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Boosting your credit score for a buy to let mortgage application

Make sure your credit score is strong to get the best btl mortgage rates

Last Friday I talked about qualifying for the cheapest buy to let mortgage. As I explained, buy to let mortgage lenders assess both your circumstances and your investment plans when deciding what to lend, and how cheaply. And whilst you can make sure your business is airtight, making sure you have a spotless credit score can be a little more complex.

Fortunately, whilst blemishes on your record might haunt you more than a drunken holiday tattoo, they are easier to remove. If you’re about to apply for a buy to let mortgage, read on to find out how to make sure your credit score is as strong as possible.

Checking your credit score before a buy to let mortgage application

Firstly, before any big credit application (like a buy to let mortgage), get a credit report and scrutinise it. And I mean scrutinise; imagine trying to find a wasp’s contact lens in a shag carpet and you’ll have a rough idea of how closely you should be looking. The sort of things you should be searching for are:

  • Out-of-use products. You may not use that credit card any more, but if it hasn’t been cancelled, it’s still on your credit file – along, possibly, with an out-of-date address. This sort of discrepancy can cost you a credit application.
  • Products that aren’t yours. Don’t recognise that mobile phone? You might be the victim of a fraudster.
  • Errors or things you want to challenge. A credit report might display arrears you went into through no fault of your own (through theft, for instance), or it might display something that plain isn’t right. You can write to a credit agency to request them to remove an error or add a ‘notice of correction’ explaining your side of the story (make sure you do this for all of the agencies, Experian, Equifax and Callcredit… not just one).

Improving your credit score

Once you’ve looked at your credit score, you’ll have an idea of the areas that can be improved. Generally speaking, lenders are looking for:

  • Stability. It helps if you own, rather than rent, your main home, and have had the same address and bank account for a while. Lenders also like people in steady employment, so if you’re self-employed, remember to keep detailed accounts that evidence a profitable business. Also remember that buy to let mortgages are usually assessed on the potential rental income of the property you want, rather than your personal income.
  • Consistency. The same address should be on all active contracts, accounts and products. If you have any you no longer use, cancel them – don’t let them linger at an old address.
  • Financial prudence. A fancy way of saying ‘good with money’ – i.e. you keep up your payments and are never late. Perversely, someone who has taken out several loans and paid them all off promptly might have a better credit score than someone who’s never borrowed money in their life! Late payments and arrears that are a year old or younger will have the greatest effect on your application, so remember, if you start to struggle with making payments, contact your lender! If you have any outstanding personal debts, try to pay these off with savings.
  • Being on the electoral roll. It definitely doesn’t hurt. You may not see the point of voting or have a morbid fear of jury duty, but not being on your council’s books could well hurt a credit application.
  • Good timing. Lots of notes on your file at once look very bad. Space out applications, and make sure you apply before a big disruption like changing job or moving house. If you’re only getting a quote and not making an application, ask for a ‘soft search’ that won’t damage your credit score the way a credit search would.

A final point

Credit scoring is far from consistent. The three credit referencing agencies each produce different reports, and every lender interprets them differently, based on what their idea of an ‘ideal customer’ looks like.

This means that if you do get turned down for a buy to let mortgage, it doesn’t necessarily mean you’ll be turned down for the next one. Whilst lots of credit checks in a short space of time can harm your credit score, if you do get turned down, your TurnKey Landlords adviser will do their best to explain why and work with you to find a buy to let mortgage that is more suitable.

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Amelia Vargo is an online marketing executive for CT Capital. Amelia writes for Turnkey Mortgages, Turnkey Landlords, TurnKey Bridging, TurnKey Life and Commercial Trust.