What credit score do you need for a mortgage?
- How does my credit score affect a mortgage application?
- What’s the minimum credit score needed for a mortgage?
- What is a good credit score for a mortgage?
- Can I get a mortgage with a fair credit score?
- Can I get a mortgage with a poor or bad credit score?
- Improving your credit score for your mortgage application
- How do I get a copy of my credit report?
- How do you reduce your chances of being rejected for a mortgage?
- Does getting a mortgage affect my credit score?
How does my credit score affect a mortgage application?
One of the most crucial elements of a lender’s affordability assessment during a mortgage application is your credit history. The main reason why a lender assesses your credit is to help them determine if you are a risky borrower.
A high or “better credit” score indicates lower risk, showing a greater likelihood of you being able to make repayments consistently. If you have a low or “bad credit” score then you will be seen as a higher risk, which could mean your mortgage application may be declined.
If your application is accepted and you have bad credit, it can lead to lenders imposing certain conditions like higher interest rates or larger deposit requirements. This is to mitigate their risk exposure and ensure they lose little to no money at all, as at the end of the day a mortgage lender is a business.
Having a clear idea of your credit situation before you apply for a mortgage can increase your chances of success. This is because you can look to improve it if it isn’t up to scratch, or if you have a history of bad credit you could use a specialist bad credit mortgage lender.
What’s the minimum credit score needed for a mortgage?
There isn’t a minimum score imposed by lenders for you to be accepted for a mortgage. Instead, the higher your score the better your chances of success, plus the improved chances of you obtaining a competitive product.
The reason lenders don’t impose a minimum score is because your credit is only one of the things assessed during the application process. For example, someone may have a bad credit score, but have a really high deposit amount, for example, 75% of the property’s value and a high income. This essentially means that the perceived risk of a bad credit score is balanced with the high deposit and income amount.
Whilst it is near on impossible to quote a minimum score, in my experience, I find that clients have better success when providing accurate information. Details such as precise dates and amounts help enormously.
What is a good credit score for a mortgage?
Lenders don’t have any brackets or tiers in place as to what credit scores have the best chances of getting a mortgage. However, within the industry there are three main credit reference agencies (CRAs) that are used. They are Experian, Equifax and TransUnion, and lenders will use all three when assessing an applicant’s credit.
Luckily, all three CRAs provide us with brackets that state what category your credit score falls into. Each CRA has a slightly different scoring system, so checking all of them can be beneficial before applying for a mortgage.
The higher you can get up on each list, the better your chances of mortgage success. Below we have highlighted the brackets listed by each lender:
Experian
| 961 – 999 | Excellent |
| 881 – 960 | Good |
| 721 – 880 | Fair |
| 561 – 720 | Poor |
| 0 – 560 | Very Poor |
Equifax
| 800 – 850 | Excellent Credit Score |
| 740 – 799 | Very Good Credit Score |
| 670 – 739 | Good Credit Score |
| 580 – 669 | Fair Credit Score |
| 300 – 579 | Poor Credit Score |
TransUnion
| 628 – 710 | Excellent |
| 604 – 627 | Good |
| 566 – 603 | Fair |
| 551- 565 | Poor |
| 0 – 550 | Very Poor |
Can I get a mortgage with a:
Yes, whilst having a good to excellent credit score will be much more beneficial, you can still get a mortgage with a fair credit score. If you have a fair credit score, it’s likely that your lender options will be reduced, and these lenders may also impose certain requirements.
A common one is for them to increase the interest rates on products or for them to require a larger than average deposit. This is so they can offset any risk when lending to you. Working with a mortgage broker can open up your options as many brokers, like us, have access to specialist lenders. These lenders don’t always advertise to the general public, so a broker may be required to access them.
Furthermore, a broker can prepare and present your application in the best possible light to a lender, again increasing your chances of success.
It’s possible, but getting a mortgage with a bad credit score can be much more challenging than if you score was to be ‘good’ or ‘excellent’.
You may be in this position for one of two reasons. Number one is that you have experienced credit issues in the past, like being handed with a CCJ. However, a second reason is that you may have little to no borrowing history, therefore you will be seen to have a poor credit score.
If you are in this situation it can be a good idea to look to improve your credit score before applying for a mortgage. While it will take time and money to build up a more favourable score, it can work out much cheaper in the long run.
This is because if your credit is very bad, specialist lenders will likely be your only option. These lenders are likely to charge much higher rates of interest, as well as require a larger deposit.
If you have a bad or poor credit score, it’s very likely you will need to consult the expertise of a mortgage broker. Their knowledge of the market, paired with the connections they have to specialist lenders, can prove invaluable.
