As property investors we need to make sure that we look after our Credit score. Gone are the days when a buy to let mortgage was just dependant on the rental income from the property. With lenders very cautious about whom they lend money to, your personal credit score will be taken into account when you buy investment property.
If you are an experienced investor with a large portfolio, rather ironically you have less chance of being able to get a mortgage at the moment than someone who is a novice investor purchasing their first investment property (which probably means they also have very little experience) as they are of course less of a risk or so the lenders believe!
So it is really important you do all you can to make sure your credit score stays as high as possible. There are three main credit agencies: Equifax, Experian and Callcredit. You need to check your rating with all of them as they may hold slightly different information. You need to check that the information they hold is correct.
It never ceases to amaze me how many investors I meet who say they were turned down for a mortgage, despite having a good credit score, or so they thought until they actually checked and found out there was something there they did not know about on their credit file. If the information is wrong you can apply to get it changed. This can take some time so well worth doing it now instead of waiting until you are in a rush to buy a great deal.
To keep an eye on my credit score (which is completely shot at the moment because I have too many properties) I use Check my file which is a convenient way to check all three main agencies at the same time for a small monthly fee.
One very important factor that causes problems for many people trying to buy a property is that you MUST be registered on the Electoral Roll somewhere, preferable the place that you call your home address. This is very easy to do, but also very easy not to do and many people just don’t bother in particular if they are moving around a lot. This is a huge mistake. If your records do not match up, if they can not find where you have been or are living it is very unlikely that you will get a mortgage at the moment.
It is the time of year when the Electoral Roll forms that are starting to drop through your letterbox – filling them out and returning them is vital to your credit standing. It’s essential (and is also required by law) that you register on the electoral roll each year – even if you haven’t moved house. When you complete the forms, we strongly recommend that you make sure that you tick the ‘opt out’ section to make sure your details remain private and can’t be used for marketing purposes – as 43% of the population has already done.
Local councils will be collecting data between now and November, in preparation for publishing the 2010 Register of Electors. This information is then sold on to the UK’s three credit reference agencies, which in turn overlay the information onto consumer credit reports.
Because credit reference agencies use the Register of Electors as the index for storing all credit report data, it’s more important than many think to make sure the form is completed accurately and promptly. If lenders can’t see that you are currently registered on the electoral roll at your named address, they may assume either that they haven’t found your full report, or, worse still, in these times of identity fraud, think that your application is fraudulent.
If you find that your credit score is not as good as it should be and so you are not able to get mortgages there are still many ways you can make the most of the fantastic buying opportunity we have now. First of all it may be possible to do a joint venture (JV) with someone who does not have any mortgages (other than their own residence), a good credit score and would love to invest in property but just does not know what to do. Using your knowledge and skill you may be able to find some great deals, put them in your JV partners name and have a deed of trust to recognise you interest in the property.
Alternatively you may chose to use Purchase options to control property without the need for finance at all. Purchase options are the new buzz words amongst property investors and I am sure will become increasingly popular over the next few years.
Founder, property investors network