Nearly half (43%) of homeowners aren’t aware of all the steps in their mortgage process.

Dilpreet Bhagrath answers some of the most-searched-for questions about mortgages, to help both current and potential homeowners prepare for any potential obstacles in the mortgage process.

1. What happens if your mortgage lender goes bust?

Don’t panic. There will be a process in place to protect you.

Contact your lender as soon as possible to ask for their advice on the next steps with your mortgage. In some instances, they’ll continue to honour the product until the end of your mortgage term, with the help of another lender who might purchase their portfolio of mortgage loans. In most cases, the terms of your mortgage agreement won’t change.

In the case of the recent acquisition of Tesco’s mortgage book by Lloyds Banking Group, once the accounts have been transferred over, customers’ mortgage terms will remain as they were with Tesco. This should give customers peace of mind that their mortgage is being proactively looked after whether they’re partway through their mortgage or coming to the end of the term.

2. What happens to your mortgage when you move house? 

If you’re moving to a new home, you might be able to take your mortgage deal with you. Simply ask your lender about the process of ‘porting’ your mortgage arrangement.

During this process, the lender will need to value the new property to see if they’re happy to lend on it. If the new property is larger, it's likely you’ll have to borrow more (known as a 'top-up'), and you’ll have to prove to your lender that you can afford the higher repayments using your income, outgoings and other payments. It’s important to remember that the ‘top-up’ will be based on the mortgage deals available from the lender at the time, not on the same interest rate as your current deal.

Should they decline your request to borrow extra money, you’ll need to pay the early repayment charge on your current mortgage and find a new lender to finance your new home. It’s worth speaking to a mortgage broker to find the most suitable outcome for your personal circumstances.

3. Can you get a mortgage if you’re self-employed? 

There are 4.85 million self-employed workers in the UK. It’s estimated this number will rise to 5.5 million by 2022.

While it can seem like a trickier process, self-employed people can still successfully apply for a mortgage.

Make sure you’re prepared with at least two to three years’ of financial documents as this is the amount some lenders will require. Keep your personal and professional bank accounts separate, and registering for the electoral roll can help lenders to confirm your identity.

As always, it’s to consider any personal and future circumstances when securing a mortgage and seek professional advice to ensure you're aware of the options.

4. Can you get a mortgage if you have bad credit? 

All lenders will conduct a credit check when you apply for a mortgage with them. Many people will assume that if they have a poor credit rating, they won’t be able to get a mortgage. But that’s not always the case.

There may be options out there. It’s important to remember that some credit issues carry less weight than others. Factors including how much bad credit you have and how long it’s been since the incident occurred will all contribute to whether the lender approves your application.

Some high street lenders will consider offering you a mortgage deal if they consider your credit issues as small.

It’s worth being aware that the mortgage deals available to those with bad credit will often have higher rates and fees, and they may require a larger deposit.

Speak to a mortgage broker to discuss the options available to you based on your situation.

5. Can you get a mortgage if you have an overdraft? 

It’s possible to get a mortgage with an overdraft, but your debt-to-income ratio will be taken into account. This includes the portion of your monthly income that goes towards paying credit card bills, loans and student finance. This is assessed to ensure that you’re not financially overstretched and can afford your monthly mortgage repayments.

If you’re actively using your bank’s overdraft or paying one-off, this will also be taken into account during the mortgage application. When lenders assess your monthly income and outgoings, any money used to pay off the overdraft will be accounted for.

Taking out a personal loan in the run-up to applying for a mortgage will impact your affordability assessment as these repayment costs will also have to be considered by the lender. It’s also advisable to cancel any unused credit cards before you apply for a mortgage, as lenders look at the amount of credit available to you, not the amount you actually owe.

Buying a home is one of the biggest financial and emotional commitments someone will make in their lifetime. Speak to a mortgage broker to discuss what options are available to you and lead you through the process. 

For more information on mortgage complications or costs, head over to https://trussle.com/blog/ for advice and tips.

A good credit score provides you with so many benefits, such as reasonable interest rates, faster loan approvals, and suitable insurance policies. Nearly 70 million Americans are suffering from bad credit because repairing your credit requires a lot of time and self-control. So, what is the best way to improve your credit score in no time? The answer is simple – buy a tradeline.