While it’s certainly more challenging to get a mortgage with a fair or poor credit score, it’s not impossible. We’ve helped many clients in these situations find suitable loan options, often through specialised lenders or government-backed programmes.
Improving your credit score for your mortgage application
If you are in a position where you have a fair or poor credit score before applying for a mortgage, then looking to increase it can be key. There are a number of steps you can take to see credit score improvements relatively quickly. Here are some of our top tips:
- First, it’s best to obtain copies of your credit records from each CRA because they all may hold slightly different information on you. Next, review your reports and if anything looks inaccurate, ensure it is fixed. Wrong information can have a negative impact on your report. You will need to contact the relevant agency with supporting documentation to get something fixed.
- A really simple trick to help your credit score is to ensure you’re on the electoral register and if not, get on it. This is a form of identify verification as well as an anti-fraud tactic that can influence your credit score.
- Ensure you close any unused credit accounts too. By having multiple lines of credit open it shows lenders that you are someone who relies on borrowing to fund their costs. Lenders will see you as someone who is worried about their finances, making you a riskier borrower.
- If possible, settling any debts will benefit you score, especially more serious issues like CCJs or IVAs. This demonstrates good money management, as a lender won’t want to lend to someone with existing amounts of debt.
- Once you have followed the steps above, take action to build a good credit history. The best way to do so is by taking out more credit. Take out a credit card or a small loan and ensure you pay everything back on time and in full, although only if you know you can afford to. This demonstrates good money management, reducing how risky lenders will perceive you.
Why not check out our full in-detail guide on how to improve your credit score!
How do I get a copy of my credit report?
There are three main CRAs that you should obtain your credit report from. So, how do you go about getting your credit report? All three agencies allow you to do so online through their website:
Experian have a free credit score tool that can be accessed via their website, this will only show you your current credit score and not an overall report. If you want a full report you will need to sign up to a membership. This is free for the first 30 days and then £14.99 per month after that. This membership can also give you personalised tips on how to improve your credit score.
Equifax also have both free and paid options on their website. For no cost you can get an Equifax Statutory Credit Report, a one-time report that can be accessed for life. However, if you want more detail then opt for their paid credit report. This is free for the first 30 days, then £14.95 per month after that.
TransUnion has a paid and a free option. You can get a free copy of your credit report every 12 months from them. However, a report you can consistently monitor will cost you $29.95 per month, which will let you know if anything changes.
How do you reduce your chances of being rejected for a mortgage?
Whilst improving you credit score can help increase your chances of success, a few more factors play a part, so just improving your credit might not be enough. Consider these areas and look to optimise them where possible:
- Deposit amount – the more deposit you can provide, the more you can increase your chances of success. This is because a lender won’t need to lend as much to you, in turn reducing the risk of lending to you.
- Your Income – as well as your credit, your income plays a large part in how much you can borrow, so if you can increase your income you may be able to borrow more. Furthermore, if you have a good income in relation to what you want to borrow, you could be seen as less of a risk. Additional income could come from a career progression or another source that generates you money consistently.
- Mortgage broker – using a mortgage broker provides an expert insight when looking for a mortgage. They will do all the hard work for you and pair you with the most suitable lender based on your circumstances.
Does getting a mortgage affect my credit score?
While having a mortgage doesn’t directly impact your credit score, the application process can. During a lender’s affordability assessment they will carry out a ‘hard’ search on your credit file. This is the opposite to a ‘soft’ credit check, so this search will show on your file.
A small number of hard checks over time will have little to no impact. However, multiple frequent hard checks will have a negative effect. This is why if you’re declined for one mortgage, it’s best not to go straight back and apply for another.
The only other time having a mortgage may affect your credit score is if you miss payments. Missed payments on a large loan like a mortgage can significantly impact your credit, making it harder to obtain new lines of credit in future.
Furthermore, if you wanted to remortgage, a lender would carry out a new credit check during your application, so if your credit isn’t in a good place you may be unable to do so.
If you are struggling or can’t pay your mortgage, contact your lender as soon as possible.
Phil Scott
Director
About the author
Phil has worked in the financial services industry since 1992, having started with a large insurance company. He went self employed in 1996 as an Independent Financial Adviser before setting up his first company, Needham Market Home Financial in 1999.
After four years, he decided to concentrate solely on mortgages and related insurances, and The Mortgage Centres was born. Since then, Phil has been influential in the opening of several new offices as the business continues to grow.
Qualifications
Financial Planning Certificate: 1,2 & 3
Year Attained: 1992
Certificate in Mortgage Advice and Practice (CEMAP)
Year Attained: 2001
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