Householders are being warned they could be paying thousands of pounds more for their mortgage than they need. One simple mistake could see an extra £400 a month on a £200,000 mortgage.
Aaron Peake, personal finance expert at free credit score service CredAbility, says thousands are overpaying because of a credit report error. For a low credit score could mean higher mortgage rates, even if you have a good deposit.
He said: “We all know a bad credit score can make it harder to get a loan, credit card, or even a mobile phone contract but the impact on your mortgage can be much bigger than people realise.
“The gap between a great credit score and a poor one could cost you thousands over the course of your mortgage.” He explained lenders use your credit report to decide not just whether to approve your mortgage application, but also what interest rate it will offer.
If you are borrowing hundreds of thousands, the difference of just a couple of percentage points can be massive, reports Lancs Live. He said: “Let’s say you’re borrowing £200,000 over 25 years. With a strong credit score, you might be offered a mortgage at 4%.
“But if your score’s lower and you’re offered 7% instead, that’s an extra £430 a month, or more than £129,000 over the full term of your mortgage. That’s another house deposit, just in interest.”
What could affect your score?
One key reason purchasers get caught out is not realising that there isn’t just one credit score. In the UK adults have three credit reports, and each can be slightly different.
Aaron says: “The main credit reference agencies in the UK are Equifax (free to check with CredAbility), Experian, and TransUnion. “Some lenders only check one, so it’s worth checking all three.
“One might be missing a payment, showing an old address or listing a credit card you closed years ago. Even a small error could mean a lower score.”
Five steps to boost your credit score
1. Check all three reports: Aaron warns: “Don’t wait until you’ve found your dream home to start looking into your credit score. Take a moment to review all three of your reports – you can do this for free through services like CredAbility or TotallyMoney, and it won’t affect your score.”
2. Fix any errors: “Out-of-date addresses, duplicate accounts, or incorrect payment info can all hold you back,” says the expert. “If you spot anything wrong, contact the credit reference agency and get it corrected. That alone could help you qualify for a better deal.”
3. Register to vote: Aaron says: “It’s quick, free, and can give your score a noticeable nudge in the right direction as it helps lenders confirm your identity and address. It only takes a few minutes at gov.uk/register-to-vote, but it’s something many people forget about.”
4. Build a credit history: “Using a credit card little and often and paying it off in full each month is a tried and tested way to build credit. Consider setting up direct debits for all your bills – including phone contracts, streaming subscriptions and utility bills – to make sure everything’s paid on time,” advises Aaron.
5. Hold off on new applications: “Every time you apply for credit, it can leave a mark on your report for six months,” he explains. “Too many in a short time can be a red flag for lenders. If you’re applying for a mortgage, try not to take out any new credit in the six months beforehand.”
