Here are some useful tips specifically for first-time buyers who are struggling to pass a credit checks due to having a lack of credit:
- Start building your credit: One of the most effective ways first time buyers can improve your credit score is to start using credit responsibly. You can do this by getting a credit card and using it for small purchases that you can pay off each month. This will show mortgage lenders that you are capable of using credit responsibly and will help you build a positive credit history.
- Get a secured credit card: If you’re having trouble getting approved for a traditional credit card, you may want to consider getting a secured credit card. These cards require a cash deposit as collateral, which can be used to cover any charges you make on the card. Using a secured credit card responsibly can help you build your credit and improve your chances of getting approved for a traditional credit card in the future.
- Pay your bills on time: Payment history is a major factor in your credit score, so it’s important first time buyers pay all your bills on time. This includes utility bills, rent, and any other monthly payments you may have. By consistently paying your bills on time, you’ll show lenders that you are reliable and responsible with your finances.
- Don’t apply for too much credit at once: Each time you apply for credit, it creates a hard inquiry on your credit report. Having too many hard inquiries in a short period of time can hurt your credit score, so it’s important to be selective about when and where you apply for credit.
- Seek the help of a co-signer: If you’re still having trouble getting approved for a mortgage, you may want to consider seeking the help of a co-signer. A co-signer is someone who agrees to take on the responsibility of repaying the mortgage if you are unable to do so. Having a co-signer with good credit can improve your chances of getting approved for a mortgage.
- Consider government schemes: The UK government offers several schemes to help first-time buyers get on the property ladder, even if they don’t have a lot of money saved for a down payment or if they have poor credit. For example, the Shared Ownership scheme allows you to buy a share of a property and pay rent on the remaining share, while the Right to Buy scheme allows certain tenants to buy their rented home at a discounted price.
- Make sure you are registered on the electoral register: Lenders often check the electoral register to verify your identity and address when you apply for a mortgage. If you’re not registered to vote, it can be more difficult for lenders to verify your identity, which could affect your chances of getting approved for a mortgage. Make sure you are registered to vote at your current address to improve your chances of getting approved for a mortgage.
By following these tips for first time buyers, you can improve your chances of getting approved for a mortgage application approved, even if you don’t have a credit history. Building credit takes time and patience, but with persistence and responsible financial habits, you can eventually qualify for the first time buyer mortgage you need to buy your first home.