender outlining what amount they would be able to lend you if you were to go ahead with your application.

Once you have your agreement in principle you can start the house search with confidence. This statement helps to speed up the buying process as it gives you some confidence that you are searching for homes in the right price range. However, it's important to remember that an agreement in principle doesn’t mean that you will definitely have your mortgage application approved.

Lots of things have to fall into place for a mortgage to be approved, and unfortunately, this list gets even longer when you are self-employed.

Self-employed mortgages: Dos and Don’ts

If you are thinking about applying for a mortgage in the next few years, consider the following dos and don’ts.

  • Do. Hire a certified accountant or a chartered accountant to help prepare your accounts or your tax return. If you are trying to legally keep your tax liability down, an accountant will be able to show you how you can still show healthy income.
  • Do. Keep accurate and up-to-date accounts. Make sure that you understand your accounts and that you can explain dips in profit or any seasonal changes to your income.
  • Do. Enlist the help of a mortgage broker to help you to understand your options. They will have extensive experience with mortgage providers and will be able to help you find a lender that is more likely to accept your application.
  • Do. Reach out to your current lender if you are self-employed and are looking to move house or remortgage your property. They have an existing relationship and may be more likely to accept your application.
  • Don’t. Change your income too much for tax purposes. This will have a huge impact on your ability to get a mortgage, and it could take years to correct the damage.
  • Don’t. Give up! It might seem like a headache to get a mortgage when you are self-employed, but it will be worth the effort once you step through the front door of your new home.

For further information, please visit our self-employed mortgage services page.