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what credit score mortgage
what credit score mortgage

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What Credit Score Do I Need For A Mortgage?

If you're trying to get a mortgage, you may be wondering what the minimum credit score is that you need to be accepted by mortgage lenders. There's no specific credit score required to get a mortgage simply because there's no single credit score.
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If you're trying to get a mortgage, you may be wondering what the minimum credit score is that you need to be accepted by mortgage lenders.

Yet, while this is a common question, in fact, there is no single answer to it. There's no specific credit score required to get a mortgage simply because there's no single credit score.

When you apply for a mortgage (or apply to any lender for any type of credit), the lender will get information about you and your credit history from credit reference agencies like Experian, Equifax and TransUnion to calculate your credit score. 

They do this because credit scores help them to determine whether it's worth their while to take the risk of lending money.  In essence, your credit report will give them the information they need to decide if you're likely to be a reliable, responsible borrower who will repay their debt.

For some, it can be difficult to know exactly what a good credit score number is to be able to get a mortgage. Typically, if you have a good credit score (i.e. a higher score), you will be viewed as a lower risk borrower. If your credit history is lower you will be viewed as a higher risk borrower.

Therefore, if you score more points on your credit report, you'll have a better chance of your mortgage application being accepted by the mortgage lenders of your choice. You'll also have a far better chance of being offered a better interest rate on your mortgage.

What minimum score will I need to be offered a mortgage?

There's no set minimum credit score you'll need to achieve to get a mortgage. This is because the credit score you need to buy a property with a mortgage will vary depending on which lender you apply to. Also, different systems are used to calculate credit scores by each credit reference agency. Therefore the numbers can't be compared.

It's always going to be true that credit scores that are higher will give you the best chance of securing a mortgage and being given access to the most attractive interest rates. 

But if your credit score is at least good, you should still be able to get a mortgage, albeit with a higher interest rate. If you have a low credit score, though, you may find it a lot harder to get a mortgage.

There are three credit reference agencies that mortgage lenders commonly use in the UK - Experian, Equifax and TransUnion. Each major credit reference agency has a unique credit score system of its own. Lenders may use any one of the three to determine whether you'll be approved for a mortgage.

  • The Experian scoring system ranges between 0 and 999, with a credit score of under 721 said to be a poor credit score.

  • The TransUnion system has scores between 0 and 710 while also having five rating bands. With this system, anything below 566 is a poor credit score.

  • Finally, the Equifax scale runs between 0 and 700, with a low credit score being anything under 380.

This makes it clear just how varied each different scoring system is and how it's almost impossible to determine what score for a mortgage is required.

If your credit score is below the "good" threshold or is definitely in the poor credit threshold, you should probably try to build your credit before applying for a mortgage.

What's the minimum score I can have to get a mortgage?

We already know what different CRAs consider to be a bad credit score. But if you're asking what score you need to achieve before you even consider filling out a mortgage application, it may also help you to know what is considered to be a good credit score by each credit reference agency. This will enable you to quickly determine if you need to improve your credit score before applying for a mortgage.

  • Experian ranks a good credit score as anything between 881 and 960.

  • TransUnion ranks a good score as anything between 604 and 627.

  • Equifax ranks a good score as anything between 420 and 465.

  • If you want to access the best mortgage rates of all, bumping up your credit score to excellent is the best idea.

  • Experian ranks an excellent credit score as anything between 961 and 999.

  • An excellent credit score with TransUnion is between 628 and 710.

  • Equifax's excellent credit score ranking is between 466 and 700.

  • Your application will have the best chance of succeeding if you can improve your score to at least a "good" level.

How does a mortgage lender use credit reference agencies to make a lending decision?

When it comes to getting a mortgage, it can be difficult to determine how lenders think. This is because they all use their own scoring system and make decisions in different ways. Nevertheless, there are a few key factors that they are looking for when they check your credit history that will aid them in making their decision. These include:

  • Your credit report information. This includes your full credit history along with public record data, such as any IVAs or CCJs that are on your file.

  • The details that you give them on the form when you apply for a mortgage.

  • Information already held by the lenders about you. This will apply if you've ever had a credit card, loan, or bank account with them.

  • The mortgage lenders' own policies. These can vary between different lenders.

