Your residential and employment stability are key factors in borrowing money. Lenders are jittery about instability, as it brings uncertainty and adds greater risk to the money they lend. When it comes down to it, lenders care about the likelihood of being repaid and on-time. Your home and employment history are reliable markers, which can vary from being constant or cycling through changes from month-to-month. If you’re changing address, or have moved home recently, you should be aware that this has a negative impact on your creditworthiness. Alongside this, lenders like to see that you’re steadily employed with a reliable income. But do you know exactly how they assess your overall stability this? Most people don’t. That’s why we are here to tell you the top four things that feature in your Lender Report to assess your stability.
What lenders check:
Unusually, the first aspect of stability seems to have little to do with your employment or your living situation, but you might not know that being on the Electoral Register serves as an extra proof of address that lenders can rely upon. Many lenders will decline applicants who are not on the Electoral Register. The longer you’re on the register, the better your score. If you’re not registered, it takes a few minutes, and you can do so here. Or, if you want to know more about being on the electoral roll for improved creditworthiness, then you can read our article here.
Lenders will consider your Residential Status when assessing your credit application. This means they’ll look to see whether you own your home, or if you’re renting, whether you’re a council tenant, or if you’re living with family (parents, for instance) or friends. If you are tenant and renting, lenders can even assess whether the property is furnished or unfurnished. An unfurnished property suggests you are stable where you are – as you’re much less likely to move often if you have furniture to take with you!
The best status to have, in the eyes of lenders, is to be a homeowner. Homeowners, particularly those who pay a mortgage consistently, are viewed as the least risky borrower. Interestingly, for creditworthiness, it is better to have a mortgage than own your home out-right; as a mortgage is the credit agreement with the highest positive impact.
Lenders will look at your current employment status to see if you are employed, unemployed, self-employed, or working on a contractual basis. Full-time employment is the best status because it tells lenders you have job stability. By contrast, contract based roles can reduce your chances of borrowing as these introduce a level of uncertainty around your income.
Lenders will also look at how long you’ve been with your current employer. They assume that the longer you’ve already been with an employer, the greater employment stability you have. This means they’re more likely to trust you to make regular repayments, as your income is unlikely to suddenly change.
A final word
If your stability is top-notch, it helps prove to lenders that you’re a sound applicant and very likely to make your repayments on time. If not, it can get a little more complicated. Hopping between jobs, temporary gigs, or self-employment all can negatively affect how lenders score you, as well as hopping between addresses. If this applies to you, you’ll need to make sure the rest of your credit file proves you’re creditworthy as a borrower.
To check how lenders will view your credit report, get started with your free Credibble account. We provide you with your Lender Score and full Lender Report at no cost to you, so that you can see where you stand and how to improve your position as a borrower.