Does mortgage help risk parents’ credit rating?

"This sector has had difficulty meeting the large deposit requirements that have become de facto, so products like the Lloyds TSB ‘Lend a Hand’ mortgage that requires assistance from parents for the initial deposit are a really good sign.

"But parents do need to be aware that if they undertake to guarantee one of their children’s mortgages their financial history will be linked with that of their child.

"Whilst I am sure that in the majority of cases this won’t be an issue at all for the family, if the child does hit financial difficulties in the future it could have a detrimental affect on the parents’ ability to get credit.

"We don’t want to discourage this sort of activity to help the next generation get on the property ladder. But we do want parents to be fully aware of the implications of taking on linked financial agreements with their children.

"After all, in this new era of reduced availability to credit right across the consumer marketplace, it’s vital to ensure that you have the best possible credit rating to ensure your application isn’t declined, and you get the best deal available. Any detrimental information, including defaults on a linked financial agreement, will count against someone for new applications."

Equifax Top Tips for First-Time Buyers

* Before you do anything get a copy of your Credit Report –;

* When calculating what you can afford, make sure that you factor in all expenses including conveyancing, stamp duty, solicitor fees, and Estate Agency fees;

* Shop around for the best mortgage deal– get at least three quotes to compare;

* When shopping around ensure enquiries are logged as ‘quotation’ (soft) searches rather than ‘application’ (hard) otherwise it could impact on your credit rating;

* Ensure you take account of all the costs, as some deals look good on the surface, but can be more costly once you have added in the arrangement fee, etc;

* Always take an experienced home buyer, such as a parent or a home-owning friend, when looking at property – you don’t want to miss anything that may cost you dearly in the future to fix;

* Set out a monthly budget as it all adds up. Remember to include expenses such as council tax (check which band you are in), gas and electricity bills, house/building insurance, travel expenses, boiler servicing, ground/maintenance rent (If leasehold);

* Don’t lie on your application, such as increasing the amount you earn or saying you have a perfect credit history – you may be found out and it could jeopardise your chance of getting a mortgage;

* If you find it all a bit confusing or you don’t have time to re-mortgage consider consulting an independent mortgage advisor.

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