Having your application for a mortgage declined can be a very difficult and stressful experience. However, there are many reasons why this may have occurred and we would like to help you understand some of the reasons behind it, and to help you where possible.
In order to lend to you, we give you a credit score, using three types of information:
The details you gave us on your application form
How you've managed any other loans, credit or accounts
Information from a national credit reference agency
We then use this score to assess the likelihood of you being able to meet the mortgage payments, as it helps with our decision as to whether your application should go ahead. It also helps make sure that all applications are treated in exactly the same way, so that all our customers are dealt with impartially. We also constantly check the accuracy of our systems.
If your finances are linked with someone else, this can also affect your credit score.
Here are a few examples of things you can do to maintain or improve your credit score:
Be a 'good borrower' - keep up payments and never be late
Avoid extra credit
Ensure you are on the electoral register
When you're shopping around, get a 'quote search' and not a 'credit search' (a full credit search will be required only when you actually decide to proceed with a mortgage or loan).
Lenders are not able to detail the precise way that their credit scoring works. However, you can apply to the various credit referencing agencies for details of the information they hold on you.
You'll sometimes hear about people unfairly being refused credit simply because someone who once lived at their address has a bad credit history. Rest assured, if we do ever take another person into account when you apply for a mortgage, it won't be because you've shared the same address. It will only ever be someone you are or have been financially connected with.
apply for a mortgage with us, we may take into account other members of your household with whom you have or had some sort of financial connection. For example, it could be someone you share an account with, or someone you have made a joint application with for credit in the past. A credit reference agency won't provide us with information about someone who used to live at your address just for the sake of it. They will only ever do this if there has been a financial link with you and that other person.
If we have provided you with a 'quote search' (a 'Mortgage Promise'), only a 'soft' footprint remains. This is the term used to describe a search which does not leave a record on your credit history and will not impact your credit score. Only if you proceed to fully apply for a mortgage will you require a full credit search which will be recorded.
You may want to see what information a credit reference agency holds about you - especially if you've been turned down for credit. Agencies are required to let you have a copy of the information they hold and for this basic service they charge a small fee. You should find it fairly straightforward to see your details - simply contact the credit reference agency and ask them for a copy of your file. To help the agency match your details correctly with your file, you'll need to include the following information:
Your full name, as well as any change of name you've had during that time
Your date of birth
All addresses you've lived at over the past 6 years.
Here's how to contact them:
Write to: TransUnion International UK Ltd, Consumer Services Team, PO Box 491, Leeds LS3 1WZ.
Our affordability calculations are based on looking at your income and outgoings (including other outstanding credit commitments, household expenditure and family living expenditure), to gauge what level of mortgage you can realistically afford.
There are several other things you can do to help improve your chances of being accepted for a mortgage:
Save more and establish a savings plan - you could use TSB's online Money Planner or other online comparison sites in order to save money and build up a larger deposit. This will help you review your spending/saving. Aim to borrow a smaller proportion of the property's value for the best deals.
Check credit cards - make sure you cancel inactive ones.
It may be beneficial to look at lower value properties that you can afford with the deposit you hold.
We use a combination of means to establish the value of a property in a fair and consistent manner. If our valuers return with a value on the property that is less than expected, this could affect our ability to grant your mortgage.
Your mortgage must finish before your 75th birthday and if you are looking to borrow into your retirement we will need to review your pension income as well as other incomes you may have to ensure this will be affordable for you. There are specialist lenders who may be able to help you with lending after retirement if we are unable to, or you could try contacting an Independent Financial Advisor.
Problems on your file can trigger an automatic rejection.
The report will pinpoint any issues impacting you personally. These could be:
Adverse credit score
If you have too much debt already
Long-forgotten cards or loan facilities you've never cancelled
Potential ID fraud
False links to family or former partners with poor records
2. Control your spending
Lenders no longer offer simple multiples of salary.
Instead they calculate how big a loan you can afford once all your other bills are paid - and they check your bank statements.
If you've been over your agreed overdraft limit a lot lately, it's worth postponing an application until you've had at least six clean months.
3. Be realistic about property values
Before you start looking for a property, try and do some online research to find out what similar properties have sold for in the area you are buying. It's always best to do your sums before you put in an offer.
4. Have you provided the right information?
Simple mistakes such as listing your wage and overtime payments in the wrong boxes can trigger rejections.
