What Credit Score Do You Need For a Mortgage?

A common myth about mortgages is that you need a minimum credit score to get approved. This isn’t true and there are many other factors that lenders consider before they will loan to you.

Each lender will interpret your credit history differently according to factors, such as your age, deposit, income, the type of property you’re buying and the reference agencies they use.

In this article, we’ll look at how your credit score affects your mortgage application and the steps you can take to improve it if necessary.

What is a credit score?

Your credit score represents how reliable you are at borrowing money according to a particular agency or lender. Your score improves with positive actions, such as paying off your credit card and loans on time.

If you go over your agreed credit limit or miss payments, this will negatively impact your credit score.

There’s no universal credit score, as each agency interprets your credit history according to different criteria. So what is considered a negative by one agency might not be considered a negative by another.

What is the minimum credit score you need for a mortgage?

No set figure determines whether you can get a mortgage or not. This is because getting approved for a mortgage depends on more than just your credit score and because agencies and lenders use different scoring systems.

However, the higher your credit score the better your chances of getting a mortgage offer and the best rates. You will find it harder to get a mortgage if your credit score is poor but it’s not impossible.

The three main credit rating agencies, Experian, Equifax and TransUnion each have different scales that affect what they consider a poor rating when doing mortgage credit checks. Below is what they consider a poor rating:

• Experian: anything below 721 is considered poor
• Equifax: anything below 380 is considered poor
• TransUnion: anything below 566 is considered poor

As you can see the scales differ depending on the agency. If you’re unsure whether your credit score will affect your prospects of getting a mortgage, speak to one of the advisors we work with. They can provide you with advice and potentially help you get a mortgage even if you have bad credit.

What is a good credit score?

A good credit score will depend on the agency from which you’re getting your credit rating.

The table below shows how Equifax, Experian and TransUnion rank credit scores. This is important because the scores are different depending on the agency. Equifax ranks credit scores out of 700, while Experian rates them out of 999.

So what’s considered a credit score of 700 is considered excellent by Equifax, but a 700 using Experian’s rating is considered poor. To get a better understanding of the scoring systems, check out our table below:

How can you boost your credit score?

You can improve your credit score in several ways, including a few one-off ways such as registering on the electoral roll and clearing any errors on your credit report.

Your credit score provides a lender with a valuable snapshot of how good you are at managing your finances. It’s a reliability check to see how responsible you’ve been when borrowing money in the past (most credit reports stretch back six years, looking at loan repayments, credit card usage, mortgage payments and utility bills).

With this in mind, there are several practical things you can do to ensure your credit history remains clear of any financial blips and improves your chances of qualifying for the best mortgage offers:

• Reduce any existing debts down to a minimum where possible
• Keep up to date with any existing loan repayments
• Make sure any credit card payments are up to date and close any credit accounts you’re no longer using
• Resolve any civil disputes (parking fines etc) before the prospect of a county court judgment (CCJ) is issued
• If you live with a partner, ask them to follow these same guidelines to ensure their credit record also remains healthy

In addition to this list, if you’re considering applying for a mortgage at some point over the next 6-12 months, try to avoid applying for any other major line of credit unless necessary. This prevents any prospective mortgage lender from seeing these checks and reaching a conclusion that you may be over-reliant on credit.

Finally, keep a regular check on your credit history held by the agencies. If anything irregular comes up on the report, be sure to take steps to have the information removed by the credit company involved.

If I meet a minimum credit score will I be accepted for a mortgage?

No, lenders consider multiple factors not just your credit score when they’re considering your mortgage affordability.

A good credit score will help you in your mortgage application, but it won’t be the only, or deciding factor in whether you’re accepted for one or not. Lenders will also consider other factors such as those listed below:

• Deposit: A larger deposit typically helps with your application as it affects your loan-to-value ratio (LTV). A lower LTV makes you a lower risk to lenders and means you’re more likely to be offered the best rates.
• Paperwork: Lenders will want to see a variety of documents before they offer you a mortgage. Some of these include proof of income, at least three months of bank statements, personal ID, proof of address, evidence of deposit, latest P60 form etc.
• Employment status: Whether you’re in full-time employment or self-employed can affect your mortgage application. If you’ve been employed for several years and have a stable income you’re considered a lower risk than someone who works part-time or is a contractor.
• Age: Most lenders require mortgage applicants to be at least 18 years old. Most of them also have a maximum age limit, which is typically the age you are when you take out the mortgage or how old you’ll be when your mortgage term ends.
• Type of property you’re buying: If you’re buying a non-standard property such as a thatched country cottage or a flat above a shop, some lenders may be reluctant to lend to. This can be because of concerns over resale potential if they have to repossess your home in the future.

How can you improve your credit score for a mortgage?

If you’re thinking of applying for a mortgage soon, there are some steps you can take to improve your credit score.

• Make all of your credit card payments on time. This is one of the best things you can do to keep a good credit score and avoid any marks against your record.
• Avoid going into your overdraft and try to keep your credit use below 25%. This will give lenders the impression that you’re in control of your spending.
• Try to avoid applying for anything that requires a hard credit search in the 12 months before you apply for a mortgage. Too many of these searches can make it look like you’re too reliant on credit.

If you want to see what your credit score is right now, click the link below to see.

Get matched with the right mortgage broker

The right broker can help you get a mortgage whether you have a poor credit rating or not, and we’re perfectly placed to help you find the broker to accommodate you.

Our unique broker matching service will take a few details and put you in touch with a broker who has extensive experience with your situation and will be able to help you source the ideal mortgage for your needs.

So, if you’re worried that credit card debt will affect your mortgage application, get in touch for the expert support you need – call us on 0808 189 2301 or make an enquiry and we’ll take it from there.