What Credit Score Do You Need for a Mortgage?

People often think they need a certain credit score to get a mortgage, but that isn’t always the case. So what is a credit score and how will it affect you getting a mortgage?

What is a Credit Score?

Your credit score reflects what type of borrower you are and how you manage the credit you have. Sensible borrowing and repayment will improve your credit score, whereas missing payments and going over your credit limit will likely reduce your credit score. They will usually look at similar things, but some things will be more of a concern to certain lenders.

What is a Good Credit Score?

You want to aim for as big a score as possible, as this means you are managing your borrowing effectively. However, there is no set score that you have to reach for a mortgage. There are three major credit reference agencies (CRAs). They are Equifax, Experian and Transunion. They all use an independent scoring system.

As an example, Equifax’s credit score is out of 1000. A score over 670 is considered very good, 531-670 is good, 439-530 is poor and 0-438 is very poor. For Transunion, a good credit score is 604 or above (max 710). For Experian, over 881 is considered a good score.

How do Mortgage Lenders Make Their Decisions?

Lenders will look at your credit history and may look at up to 6 years’ worth of data. So young people who have no credit history may find it just as hard to get a mortgage as an older person with a bad credit history. Missed payments, CCJs, bankruptcy and high levels of lending can all raise red flags to lenders. Lenders will also look at your individual affordability, such as your income and any existing financial commitments. This can include things such as nursery fees that wouldn’t show on your credit file.

What Credit Score Do You Need For A Mortgage?

The best way to prepare to get a mortgage is to use one of the credit reference agencies and review your credit file before you apply. This will give you time to improve your credit score. Having a lower credit score won’t necessarily mean you won’t get a mortgage, but it may reduce your chances of securing the best deal.

Can I get a Mortgage with Bad Credit?

Yes, you can. Having bad credit does not rule you out from being able to get a mortgage, and there are some lenders which offer mortgages for people with bad credit. However, they are often not at the best interest rates and can incur higher fees.

If you are concerned about getting a mortgage with your current credit score, it would be worth speaking to an independent broker or mortgage advisor who can assess your situation and look for the best deal for you.

How Can I Reduce The Chances of a Mortgage Being Rejected?

If you are thinking of buying a house, now is the time to look at your credit history and look to improve your credit score.

Ways to do this include:

1. Have a credit card but spend a small amount each month and pay it off in full. This shows good financial discipline.
2. Priorities paying off any existing debt including loans and credit cards.
3. Have payments set on the same day each month and make sure enough money is in your account to cover payments.
4. Close any old credit cards, as they will show on your credit file.
5. Avoid ‘hard searches’, with are searches that are recorded on your credit file from lenders. This could include, credit cards, loans, car finance, store finance and even mobile phone providers.
6. Keep your credit use as low as possible. 25% is a good guide.
7. Get on the electoral roll where you live as this stability of residency proves to lenders you are who you say you are.

For More Information

If you have any questions, don’t hesitate to get in touch with Propertyable. For more information about buying a house as a first-time buyer, follow this link to learn more. If you’re curious about the costs of buying a home, you can read our library of articles to learn more.