Your mortgage application and your credit history

2021-09-13

General

FAQ's

You’d like to submit a mortgage application but your credit history is not the greatest.

Don’t despair. We can help you fix that.

Now, we’re not going to mislead you. Lenders pay close attention to credit histories and a poor one is not going to do you any favours.

But a sub par credit history is not set in stone. With a strategy in place and a determined effort, you can improve your credit history and apply for a mortgage with great success.

Know what your credit history is

Firstly, it’s important to be completely honest with yourself and your mortgage broker.

Many people experience credit history problems and we have helped them completely transform this. However, we can only do that if you are upfront about your credit history status.

The best way to understand fully what your credit history says is by obtaining a copy of your credit report.

This document will show any credit agreements you may have. These include:

Overdraft
Mortgage
Credit cards
Loans with credit unions
Personal loans
Hire purchase agreements
Car finance
Flexi-finance

Having any of these credit agreements in place is not a problem. But if you’ve ever experienced a problem paying back your repayments, it’s important to obtain your credit report to see what your credit rating is.

Where can you get your credit report?

Presently in Ireland you can obtain your credit report from the following site.

Central Credit Register (CCR)

This site provides excellent information. The CCR is widely considered to show very comprehensive detail and is the site for our customers to get their credit reports.

In general, any repayments that you may miss but make up within a calendar month are not marked as a missed payment on your credit history/report. If you make up the missed payment later than that, then it is marked against you.

Needless to say, you want to avoid that.

But it is worth noting that you need to provide six months worth of bank statements and other documents as part of your mortgage application.

Therefore if you do encounter financial difficulties for a period of time, you can still improve your credit history. The way to do this is by ensuring you repay all your commitments on time over six months to include a strong set of banking documents and credit report with your mortgage application.

If you have a more serious credit issue, such as non payment of a loan, you should provide a copy of your Credit Report to your mortgage broker or advisor who will give you a plan to show you how to proceed.

Reduce your debt as far as possible

Debt gets a bad reputation, but some of that reputation is unwarranted.

Borrowing money can make a lot of sense under certain circumstances. Not least applying for a mortgage to buy a house!

However, taking on too much debt is not a good idea.

It reduces your monthly disposable income. And it can also add stress to your shoulders to be indebted to so many creditors.

One of the “getting mortgage-ready” activities we advise all of our clients as they prepare to submit their mortgage application is to eliminate their debt as much as possible.

Pay off as much as you can. If you can’t eliminate debt, at least pay down as much as possible on what you owe.

Doing this will have two important benefits for you.

Firstly, the fact that you owe less relevant to your monthly income will strengthen your mortgage application in lenders’ eyes. With less debt, the ratio is much more in your favour.

Secondly, as you pay off various debts that you owe you will free up money that can be diverted to your savings for your deposit. We have seen time and time again how quickly savings can grow when money that used to pay off borrowings is now available.

In summary, your credit history plays an important part in you being approved for a mortgage.

We would be delighted to chat with you on how you can improve your credit score for your mortgage application. Contact us for a confidential chat.