When mortgage lenders check your credit report, they can get an overview of your previous credit history. It will show things such as the debt you owe on your credit cards, whether you're registered to vote on the Electoral Roll, and whether or not you've had missed payments at any time. Once they have all of this data, they can give you their own credit score, which may be a good credit score or a low credit score depending on their unique criteria.

How does affordability affect whether I can get a mortgage?

When you're trying to get a mortgage, it's common to focus primarily on the minimum credit score you need to be accepted by lenders. Yet, there's more to applying for a mortgage than that. Knowing what credit score for a mortgage would make you most attractive to mortgage lenders is helpful, but affordability is another of the factors that comes into play.

Lenders need to see that you can afford a mortgage before lending you any money to buy a house. You will only be accepted for a mortgage if you're a low enough risk. 

That means they won't just look at your credit file. They'll also look closely at your financial incoming and outgoings. They won't just look at your credit card bills and repayments or whether you make your loan payments on time. They'll also be examining your financial circumstances, including your income and how it compares with your fixed, regular costs such as council tax bills, childcare and other monthly expenditure.

You need to show lenders that you're capable of affording your mortgage payments on your property every month even if the interest rate went up or your life situation suddenly changed. If you can demonstrate this in your application, you may be approved for a mortgage even when you don't have a credit score that is considered good or better.

What happens if I have a bad credit file?

It is still technically possible to get a specialist mortgage for bad credit. However, it's a lot harder to get your mortgage application accepted by a lender. It'll also probably mean you have a higher interest rate and will be required to pay a bigger deposit on your house.

Many people have had credit issues in their past, which have led to a bad credit profile. For example, they could have defaulted on a loan, failed to pay credit card payments on time, or could have struggled with other financial problems.

Other people are simply in circumstances that look unattractive on their credit profile. For example, they may be self-employed, are not on the electoral register, have a lower income, or have only recently moved to the UK. They may even simply have minimal credit in their history, for example, if they've never taken out loans or credit cards before.

Lenders need to get information about your ability to manage your income and finances effectively. They need to be certain when approving mortgages that those they give home loans to aren't going to miss their monthly mortgage payments and get into excess debt. 

It's therefore important to show them that you're able to pay your credit card and loans regularly, manage your mobile phone contract responsibly and even handle payments to some utility services to increase your score enough to be approved for a mortgage.

Some mortgage lenders will accept applicants who are in a difficult financial situation for some of their mortgages and home loan products. However, these will naturally have far higher interest rates and require a much higher deposit. 

For example, people with a poor Experian, TransUnion or Equifax score may be accepted for a home loan by lenders who are prepared to offer mortgages to those with black marks on their credit record, including IVAs that were paid off several years ago and small CCJs over 6 months old. Nevertheless, there's no guarantee of being accepted for these kinds of mortgages since they are still quite difficult to obtain.

If you need expert advice on which specialist mortgage product would be right for you, it's best to speak to a specialist mortgage broker registered in England that is authorised and regulated by the Financial Conduct Authority with expertise in this area. A specialist bad credit mortgage broker with a registered office in England will have the skills and knowledge to advise you about improving your chance of getting accepted, how much deposit you're likely to need, and help you find products that best suit your situation.

How can I improve my score?

If you need to get a home loan, you could benefit from boosting your credit score. Here are some tips to improve your credit score that could help you.

  • Pay every bill on time. This will prevent late or missed payments from appearing on your credit file and prevent you from being hit with fees and charges.

  • Register on the electoral roll to confirm your identity and home address.

  • Minimise your credit applications. Each time you apply for loans or credit cards, the lender will record a hard search on your file. This could cause your score to drop as you may appear to be too reliant on getting credit.

  • Stay within your credit limit. Wherever possible, keep the balance of your loans and cards at 25% of the limit or under.

  • Regularly check your Experian credit file to ensure all the details are up to date and accurate. Even small changes such as how your address is recorded could negatively affect your credit rating. If you spot anything which requires correction, contact the lender and ask for an amendment to be made. Alternatively, CRAs like Experian can contact your lenders on your behalf to ask them to do this. 

Obtaining a mortgage

If you're ready to make a mortgage application, but you aren't sure where to start, especially if you're a first time buyer or have had financial problems in the past, speaking to a specialist mortgage broker is often the best course of action. They can help you find products that suit your needs as well as the best interest rates for you so you can buy the house of your dreams.

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