5. Be aware of non-refundable application fees
Mortgage applications are usually subject to admin fees
Your fee may not be refunded if your application fails
Steps you can take to help improve the chances of your lending application being approved first time
There are a number of steps you can take to help improve your chances of being accepted for a mortgage the first time you apply. The list below highlights some of the key reasons why you may be declined and offers a few suggestions for countering them.
1. You are a first time buyer with no or limited credit history
Try to live within your means, as this will help you control your spending and help improve your chances of retaining a good credit status.
Don't build up too much debt on your credit cards, and ensure you pay them off in full each month to show you can manage debt.
Pay your rent, utility, telephone, and any other bills on time.
Lenders often ask for three months' bank statements, so it's important to consider how your spending behaviour may be viewed by a lender.
2. You don't have a large enough deposit
You could use TSB's online Money Planner, arrange a full financial review with us, or use an online comparison site. These will all help you review your spending/saving and identify ways to save money in order to build up a larger deposit.
Look at lower value properties.
Consider buying on a shared equity basis with a lower deposit. Local Authorities, developers or Housing Associations may be able to help. Speak to us in the first instance so we may understand your requirements.
3. You need to remortgage but your circumstances have changed since you last took out a mortgage
Understand how much equity you have in your home before applying.
Consider how much you can afford before applying and be clear on the following:
Your personal circumstances/finances
Your levels of unsecured debt (if any)
The type of mortgage you need
If you have an interest only mortgage, do you have a repayment vehicle in place lenders will accept? Inheritance isn't likely to be an option lenders will allow.
4. You have a poor credit history
Some lenders may consider you after a year of re-establishing a good payment record, but you may pay a higher interest rate than other borrowers.
If you are in this situation, speak to an Independent Financial Advisor as some specialist lenders may be able to help you.
5. You are self-employed
Lenders will generally want to see the last three years' financial statements and proof of income.
If your financial statements are up to date, a lender is more likely to consider it.
6. You have been made redundant
If you have been made redundant recently and then became self-employed, your application is more likely to succeed if you are in the same type of work that you did as an employee.
If you have been made redundant and you wish to apply for a new mortgage, a lender will need to be confident you have other means of repaying your mortgage before granting you one. They will look for assets, savings and what the redundancy package was.
There are some useful websites which offer advice and useful tips around credit and applying for credit. The links below will take you to these websites which may help you with your specific questions or situation. Please note, we are constantly reviewing our website and this is not an exhaustive list. We may change these details as we identify further sources of information.
Citizens Advice Bureau
Helps people resolve their legal, finance and other problems by providing free, independent and confidential advice.
We are offering these links as a service to you and hope that you will be able to find some useful information from them. However, please note that we do not monitor or approve the content of any of these websites and we take no responsibility for the content. We have no control over the availability of any of these websites.
You make your full application
Whether you started your application online, by speaking to one of our Mortgage Advisors over the phone or by visiting a Mortgage Advisor in your branch, your application will start the same way. At this point we'll confirm whether we're able to proceed with your application.
We issue your mortgage pack
When we've confirmed that we can proceed, we'll issue your mortgage pack. This will include a copy of the Mortgage Illustration you accepted, a summary of the information you've given us and a request for documents that we'll need to see.
Processing of your mortgage application will commence on the next working day.
We process your application
When we begin to process your application we'll:
Check the details which have been keyed
Process any fees that need to be paid
Contact you to request any additional or outstanding information or documentation
Instruct the property valuation
If we've requested to see any documentation, it'll speed the process up if you're able to take it to your local branch as soon as possible.
We arrange for the property to be valued
While we're processing the rest of your application, we'll make arrangements for a valuer to value the property. The valuer will contact the people who have access to the property to make an appointment to carry out the valuation. The valuation can impact on the loan-to-value of your new mortgage and may in turn affect the products you're eligible for.
Your mortgage offer is issued
When we've got all the documentation we require, along with the valuation report, we'll make our lending decision for your mortgage. If we approve your application, we'll then issue copies of the mortgage offer to you and your conveyancer.
Your mortgage completes
The conveyancer will carry out various legal checks on the property, known as searches. They will also make sure they are happy with the legal side of the property generally. If there are no concerns then the conveyancer will contact us to confirm when you want your mortgage to start, and the date they'll need the funds to be released. On the requested date, we'll send the funds to the conveyancer who will complete the transaction.
Your first payment is made
When the mortgage has completed, we'll send you a letter confirming what your first payment will be, and when we'll require it. Your subsequent payments will be for the amount we tell you and you will pay them on the date you requested each month.
Get an indication of how much your mortgage repayments will be.