15 Aug 2022
What Credit Score is Needed for a Mortgage?
Looking at getting a mortgage? Your credit score will play a large part in your mortgage chances and how much interest you’ll need to pay.
Lenders use your credit score to determine how reliable you are at paying back money. The lower your score, the less likely lenders will be to accept you as you’re seen as higher risk.
That’s why it’s important to check your score and improve it where possible before applying for a mortgage.
However, there is no ‘exact’ score that will automatically make you eligible for a mortgage as every lender has different criteria. Credit score companies also use different scoring systems to work out your overall rating, so you shouldn’t have a specific number in mind.
As an online mortgage advisor, we look at your credit profile as a whole and match you with lenders who will accept your credit score. Even if you have a lower score, there will be lenders out there willing to accept you if you fit the rest of their criteria.
Read on to understand the importance of credit scores, how to improve your chances for success and what we can do to help you.
What is a Credit Score?
A credit score is a three-digit number based on an individual’s credit report and represents their likeability at paying bills back on time.
It’s used by mortgage lenders to work out whether an applicant qualifies for a loan.
Many high street lenders will not accept someone with a poor credit score. If your score is lower than ideal, we have access to more lenders who deal with financial circumstances like this.
How Does the Scoring System Work?
There are a number of credit scoring companies, including TransUnion, Experian and Equifax. They use different scoring categories to determine your credit reliability.
Let’s take Experian as an example. They rate credit scores between 0 and 999, with the scoring brackets as follows:
- Excellent: 961-999, this is the best score you can have making you more eligible for the best deals and lowest interest rates.
- Good: 881 – 960, you will still be considered for a couple of the best mortgage deals.
- Fair: 721 – 880, most likely to get a good mortgage deal with an average interest rate.
- Poor: 561 – 720, you can still get a mortgage, but your interest rates are likely to be high.
- Very poor: 0 – 560, you’re likely to be declined by most lenders or will be charged very high interest rates.
Your score will be based on your credit history, such as paying bills back on time. If you have missed payments in the last six years, this will affect your score negatively.
What Negatively Affects My Credit?
Negative credit is caused by making late payments and falling into financial difficulty.
This can lead to serious adverse credit issues, such as IVAs (especially if they’re still active), County Court Judgements, bankruptcy, Debt Management Plans etc. If you have any of these issues, you’re much less likely to get accepted by traditional high street lenders.
In these cases, you will need to speak with adverse credit advisors – they will have access to specialist lenders who deal with applications like this regularly.
What If I Have No Credit?
You could have little to no credit rating, also called a ‘thin’ rating, which can be caused by many circumstances, such as:
- You’ve just moved to the UK
- You don’t have a UK bank account
- You live at home with family and haven’t had to pay any bills
Without credit history, lenders aren’t able to work out how reliable you will be with paying back monthly repayments.
In this case, you’ll need a specialist lender who doesn’t use your credit score to determine whether you’re eligible.
As long as you have the affordability of a mortgage, such as a good deposit and good salary, you can still find lenders willing to help.
Can I Improve My Rating?
There are lots of things you can do to improve your credit score, but it can take some time. This includes making all payments on time, using a credit card but staying in your credit limit, avoiding pay day loans and paying off debt.
If you have missed or late payments on your file, they’ll stay visible on your record for six years. This makes improving your score a long process.
Even if your score is low and you don’t have the time to increase it, we have access to many more lenders than traditional brokers at Mortgages Online.
This means we’re more likely to find specialist lenders who won’t use your credit score to accept your application.
Further Guidance and Advice
To sum up, your credit score plays a large role in getting a good mortgage offer. However, there are options available to those who have a low score.
You don’t have to have a certain score to get accepted, but the higher your score the better your options will be, so try your best to keep your score ‘good’ or ‘excellent’ for the best options.
If you need further help with finding a mortgage, you can speak to a member of our team on 03300 58 60 58 or emailing us at firstname.lastname@example.org.
Or why not use our online form to see if you’re eligible? Your credit score won’t be affected by this.