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Author: Carl Shave-Director
Updated on January 30th, 2024

Will a low credit score affect my chance of getting a mortgage?

It can seem difficult enough to get a mortgage even when you have a clean, simple credit history. But if you have a poor credit score (or no credit history at all), then you can feel like throwing in the towel altogether.

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Don’t give up – there are many more options than you think. If you’re wondering how you can get a mortgage with a low or poor credit score, or what you do to help your mortgage application succeed, we’ve put together this advice to help you get on the way to becoming a home-owner.

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Can I get a mortgage with no credit rating?

At first glance, it doesn’t make sense. If you’ve never gone into debt before or needed to borrow money, then surely it stands to reason you’ll be seen as someone who is responsible with money? This should make you a sure be for an easy mortgage application.

Unfortunately, this is not the case, and by having very little or no history of credit you are likely to be in as poor a position – or perhaps actually worse off – as someone with a chequered financial past.

When assessing applicants, lenders look for patterns of behaviour that prove you are capable of borrowing money and paying it back on time, without incurring defaults, delays or penalties. With no record of borrowing and repaying, there is no way of telling how you manage your finances or how you would handle a large loan amount, and therefore you are viewed as a high risk.

This might not seem fair, but it’s how the world of credit works. But now we know this, we can work on ways to improve your credit score.

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Poor Credit Score Mortgages

Now you are aware of how little or no credit history can result in a low credit score, let’s take a look at how this impacts your mortgage application. When they see you have no real history of borrowing, lenders will react in one of a number of ways:

  • A simple ‘No’ – they just flat-out refuse your application.
  • Asking you to come up with a larger deposit – as well as showing your commitment and resources, it means they will be lending you less, making you less of a risk.
  • Charging higher fees – with less options on the table, you may need to consider an offer where the lender is happy to assist for a higher fee.
  • Charging a higher rate of interest – again, this is the cost of the lender’s help in these circumstances, and reflects the perceived risk of lending money to you.

This approach can be very disappointing, especially when you are just starting out on the road to home ownership and have never needed to borrow money before.

It might look like lenders are asking you to prove yourself or pay for their confidence, but if you can’t afford a larger deposit, you might just have to accept this philosophically and move forward with positive actions to improve your credit score.

Unless you are waiting for a black mark to drop off your credit report (they remain there for six years), there are a few tactics you can use to help create a better credit history.

Can I Remortgage with a Low Credit Score?

Yes, you can, just as you can get a new mortgage. The trick is to deal with lenders pay attention to the whole of your credit report, and not just your credit score.

Many lenders will use a credit scoring system, or rely on that operated by the three main credit reference agencies. The trouble is, many will simply rely on the score itself, without looking at the details.

There are, however, many other lenders who ‘credit search’ rather than ‘credit score’, and look deeper into the patterns and behaviour within your credit report to check that your conduct in each area meets their criteria. These are the lenders who will spot a consistent recent credit history and who you will be better off dealing with for your mortgage offer.

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Correcting my credit issues

Once you’ve covered the basics and the details on your credit history are all accurate, you’ll be left with entries that either show you in a good or bad light. Healthy entries are great, but any bad credit events may hinder your credit rating, and thus your ability to get a mortgage.

If you can do anything about these cases, then you should. The longer ago something unfortunate happened, the less weight it will carry now, but whatever you can solve in the present will help you in any future applications.

  • Get payments up to date – Have you been late with any payments? If you have any balances outstanding, get them up-to-date, and change your ways if you always wait until the red bill arrives. Paying bills or installments on time will stand in your favour. Don’t let a bad habit wreck your credit rating.
  • Settle outstanding debts – It could help your credit score if you are able to pay off any debts or balances that you left hanging. Did you have a default on any payments, or was a CCJ registered against you? These black marks will fall off your credit record after six years, but in the meantime a lender will look more favourably on a debt that has been settled than one still outstanding, so now is the time to clear the decks and make things right with your financial past.

What can be done about a Low Credit Score?

Whether your low credit rating is because of a poor credit history or no credit history to speak of, you will need to approach improving your credit score in much the same way.

You need to focus on improving your credit record by showing you are a reliable borrower, and we’ve broken down the tactics we recommend into three broad stages:

  1. Take control of the basics
  2. Put any problems right
  3. Build yourself a good credit history

Each stage contains further details of what you need to do. We’ll explain these over the next few sections, keeping it as straightforward as possible.

How can you improve your Credit Score?

Taking control of the basics – the easy housekeeping elements of your financial affairs – is the best first step to improving your credit rating. It’s worth looking into these things every year or two, just to make sure everything is in good order, and will give you a solid foundation on which to build your credit rating strategy.

1.  Get on the electoral register. 

This can make a big difference to your mortgage application, as a lender wants to make sure they know who they are lending to. Being on the electoral roll goes a long way to verifying your identity and is a useful anti-fraud measure.

2. Get copies of your credit reports. 

The three main credit reference agencies in the UK – ExperianTransUnion and Equifax – all hold data on your credit history. As they are all independent, they could possible each hold slightly different information, so you should get copies of your credit report from each.

Note – checking your own credit history is not viewed in the same way as when a lender checks it for their assessments, and it will not affect your credit records. You can check your own files as often as you want.

3. Correct any errors on your credit report. 

Go through the reports thoroughly, and make sure all the information on balances, accounts, dates, etc, is correct and up-to-date. If not, get in touch with them straight away and ask for the records to be amended to show the correct information. This might take a few weeks, and you should request new copies after some time has passed to make sure your records have been updated.

