Save £4,000 a year on mortgage repayments by boosting your credit score
Those with poor credit scores could be paying thousands of pounds more per year on their mortgages, according to MortgageGym.
The online mortgage adviser worked out that, over the lifetime of a mortgage, this could add up to tens of thousands of pounds of potential savings for borrowers who boost their credit score.
Low income, low score?
MortgageGym has reviewed credit reports from among 29,000 of the company’s most recent website visitors. The results show a direct correlation between mortgage applicants’ salaries and credit scores, with its first-time buyer customers and low income applicants having the worst credit scores.
The report highlights that first-time buyers and lower income households should pay close attention to their credit scores, especially before applying for a new mortgage. MortgageGym’s analysis shows that applicants with salaries of under £20k have the worst credit scores of all its website visitors, proving that the UK’s lowest income households face the highest costs of borrowing.
The payment premium
The cost of having a poor credit score can be very high for mortgage customers. A first-time buyer today with a good credit score who has a £150,000 mortgage on a 25-year repayment could pay as little as £608.40 per month with a 1.62% two year fixed rate from Halifax.
The same customer with impaired credit could pay £947.29 per month for a 5.79% two year fixed rate from specialist lender – over £4,000 extra per year.
MortgageGym has published it top tips to boost your credit score and understand your mortgage eligibility:
– Checking your credit score and mortgage eligibility for free
You can do this by using MortgageGym’s free eligibility checker and see your free Experian Credit Score
– Prove where you live
Register on the electoral roll at your current address – you can do this even if you’re in shared accommodation or living at home with your parents.
– Build your credit history
Having little or no credit history can make it difficult for companies to assess you, and your credit score may be lower as a result. This is a common problem for young people and people who are new to the country.
– Make payments reliably
Paying your accounts on time and in full each month is a good way to show lenders you’re a reliable borrower, and capable of handling credit responsibly. Old, well-managed accounts will usually improve your score – although be sure to read about the potential impact of unused credit cards.
– Keep your credit utilisation low
Your credit utilisation is the percentage you use of your credit limit. For example, if you have a limit of £2,000 and you’ve used £1,000 of that, your credit utilisation is 50%. Usually, a lower percentage will be seen positively by companies, and will increase your score as a result. If possible, try and keep your credit utilisation at 25%.
John Ingram, co-founder of MortgageGym, said: “There is a pressing need for first time buyers and lower income households to build a good credit score to make sure they can access the cheapest mortgage rates. The higher your credit score, the better your chances of being accepted for the best rates. Consumers deserve the transparency and clarity that MortgageGym has brought to the UK mortgage market.”