How your credit score affects your mortgage application

15th August 2018

By Kurt Wood

Buying your first house is a major milestone for many of us – but having a poor credit history can dampen your chances of getting a mortgage. 

Here’s how to get yours in tip-top shape before heading for the mortgage advisors.  

Credit scores and mortgages

Credit checks are a massive part of the mortgage application process. Your bank or building society will want a clear sense of your financial background before offering you a mortgage. 

If they’re happy with your score, they’ll offer you a Mortgage in Principle (MiP). This is also known as a Decision in Principle (DiP) or an Agreement in Principle (AiP). 

This doesn’t guarantee you’ll get a mortgage, but it does mean they’re happy with what they’ve seen so far. 

Once you’ve had and accepted your MiP, the lender will take a detailed look at your credit score. This check will show up on your credit file for three months. 

What is the minimum credit score for a mortgage?

It would be great if there was a black and white answer to this question – but mortgages aren’t a one-size-fits-all product.   

There is no official credit score needed to get a mortgage. It’s down to lenders to decide which applications they want to approve.  

It’s also worth noting that there is no universally recognised credit score.  The three main credit reference agencies in the UK – Experian, Expedia and CallCredit – all use different criteria to calculate scores, and it’s up to the lender which agency to use. 

To get a decent sense of your chances of success, try getting a free credit report from all three agencies. 

A good credit score doesn't guarantee you'll get a mortgage

All three major credit agencies have the same rankings of ‘very poor’, ‘poor’, ‘fair’ and ‘good’ to ‘excellent’. Having a good or excellent score puts you in a better position for getting a mortgage. But it doesn’t guarantee approval. 

This is because your credit score isn’t the only thing that influences whether you get accepted. Lenders also look at: 

Your income – how much you earn (including your partner’s earnings for joint applications).  

Your bills and outgoings – a breakdown of monthly commitments, so your lender can work out whether you can afford mortgage repayments.  

Current debt – existing balances on loans and credit cards will be taken into account to make sure you’re not under too much financial strain.  

A better score also means you will have access to better interest rates, and you’ll be able to shop around for the best deals – a luxury you won’t have with poor credit history.  

Can you get a mortgage with bad credit?

If you have a low rating, County Court Judgements (CCJs), or bankruptcies in the last 10 years, you probably won’t be offered a mortgage (or you’ll only be able to get very high-interest deals).  

If your score is just a little on the low side (hanging just inside the poor or fair rankings) there are things you can do to boost your chances fairly quickly. 

Guarantor mortgages for bad credit scores

Most banks and building societies offer guarantor mortgages. These involve getting a relative to “guarantee” your mortgage repayments. So if you fall behind, they’re obliged to stop in and pay your lender. 

Because this lowers the risk to the lender, they’re more likely to overlook your ropey credit score. 

To get a guarantor mortgage, you need a relative who’s willing and able to protect your mortgage payments. 

How to get a mortgage with bad credit

Getting a mortgage if your credit score isn’t great can be a huge challenge. It doesn’t mean the end of the road for your property-owning dreams, though. 

Here are some steps you can take to improve your credit score: 

Hire a mortgage broker – brokers are specialists in finding the right mortgage product to suit your needs, so they can help you find mortgage deals 

Search for a bad credit mortgage – there are now a number of specialist mortgages for people with bad credit. But be aware that these mortgages often come with much higher interest rates, so be sure you can afford the repayments.  

Build a good history – if you can reduce your debt and build a history of making your loan, bill and credit card repayments on time, you’ll have a better chance of getting your mortgage application accepted. 

Save a bigger deposit – buyers typically put down a 20% deposit to buy their first house, but try to save more if you can. Some lenders may ask you for a larger deposit rather than rejecting your application outright. It’s also easier to get accepted for, say, a 75% LTV mortgage than a 90% LTV mortgage. 

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