What credit score do you need for a mortgage?

06 December 2022

What credit score do you need for a mortgage?
Applying for a mortgage is likely to be the largest financial commitment you will ever make, so it is strongly advised that you evaluate your financial situation before starting.

If you are about to start your mortgage application and are wondering what credit score you need for a mortgage, the good news is that there isn’t a specific credit score that you need.
However, this isn’t to say that your credit score isn’t important. Having a good credit score will show the lender that you are a reliable and responsible borrower. Whilst it is possible to get a mortgage whatever your credit score, you will likely be subject to a higher interest rate if your credit score is comparatively lower. 
It is important to note that the success of your mortgage application is not solely based on your credit score. Whilst your credit history is an important determinant, the lender will also conduct other checks such as your affordability and surveys of the property you intend to purchase.

What is a credit score and how does it affect your mortgage application?

A credit score is a numerical rating of a consumer’s credit worthiness, based on the analysis of someone’s credit report and history of borrowing. The higher your credit score, the more trustworthy as a borrower you look to the lender. As they will deem you as a lower risk, you might be eligible for lower interest rates compared to someone with a lower credit score. 

There are many factors that are used to determine your credit score, such as your repayment history and total number of accounts that you have open and active. There are multiple credit reference agencies in the UK, with three main ones; Experian, Equifax and TransUnion. Every credit reference agency uses a unique scoring system, so you might find you have a different credit score depending on who you use. However, in most circumstances, the differences will be minor and you will likely be categorised in the same bracket.
By having a higher credit score, you are more likely to be accepted for a mortgage. It might even entitle you to a lower interest rate. Due to the compound interest and lengthy periods of time that a mortgage is usually stretched over, even a small percentage difference between interest rates could have a significant impact on how much you pay every month.

How is your credit score calculated?

Your credit score is calculated based on analysis of your credit report and history. Your credit history will show how you have managed debts, loans and bills in the past, to give the lender an indication of how likely you are to keep up with your mortgage repayments. A good track record of paying bills on time will stand you in good stead, whereas a history of late or missed payments will lead the lender to be cautious. Equally, if you do not have a history of borrowing, repaying debt or making regular payments, the lender will not be able to assess your creditworthiness, which will impact your credit score.

What credit score do you need as a first time buyer?

If you are looking to apply for a first time buyer mortgage, chances are you will have less of a credit history compared to people looking for a moving home mortgage for example. This could be because you have not had any utility bills in your name for example. As previously mentioned, there is no one specific credit score that will either accept or deny you from applying as a first time buyer. This being said; the higher your credit score, the better when it comes to applying for a mortgage.

Does applying for a credit score impact your credit score?

When you apply for a mortgage, the lender will perform a hard credit check, which is to say that it will leave a permanent mark on your credit record. One credit check by itself is unlikely to affect your credit score, however a succession of hard credit checks in a short period of time could raise some red flags for lenders. Applying for a mortgage agreement in principle involves a soft credit check, which does not leave a permanent mark on your credit record.
Once you have secured a mortgage and start paying it off on time, this could improve your credit score as it shows you can be trusted to stay up to date with large repayments.

Tips to improve your credit score before a mortgage application

Improving your credit score can be a long process, and it isn’t possible to say that performing certain activities will lead to a specific score increase within a certain timeframe. However, by following the best practices will stand you in good stead in ensuring your credit score is going in the right direction. 

  • Ensure that you are registered on the electoral roll for your current address
  • Where possible, make regular payments on time and in full
  • Try to keep your credit utilisation low
  • Look for any errors or mistakes on your report and try to rectify them
  • Lenders like stability, so where possible avoid moving home regularly or changing bank accounts and credit providers too often

If you are ready to start your mortgage journey, our team of mortgage experts would love to
help! Book an appointment with one of our friendly team to discuss your options.

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