More than a third of 20-40 year olds are hoping to tap the government’s Help to Buy scheme this year, but many of them are ill-prepared to meet the initial requirements of the scheme.
Basic errors such as not being listed on the electoral roll are common, according to research by Experian CreditExpert. A lack of savings or poor payment history on something as inconsequential as a mobile phone account can also contribute to a weak credit record, affecting applications for a mortgage negatively.
The Experian CreditExpert research found just 40% of Help to Buy hopefuls were registered on the electoral roll at their current address. A quarter have never reviewed their credit record, while 7% have saved nothing towards a deposit. Less than three quarters have actually saved the minimum £5,000 required to get into Help to Buy.
“Help to Buy has brought home ownership within touching distance for thousands of younger buyers earlier than they may have dreamt possible,” said Peter Turner, managing director of Experian Consumer Services. “But it’s important to remember that the deposit is only part of the equation and consideration must be given to how much you can afford to borrow – and crucially, repay, in the years to come.”
The research discovered that 25% of the hopefuls have never checked their credit report; however, 31% are switched on to the issue, and have checked their file in the last three months. One in seven admit they have been managing their current credit accounts poorly.
Interestingly, men are likely to have saved more – 47% have more than £10k in savings, compared with just 33% of women. Unsurprisingly, Londoners have the biggest deposits saved, more than half having more than £10k and 19% having double that ready to put down. Currently, the hopefuls have an average £4,600 in other borrowing already against their name.
Turner also warned: “Anyone looking to make the most of Help to Buy would be well advised to check their credit report to better understand their credit history, and ask for help if needed, to ensure your credit report pains the best possible picture – before you make your application. Hopefuls should also note that in the short term, future applications for credit could be negatively affected as lenders may want to see how well you are repaying your current credit commitments, before offering you any more credit.”
Take a closer look at the Experian report here.