But, in order to understand how to improve your credit score by using a tradeline, you need to understand the term “tradeline” first.

What are tradelines?

A tradeline is basically any account appearing on your credit report. A tradeline keeps a record of creditor’s information to calculate his credit report. You can mutually benefit from someone with positive credit history and improve your credit score if he adds you as an authorized user (AU).

Most people ask their family and friends to add them as their AU, but if you want a quick improvement to your credit score, you can add users with exceptional credit history as an authorized user. These AU provide positive data regarding:

• Payment History
• Amount owed
• Length of history

Fair Isaac Corporation (FICO) places a credit score in 5 different grades.

• 720-850 Excellent
• 660-719 Good
• 620-659 Average
• 580-619 Below Average
• 350-579 Poor

Buying 2-3 seasoned tradeline can help you jump to a 720-850 credit score in a month.

What will a tradeline help you achieve?

A tradeline helps you improve your credit score so it will reap all the benefits a good credit score enables you to achieve. Without a good credit score, you will have limited access and services of your credit card, loan plan, and a higher rate of mortgages. In short, you will have to end up paying more money than usual.

But good tradelines on your account will help you achieve a credit score of 750 or higher in no time. When you buy an authorized tradeline from someone like Personal Tradelines, you are added as an AU to one of their credit card accounts, and it takes only 25-30 days to get your credit up to a good score.

Common mistakes people make when buying Tradelines

·         Having no idea of how tradelines work

The most common mistake people do is buy a tradeline without having the slightest idea of how it works. I recommend that you read all about tradelines and their types before actually committing to buying one. You can also get help and information from tradelines vendors.

·         Buying tradelines in hopes that it will unfreeze their accounts

Tradelines work by adding positive information to your account. If you have fraud alerts or credit freezes on your account, buying a tradeline will not work as new information can’t be posted on your credit report.

·         Understanding the age factor of tradelines

The effectiveness of a tradeline is always going to be relative to how old your own account is and what is in your credit file. For example, if you have a 10-year-old account, an 8-year-old tradeline would not have much impact on it. However, if the account is only 1-2 years old, an 8-year-old tradeline would do wonders in increasing your credit score.

·         Not having an idea of how credit score works

Before buying tradelines, it is vital to know how a credit score impacts your general lifestyle. Because even if you are successful at getting a good credit score after buying tradelines; you will have to follow a particular set of rules to maintain it.

·         Going cheap

Some people go for 4-5 cheap tradelines instead of buying 2-3 seasoned tradelines. It ends up costing you more money, and you are better off buying seasoned or authorized tradelines rather than a lot of cheap tradelines.

Also, a cheap tradeline will not have that much positive effect on your credit report as they don’t have good age. This works against the goal of improving your credit score exponentially.

·         Buying tradelines for shady companies

Unfortunately, there are a lot of companies that are selling tradelines, and it is tough to trust someone random. It is essential to do a background check on a company which includes customer reviews, their ratings, and some money-back guarantee to make that you are getting the best service possible.

It is essential that you improve your credit score prior to applying for a mortgage in order to boost your chances of getting one.

Here are a few ways that you can bump up your credit rating with the help from Howells Solicitors:

1. Pay Your Monthly Bills on Time

The first, and most obvious, point to make would be to start paying your bills on time, or in advance. This is one of the biggest contributing factors to getting a good credit rating. Paying your bills late will give your bank a reason to tell everyone that you’re not trustworthy enough to lend money to, and therefore bring your score down.

2. Pay Your Phone Bill

Again, not too far away from point one but your monthly phone bill contributes heavily to your credit score. While it may only be £20/30 a month, ensure that there is enough money in your bank to pay this.

Usually, network providers give you a few days’ notice if the payment does not go through as they are aware that there could be a number of contributing factors (closed bank, new bank, fraud, etc.), but you should realistically always leave enough money in your account to pay this by direct debit. The smoother the transaction goes, the higher the rating gets.

3. Use Your Credit Card

If you don’t have a credit card, then it might be worth getting one. If you make small purchases on your credit card and pay them back on time, or before the due date, it shows your bank that you’re reliable and can pay back things on time.

Think of it this way; would you be more likely to lend money to someone that has no history of paying things back, so you have no idea whether you’ll get the money back or not, or more likely to lend money to someone that you know has a great history of paying people back on time?

