The Importance of Proving Stability to Lenders

Posted by Sophie Regester in Personal Finance on 15 March 2019 - Sophie is a Senior Credit Analyst at checkmyfile.

In addition to the key roles that your Credit History and Affordability play in determining whether or not you will be accepted for credit, we regularly talk about the importance of being able to demonstrate your ‘stability’ to potential lenders.

The less likely your circumstances are to change in the future, the more confident a lender can be that your Credit Rating and ability to repay any borrowing won’t change dramatically either, which makes it an important part of whether or not you’re likely to be accepted.

Building up this picture can take a bit of time and patience on your part as lenders will like to see this over an extended period, but it’s time well-spent and requires little effort.

Maintaining bank accounts

One way you can show stability to lenders is by approaching them with a bank account that you’ve held for several years.

Holding an account of any type for a long period of time usually indicates that both the customer and the provider are happy with the agreement and as such neither has sought to close the account. Not all credit providers will necessarily take the same approach and some will only see this information favourably if there’s evidence you have actually used the account regularly over a long period.

Our 2018 Banking & Credit Card survey recently revealed that more than 44% of people polled have stayed with their same bank for 10 years or more so it shouldn’t be a problem for many: provided you’ve been with your bank for at least a couple of years, this is likely to be seen favourably by lenders.

Address & Electoral Roll Listing

If your Credit Report shows that you have stayed at one address consistently for a good period of time, a lender can be more confident that it will be easier to contact you should it need to – for example if it needs to start legal proceedings if you have difficulty with repayments.

This information can be given further credence if you are also registered to vote at this address. Lenders see an Electoral Roll listing as a good way of verifying that you actually live at the address you’ve provided. The longer you’ve been registered to vote at an address, the more reliable this information becomes and the more stable you appear.

There are plenty of legitimate reasons why people may move house frequently or have no fixed address (such as overseas members of the armed forces) but it is still important to register to vote as soon as possible after moving. If this falls between annual updates, the Rolling Register will ensure that your Credit Report is updated as soon as possible. Even after registering, it can take a couple of months for your information to be updated.

As well as taking steps to ensure you re-register as soon as possible after moving, it again comes down to timing. Once you have moved house, try and give it a little while for the information on your Credit Report to move with you before applying for credit, which will make it much easier for prospective lenders to assess your Credit Report.

Employment

While information relating to employment isn’t included on your Credit Report, some applications for credit will ask for how long you’ve been in your current job as a factor in calculating your overall stability. If you have worked for the same employer for several years, the implication is that you have a steady source of income that isn’t likely to be disrupted any time soon.

This is seen as an important element when applying for a mortgage in particular, and some mortgage providers will only offer a mortgage to those that have been in their current job for three years or more. This will vary between lenders, but most will want to see that you’ve held your current position for at least a few months before applying.

Again, change isn’t a bad thing but be careful with the timing so that you don’t switch jobs immediately before a big event like a mortgage application.

In summary

On their own, it’s unlikely that any one of these things will make or break your application for credit, but combined with a good credit history, making sure you have the correct information on your Credit Report and that you can afford repayments, stability can certainly help your chances of being approved.

If you haven’t already, you can try checkmyfile FREE for 30 days , then for just £14.99 a month afterwards, which you can cancel online, by phone or by email. You’ll find the UK’s most detailed Credit Report, with data from all four UK Credit Reference Agencies, all backed up by top-rated customer service.

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