HOMEBUYERS are often urged to do their homework. Checking noise levels outside a prospective home and noting the place of local schools in league tables is de rigueur.

However, there is another, less talked about, assignment that increasing numbers of borrowers are adding to their list. Neil Munroe, of Equifax, the credit reference agency, says: “More people are looking at their credit file before they apply for a home loan.”

Failing to check that your credit record is in good shape before you apply for a mortgage could affect your chances of securing the property you want. Jonathan Cornell, of Hamptons Mortgages, a mortgage broker, says: “If you are in a chain, even a two-week delay, as a lender requests details about a discrepancy on your credit file, could, in some circumstances, cause you to lose the house.”

All mortgage lenders carry out credit checks before they grant a mortgage deal. If your record does not measure up, you could be refused a loan.

Furthermore, applications which initially pass muster, prompting lenders to grant a “mortgage agreement in principle” or a “mortgage promise”, can run into difficulties further down the line when more stringent checks are carried out.

If your mortgage is stopped at this point, you may be left out of pocket if you have paid for legal help or for a survey.

Many mainstream lenders are reluctant to lend to people who have had credit difficulties. Specialist lenders offer “credit impaired” mortgages, even if there are black marks on a credit file, but these are more expensive than the best deals on the market.

If you have fallen behind with a credit card bill or have made a late repayment on a personal loan, there is no harm in asking a lender if this is likely to affect its decision.

There may be hiccups on your record which you cannot recall. One borrower ran into trouble when a black mark appeared on her credit record because she had forgotten to return a clothing catalogue.

Other borrowers experience difficulties because their record holds no information. If you have never had a credit card or a personal loan, you are at risk of being turned down by lenders, especially if you want a 100 per cent loan.

“Having nothing on your credit record at all is not an advantage,” Paul Hearndon, of My Mortgage Direct, a broker, says. “Most lenders will look for a 12-month history of payments.”

Your credit record may be sketchy even if you have kept up to date with credit card and loan payments. Some banks share only negative information with credit reference agencies. This means that while you should have a healthy credit file, it is empty.

The only way to see the information that your lender will study is to order a copy of your credit file. There are three main credit reference agencies: Equifax, Experian and Callcredit.

Equifax will post a copy of your credit history to you for £2, or you can view it online for £8.25. Experian and Callcredit also charge £2 to send a copy of your report, but if you want to check your record online regularly, Experian charges £49.99 for one year.

Any incorrect information on your file can be put right after the credit reference agency has investigated the error.

If the black marks are all correct, you may be able to add a brief explanatory statement to your report, which will be seen by every company that accesses your file. If information is missing from your report, you may also be able to add a note explaining that your bank has not disclosed information about you.

If your record is completely blank, obtaining some credit is likely to increase your creditworthiness. “To improve your credit score, get a credit card and make repayments as regular as clockwork,” Mr Hearndon says.

LINKS

Equifax: www.equifax.co.uk; Experian: 0870 2416212; www.experian.co.uk; Callcredit: 0113-244 1555; www.callcredit.co.uk

For more on checking your credit file go to www.timesonline.co.uk/creditclinic

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