4. Sign-Up to Credit Updates

You should sign-up to a free credit report checker, such as Experian, which sends you monthly emails. This way, you will be made aware of any changes and can dispute any errors that have been made that reflects your credit in a bad light, however there is no need to run multiple, full credit checks

5. Close Unused Accounts

Closing any unused bank accounts can improve your credit score. If you opened a bank account back in the day, and you haven’t touched it since, then take the money out that is currently in there and close the account. If you have more than one credit card, then you should consolidate the debt on just one.

For further information on whether your credit score will affect your chances of getting a mortgage, or further information on how you can improve your credit score, check out this FAQ Series by Howells Solicitors, or contact the team for guidance using the contact form on their website.

The festive season is the time of year when consumers may have spent a little more than they intended, prompting many to head into the first few months of the new year with plans to bring finances into line.  Understanding their credit score can help consumers get to grips with their finances, however the latest research from Equifax reveals that over half of Brits have never checked their credit score with a credit reference agency.

Londoners are most content with their credit scores, with a third (33%) saying they were happy the last time they checked, closely followed by the South East (31%) and the South West (28%.)  Those living in the East of England are the unhappiest, with 11% saying they were not impressed the last time their checked their score. 1 in 10 of those living in the North West came in a close second when it comes to being unhappy with their credit score.

However, Equifax analysis of average credit scores across the UK seems to suggest a disconnect between consumers’ level of happiness or unhappiness with their credit score and their actual score.

Average Equifax Credit Scores by Region

This new infographic from Equifax can show individual’s how their area’s Equifax Credit Score compares with the rest of the UK.

“It is clear from our latest research that a significant number of individuals have never checked their credit score, which means that are not putting themselves in the best position when it comes to applying for credit” said Lisa Hardstaff, credit information expert at Equifax. “Not only should people get to grips with their credit scores, but they should also check their credit reports to understand what information is influencing their score. 

“The new year is always a time for new plans and potentially new financial applications. If individuals are planning on making an application for credit, they should check their credit report and score in advance. The credit report will give a record of their borrowing history, which could help them decide whether they need to improve or keep up their borrowing habits. And knowing their score and what range it falls in can help to give an indication of how lenders may view their creditworthiness.”

(Source: Equifax)

This week Finance Monthly has heard from Rob Haslingden, Head of Product Marketing & Propositions at Experian UK&Ireland, who gives us an overview of global credit scoring, the right attitudes, and the evaluation of data management and governance controls.

Some industry commentators have suggested that Open Banking is a death-knell for credit scores. After all, why do you need a credit score, if you have 12 months of transactional behaviour for a customer?

This is a curious observation, some of which is based on a misconception that Credit Reference Agencies (CRAs) see the sharing of transaction data as a threat and not an opportunity.

There’s also the assumption that because credit data is a reciprocal arrangement that somehow credit providers will not be motivated to share credit data in a lending environment, where current account information is freely available.

At the heart of this discussion is the question of what additional value CRAs and other providers can add to transactional analysis that helps both lenders and customers?

Credit scoring, then, now, and in the future

Originally credit scoring was based on historic financial behaviour, in particular the consumption of credit. More recently it has included an assessment of a customer’s current circumstances which has been based on banks sharing summarised current account behaviour. Future analysis will assess a customer’s financial circumstances based on a mix of credit and detailed transactional behaviour.

Real-time analysis of transactional data will enable the provision of scoring that can more accurately reflect a change in an individual’s personal circumstances now, and in the future. This can provide organisations with a more sensitive and timely measure of a customer’s financial status.

Suddenly we enter a world where credit scores and transactional data become the data components of a new scoring regime focused on measuring affordability.

The sharing of the current account data mandated by the Competitions and Market Authority (CMA) provides an opportunity to deliver a more accurate and timely assessment of customers’ financial well-being throughout the life of a loan. It holds the promise of delivering a better and more informed view of an individual or business’ suitability for products.

Data sharing will not only provide a measure of ‘affordability to purchase’, but may soon also provide a measure of the ‘affordability to live’.

While Open Banking won’t be in force until 2018, it is important for organisations to consider how they can prepare now. Whilst there are some technical and functional changes that are essential, some areas simply reinforce the basics of a good operational and customer centric strategy.

