When you’re trying to get that all important first foot on the property ladder, your credit history can make or break your attempts. But what credit score do you actually need to get a mortgage today?
Here in the UK, there isn’t actually any set minimum credit score that you need to have to secure a mortgage. In other words, we can’t give you a straight answer to the question of what your credit score needs to be to secure a house.
Your credit score will definitely influence your ability to get a mortgage, the selection of providers happy to lend to you, the amount you can borrow and the amount of deposit you’ll need though.
Each mortgage lender will have their own lending criteria for you to meet because they will have different levels of risk that is acceptable to them. So some lenders will be happy to grant a mortgage if you have a less than favourable credit score whereas others will reject your application.
Before you make your application, it is a good idea for you to understand how credit scores work and to get hold of yours.
What is a credit score?
In the UK a person will have their individual credit score determined by four official credit reference agencies:
- Callcredit (TransUnion)
- Crediva
- Equifax
- Experian
Each of these credit agencies is independent of each other, so each will award you a different credit score. They also score on a slightly different scale, so, for example, your Experian score will be out of 999 and your Equifax score will be out of 700.
You may be curious enough to check your score with each of these agencies, but it doesn’t matter if your score differs as long as each agency has the correct details about you.
Generally speaking, how it works with most mortgage lenders is that the greater the deposit you can put down, the lower risk you are and therefore you may be able to get away with a slightly less than stellar credit score.
How do lenders use my credit score?
When you make a mortgage application the lender will look at your credit file and use that information to help them decide:
- Whether to lend to you
- How much to let you borrow
- How much interest to charge you
Although you may have a very long credit record your most recent information held on your file will have the most influence over their decision.
Most lenders will be concerned with the state of your current financial situation and want to be sure that you can afford to pay back your loan.
How can I tell if my credit score is good?
Knowing if your credit score is good or not will depend on the credit reference agency you chose to monitor it through.
This can be confusing because with Experian for example, having a credit score of over 700 is considered good. However, with Equifax because their scoring range is different a good score would be around 475 on their scale.
Mortgage lenders are very familiar with all the different credit reference agency scoring systems, so while it may be confusing from our point of view, they will know whether your credit score is good or not and how it will affect your mortgage application.
Can I get a mortgage with a bad credit score?
Having a poor credit score makes it much more difficult to secure a mortgage. However, you should never assume that having a bad credit score will result in automatic rejection for your mortgage application.
There are a lot of factors that mortgage lenders will take into consideration when assessing your application. For example, you may be approaching them for a mortgage with a substantial deposit amount that greatly reduces the amount of money you need to borrow.
You may already have a good history with the company as a customer, so if your income is stable and is sufficiently high enough to cover your monthly repayments, your application will be much more favourable.
If your mortgage applications have been unsuccessful because of poor credit, then you may be able to approach a lender that specialises in lending to people with a poor credit record.
High Street Banks Vs Smaller lenders
The major high street banks have the money to advertise on TV and promote great mortgage rates to tempt in new customers. However, when you have a low credit score it may be better to shop around and look elsewhere for your mortgage.
Most high street banks will use your credit score to make their lending decision. The only problem is that they process such huge volumes of mortgage applications they don’t spend a lot of time looking at the finer details of your application.
Most people with a low credit score will be automatically rejected for a mortgage from a high street bank, but a smaller lender or a lender that specialises in mortgages for people with a bad credit history will overlook your score and look deeper into your circumstances.
So for example, if you are carrying bad credit, but the issues that caused this are now resolved, a specialist lender will see this and will be able to make a more informed decision.
The Small (Not Literally) Print
We’re not mortgage advisers. Not even a bit. We’re finance bloggers with experience of buying our own homes. We’ve done LOADS of research. But before you make any mortgage related decisions you should consult a mortgage adviser.
