Why was I refused a mortgage?

If your mortgage application is refused, it can be not only frustrating but inconvenient, as it can affect or even halt many plans you may have already made.

The Mortgage Advice Bureau now says that the average age of a first-time buyer is now 37, which would make a standard 25-year mortgage take them to 62. However, this figure is likely to creep up, as high house prices up and down the country take first-time buyer ages beyond 40.

The mortgage affordability rules introduced in April 2014 take into account not only how much you are earning, but how much you are spending, and whether you actually have the money to make your monthly mortgage repayment.  It could even lead to longer-term mortgages, potentially taking people past 65.

The consequence for many people though is that credit refusal can often lead to more attempts to get credit – and making multiple applications in a short space of time could have a serious impact on your chances of getting credit in the future.

There are a number of reasons you might be turned down – and finding out what they are could get you back on track.

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Are you confident about teaching your child how to manage money?

DESIGN-428-education-twitter-300Managing money well is a skill we all want our children to pick up, and in the same way that ‘charity begins at home’, so can financial management.

Research by Experian* has revealed that most (58%) parents are trying to take an active role teaching their children how to manage money well.

Over half (51%) of parents who give pocket money do so to help their children learn how to manage money independently. However, their good intentions are being undermined by a number of factors.

•              67% do not take a consistent approach in ensuring their children earn their pocket money; only ‘sometimes’ aligning it to doing chores.

•              42% of those surveyed (parents of children aged between 5-18years) admitted they did not try or were not managing to take as active a role as they would like

•              Of these parents, 36% struggled to find the time to take a more active role

•              A further 30% cite a lack of confidence, knowledge or suitable resources as factors that are holding them back.

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What is identity theft?

Identity theft means that once criminals have enough of your personal details, they can apply for credit in your name and run up debts without you knowing.

Your full name, date of birth, current address and national insurance number, and the passwords and PINs to your bank accounts are among the things they are hoping to get hold of.

Identity theft can also include:

-          Fraudsters setting up fake websites to get you to type in your digital banking password, which then gives them access to your accounts.

-          ‘Phishing’ emails pretending to be from your bank can also lead to your details being stolen.

-          Social networking sites such as Facebook accessed by fraudsters who ‘mine’ your postings for information

-          Criminals can also use the telephone – calling you at home or on your mobile, pretending to be a bank or a credit card firm and asking you to confirm your account details.

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How can I improve my credit score?

Everyone has an Experian Credit Score. Looking after it, nurturing, growing and improving it can help you get a better rate on loans, credit card or mortgages. Some simple steps can help you improve your credit score:

  1.  Stay within credit limits and keep balances low – The lower your overall balances (not including mortgage), the better.
  2.  Try not to make too many applications for credit – each application is recorded on your credit report – the fewer you’ve made in the last 6 months, the better.
  3. Make sure all bills are paid on time – Missed or late payments can have a big impact, but paying on time can really help your score.
  4.  Register to vote at your current address – lenders use the electoral roll to help confirm who you are and where you live.
  5. Review your credit report regularly – make sure it’s up to date and in good shape for when you’re ready to apply for credit.

It can also help you keep an eye on your progress while you maintain or improve your credit score before you apply.

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Planning for your long-term financial future

The Queen turns 90 this week – happy birthday ma’am! She may be just a decade short of getting a card from, um, herself (!), but she’s clearly in no hurry to retire just yet. 

Twitter poll - what age do you plan to retire?  

It’s never easy to know how much you’ll need to have set aside for your retirement. So it can be useful to think ahead and start planning for the long-term financial future.

How much might you need?
Everyone’s circumstances are different of course, but some factors can be common. If you’ve paid off your mortgage, that would free up a large part of your outgoings. However, if you are helping to fund your children in their quest for homes/studies/weddings etc, then that can push costs right back up.

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Applying for a mortgage – top tips

Applying for a mortgage is rarely a straightforward process. Your mortgage is likely to be the biggest financial commitment you’re ever going to make – with lots of decisions to make, forms to fill in and waits for lenders to respond.

In April 2014, the process was made even tougher with the introduction of new rules on mortgage affordability.  The Mortgage Market Review (MMR) was introduced to make mortgage lending more responsible and stable.

Lenders are keen to know whether you’ll you be able to afford your monthly repayments should interest rates go up or if your circumstances change.

So they’re likely to pay close attention to your income, monthly outgoings and savings as well as the information in your credit report and application form.

Experian’s mortgage application guide lays out the steps to take when preparing to make a mortgage application.

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The Experian Mortgage Application Guide

Getting a mortgageApplying for a mortgage is likely to be one of the biggest financial decisions you ever make. Taking the time to prepare and really understanding what a lender is looking for – before you make your application – could not only affect you getting approved, but could also save you a lot of money in the long term.

This guide will give you some simple steps to follow to ensure you are in the best possible position to have the mortgage you can afford approved – and at the best rate.

The mortgage lending process
Usually a lender (the bank or building society) will consider the following when deciding whether to approve your mortgage application:

  • The information in your application form, including your salary and employment status
  • The information in your credit report
  • Their own policy rules
  • The amount you want to borrow and size of your deposit
  • Your monthly outgoings and spending habits
  • Any additional information they may hold on you.

PART 1: UP TO ONE YEAR BEFORE MAKING YOUR APPLICATION

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How can my kids get on the property ladder?

First time home buyers don’t have it easy these days. The Mortgage Advice Bureau says that the average age of a first-time buyer is now 37, which would make a standard 25-year mortgage take them to 62. 

So what’s the scenario for young people today? Watch our video to find out what some of the options are out there, and some tips for how improving their credit score can set them on the road to getting on the property ladder.

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How can I improve my credit score before remortgaging?

Many homeowners may find that once that their deal comes to an end, their interest rate and mortgage payments may well go up. This could be a good time to check out whether you can re-mortgage and get a lower rate elsewhere.

It can take a few months to process a mortgage application, so it’s best not to wait until your current deal ends before you start looking around. Watch our new #AskExperian video to find out what some of the options are.

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