Improve Your Credit Score Before Applying
Your credit score is one of the most important factors in determining your secured loan rate. Lenders use credit reference agency data — from Experian, Equifax and TransUnion — to assess how reliably you have managed credit in the past and to estimate the probability that you will repay your loan as agreed. A higher score signals lower risk and typically results in a lower rate offer.
Before applying, check your credit report from all three main agencies. Look for any errors — incorrect addresses, accounts you do not recognise, or missed payments that were actually made on time — and raise a formal dispute with the relevant agency to have them corrected. Errors on credit files are more common than many borrowers realise, and removing them can improve your score relatively quickly.
Beyond correcting errors, practical steps to improve your score include ensuring you are registered on the electoral roll at your current address, reducing the utilisation rate on revolving credit facilities (such as credit cards) to below 30% of your credit limit, avoiding new credit applications in the months before your secured loan application, and ensuring all existing payments are made on time without exception. These improvements may take three to six months to fully feed through to your score, so planning ahead is important.
Reduce Your Loan-to-Value Ratio
The loan-to-value ratio — or LTV — is the total of all secured borrowing on your property (your existing mortgage plus the new secured loan) expressed as a percentage of the property's current market value. Lenders use LTV as a measure of security: the lower the LTV, the more equity exists as a buffer against any potential loss, and the lower the rate the lender is typically willing to offer.
Reducing your LTV before applying for a secured loan can be achieved in several ways. First, making overpayments on your existing mortgage reduces the outstanding balance and improves your LTV. Second, if your property has increased in value since you purchased it or since your last valuation, a current market valuation may show a higher property value than the lender's assessment — even a modest increase in value can move you into a lower LTV band and potentially a better rate tier.
Most lenders price secured loans across LTV bands — for example, different rates may apply below 60%, 70%, 75% and 85% LTV. If your total secured borrowing sits just above one of these thresholds, it may be worth making a one-off payment to your mortgage or adjusting the size of the secured loan request to bring you within the lower band. A broker can tell you which LTV thresholds are relevant for the lenders they are considering for your case.
