GETTING your first mortgage can be tough, but a new partnership between Nationwide and rent reporting agency CreditLadder could be set to make things much easier.
Customers who are registered with CreditLadder to use rent payments to improve their credit scores will now be prompted if they are eligible to apply for a Nationwide mortgage.
Getty – Contributor The new partnership between Nationwide and CreditLadder could help you get a mortgage more easily
CreditLadder will analyse the income and expenditure data of its users and overlay them against Nationwide’s qualifying mortgage criteria.
If you meet the requirements, you can then get in touch with the building society to discuss applying for a mortgage.
Unfortunately, there is no guarantee users will be accepted for a mortgage but if you don’t qualify, you’ll get regular checks to see if your circumstances have changed.
While this is the first partnership between a rent reporting service and a mortgage provider, it follows new changes brought in in October 2018 designed to help tenants use their regular rent payments to get a foot on the housing ladder.How paying rent can improve your credit score
For a long time, paying rent on time wasn’t taken into account on your credit report.
Credit reports are used by lenders like banks and building societies to try and work out whether or not to lend people money and what rates to give them.
They make a note of all the credit someone has access to (such as a mortgage, credit card, phone plan, loan or store card) and make a note of whether repayments are made on time.
Mortgage payments are included because they are a form of debt, meaning that someone who always makes their repayment on time is likely to have a better score and get access to better deals.
How to boost your chances of being approved for a mortgageThere are several ways you can increase your chance of being approved for a mortgage and getting your first step on the ladder.
Work out your budget: Work out how much you can realistically afford keeping in mind how much your mortgage repayments will be. As well as the deposit also consider other associated costs including stamp duty, solicitor and surveyor fees.
Put a deposit together: Put together the largest deposit you can – the larger your deposit, the better the deal.
Get your credit report in shape: Make sure your credit report is accurate, up-to-date and in the best position possible. You can check your credit score for free with an Experian account to give you an idea of where you stand.
Prepare well before applying for a mortgage: This may seem like an obvious tip but take extra care when filling in application forms, the smallest of errors can cause huge delays and in some cases the whole application may have to be submitted again.
Cut down on costs: Mortgage lenders will want to know your outgoings which also includes your utility bills and other fixed regular costs eg school fees, phone contracts, and Netflix/Spotify subscriptions. If you can cut back, now’s the time to do it, lower outgoings will show mortgage lenders you can afford more.
But because renting is not a form of credit, you couldn’t use your payments to improve your score.
This was a source of frustration for lots of renters who wanted lenders to acknowledge that reliably paying their monthly rent showed that they were consistent and responsible borrowers.
It is particularly frustrating for younger people who may not have many other forms of credit as rent payments are often their biggest monthly outgoing.
Towards the end of 2018, one of the credit reference agencies – Experian – decided it agreed and launched an initiative with the Big Issue Group called the Rental Exchange Group.
This allows people to register to use their rent payments to improve their Experian score.
The other two CRAs – Equifax and CallCredit – are not yet recording rental payments, so it’s only useful for the Experian score.
Should I register to record my rent payments
If a social housing provider, letting agent or landlord is already signed up – renters should already be getting their payments recorded.
But if you’re a private tenant and your landlord isn’t signed up, you can register yourself using either CreditLadder or Canopy.
The new partnership with Nationwide is an extension of this innovation.
It means that if you sign up for rent reporting with CreditLadder, you’ll also be more likely to get a Nationwide mortgage.
There are no risks associated with the new partnership with Nationwide, it just gives you more options. But you might want to think carefully before signing up with CreditLadder in the first place.
Building up your credit score is always a good idea, and adding rental payments to do this makes sense, but only if you always pay on time.
If you miss payments or pay late, you’re likely to make your credit score substantially worse, so you should only register if you’re confident you’ll repay in full when you’re supposed to.
Sheraz Dar, CEO of CreditLadder said: “With the service already live, the relationship is the first of its kind between a rent reporting service and a mortgage provider in the UK. Working with Nationwide Building Society is a key plank in our plans to help those who dream of owning their own home to realise their aspirations.”
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