Areas to consider a strong focus on now are:

Avoid disintermediation

Four out of ten customers express decreased dependence on the bank as their primary source of financial services, according to EY. If banks become less relevant to customers they run the risk of becoming ‘utilities’, leaving the door open for competitors to deliver more satisfying and engaging customer experiences.

To be successful in the world of Open Banking, organisations must ensure they put the customer at the heart of their business and create personalised services that are relevant to people’s everyday lives. Providing services that extend beyond those traditionally offered is a great way of broadening engagement and adding value. Working collaboratively or in partnership with Fintech to develop better online services is another.

Build trust and confidence

To realise the aspiration of increased competition, people must have the confidence to share their data. Organisations that seek to capitalise on the opportunity of data sharing must acknowledge their collective dependency to act responsibly. Customer perception is that banks are generally very secure. This puts established providers at a distinct advantage when asking their customers to share their transactional data.

Established banks will be keen to ensure this reputation is not undermined in the drive to open up the market and increase competition. New market entrants must find ways to build customer confidence in ways that can win the hearts and minds of customers. Being honest about the purpose for which you require data is essential. Those that remain true to their brand purpose and reflect this in their engagement with customers throughout the data sharing experience are those that will be most successful in securing customer confidence.

Leverage your brand

Brand can be a significant differentiator, particularly in a highly competitive market. Understanding how to leverage the brand to acquire customers is the key to success. Organisations with the strongest brands can capitalise on their equity where issues of trust and security will be key differentiators in getting customers to share their data.

Research confirms that those organisations who provide competitive pricing and excellent customer service are the ones that engender the most loyalty from customers. For younger age groups, the issue of brand is one of the highest factors in driving engagement, whilst the importance of customer service increases with age, Experian found.

New market entrants will have to rely on the excellence of customer experience to quickly build brand reputation and gain the trust of customers – and appeal through advertising as a means to attract and acquire.

Improve your data management

Open Banking may add to the overall confusion of ‘data’; what it means and what it is. People are concerned about the issues of data privacy, identity theft, and fraud that data sharing brings; few understand the benefits that may come as a result.

Organisations need to educate customers and emphasise the benefits of data sharing in order to gain customer trust and confidence. Organisations have a duty of care to limit the use of the data to the purpose for which the customer gives consent. Clarity and transparency are vital to securing this consent, as is the customers’ right to opt-out of data sharing. Terms and conditions for products must be simplified, and tools given that enable individuals to control and manage access to their data at any point. Failure to recognise this and abuse trust will undermine Open Banking, breach data protection and make organisations non-compliant.

Re-examine your governance model

Failing to deliver a great customer experience in a world of digital data exchange will undermine a brand and damage the business. Customers need to know who they can turn to when things go wrong.

Everyone involved in the data sharing ecosystem needs to ensure they have well-honed processes in place for resolving customer complaints quickly. Start developing your customer service model for data sharing now, and develop your scenario planning for how to deal with queries and complaints. Speed of response and commitment to customer care will be significant differentiators in a system driven by the sharing of personal information. Organisations need to focus on earning trust by doing the right thing for the customer and providing excellent customer service.

What does the future hold?

As Open Banking becomes a reality in 2018, so does the opportunity to create truly innovative services that can change the way banks interact with customers.

As with any new regime, or transformation, the future will write itself as time goes by, but there are certain elements that Open Banking will inevitably influence. These include identity verification, product comparison, better personal financial management, consent management, and risk forecasting.

Open Banking is a watershed moment in the relationship between customers and financial service providers. It creates a unique opportunity for everyone involved in the provision of services to increase relevance and trust by focusing on products that create value and improve the quality of people’s lives – predicated on the intelligent and compliant use of personal data.

Creating relationships that are transparent, honest and fair, and that enable customers’ to feel confident and secure in the knowledge that their well-being is a priority and privacy safeguarded, is what we believe is the key to creating meaningful, long-term relations that will revolutionise the way products are consumed.

In the window of opportunity between the announcement of the CMA’s remedies for retail banking and deadline for implementation, Open Banking mandated organisations should focus their efforts on building an infrastructure that supports change and generates value for customers.

Longer term, organisations should be looking to create services that are secure, engaging and personalised that deliver real-value from the intelligent use of personal data.