It’s vital that lenders have the correct information about you when they make their assessments – it could make the difference between a ‘yes’ and a ‘no’.

Build yourself a good credit history

You need to prove that you can manage your borrowing well, so you need to have some borrowings to manage. To do this, you will need to take out a line of credit of some sort – a mobile phone contract might help a little, but it does not carry the same weight as a loan from a major bank, so you’ll need to think carefully about how to proceed. Here are a few suggestions:

  1. Get a credit card. – While you should not put yourself at risk of heavy debt, smaller scale borrowing, such as through a credit card, can easily show how you can regularly take out credit and pay it back on time on a monthly basis. This will put a record of regular payments on your file. If you are new to credit cards, you will probably have plenty of options, but if you have a blemished credit record you may have to use ‘bad debt’ credit card, or a ‘credit builder’ card. In all cases, do not let credit build up on the account. Use it instead of a debit card for your usual spending, or occasional larger items, but always pay it off on time when you need to do so. The whole reason for getting a card is to build up an squeaky-clean record of payments, and missing payments will defeat the object of the exercise.
  2. Take out a loan. – As with taking out a credit card, this is another method to show you can borrow money and then repay it reliably, predictably and on time, building up a record of good behaviour on your credit record. The only type of loan you must avoid for this exercise is the payday loan. Lenders regard the use of payday loans as a sign that you are not able to manage your usual household budgets very well, and cannot live within your means. This will count against you in their assessment of your mortgage application.
  3. Reduce your level of debt. – While we have been discussing taking out new lines of credit above, it will also help to settle any outstanding balances that you have held over for a period of time. If you have a credit card that has been pushed to the limit and left that way for months, start paying it off, and perhaps destroy the card itself to prevent further spending if that helps. Again, you are aiming to show regular payments towards credit balances, and a reduction of overall debt, in order to improve your credit rating.
  4. Keep on top of all your payments. – Above all, make sure you keep track of all your accounts and pay off balances on time. Late or missed payments will show up on your credit report, and will stay on your file for six years. An easy way to keep payments happening on time is to set up direct debits, so you never have to worry about forgetting – just remember to ensure you have enough money in your account to cover them.

The whole point of building a good credit history is to improve your credit rating, and therefore your chances of successfully getting a mortgage. Stay on top of things now to avoid ending up in a poor position again in the future.

Low or Poor Credit Score FAQs

  • What is a good credit score?
  • What is a bad credit score?
  • How can I improve my credit score?
  • How do I check my credit score?
  • What is a credit score?
  • How do I get a good credit score?
  • How is a credit score used by mortgage lenders?
  • How long does it take to improve a credit score?
  • Can I get a mortgage with a bad credit score?
  • What is adverse credit history?
  • How is a credit score calculated?
  • Does a joint bank account affect credit score?
  • Does a joint account affect credit rating?
  • Does ‘buy now, pay later’ affect credit score?
  • Can I get a mortgage with no credit history?
  • How does credit history work?
  • What credit history is needed for a mortgage?

A good credit score comes from maintaining any current or previous lines of credit within the agreements. There is no actual general ‘score’, as different credit reference agencies score people is different ways – some grade you out of 5, while others score out of 600, 700 or 1000. However, you can usually assume that the higher the score, the better chances you have of being accepted for a mortgage, but you should remember that it’s just a guide and the lenders will also have their own scoring methods.

 

This is a low figure on the scales used by various credit agencies, and will indicate a troubled financial history, featuring one or more adverse credit events. Although it’s just a guide for lenders, who will have their own ways of scoring applicants, it could colour their view of your application.

 

There are a number of ways to improve your credit score – from paying down debts to using credit cards only with the aim of paying them off promptly each month, avoiding payday loans, and making sure you are on the electoral register.

Contact the three main credit agencies – Experian, Equifax and TransUnion – to obtain copies of your credit reports and see how they have scored you (some may charge a small fee). Remember that most lenders only use this as a guide and will have their own scoring system, which you can’t check unless you submit an agreement in principle.

 

This is a measure of your creditworthiness generated impartially by credit reference agencies – each with their own scoring method – that lenders will use to help assess their decisions when looking at your mortgage application. Note that credit scores given by agencies are only used as a guide and lenders will also have their own scoring methods and criteria, which will vary according to who you deal with, and a bad score may not guarantee you are declined.

 

The best way to ensure a good credit score is by keeping up with all payments on credit facilities you use and demonstrating you can balance your income and liabilities, showing good money management. You can also take simple steps like registering on the electoral roll (if you haven’t already) and cancelling lines of credit that you don’t use.

Many lenders will have their own computerised system that will assess all aspects of your financial circumstances and provide a score. Others may take the scores from credit agencies as a guide but use a more manual system to look into your creditworthiness to arrive at their own conclusions not based on figures alone.

There is no set time for this, but taking steps as quickly as you can to demonstrate you can sensibly handle borrowing and repayments will help. Ensure you make all payments on time and do not go further into debt. Adverse credit events remain on your report for six years, and matter less the longer ago they happened, so balancing with more recent good behaviour should work in your favour.

The short answer is yes, you can. However, the more severe issues you have on your credit report, the more likely you will need to talk to a specialist broker and lender to get the mortgage you need. Not everyone gets approved right away, and a specialist adviser will be able to go over all your options and advise a way forward according to your personal circumstances.

This is the term commonly used to describe events that reflect badly on your credit history, such as defaults, CCJs, missed payments, IVAs, repossessions and bankruptcy. Also note that prolonged constant use of credit facilities may also negatively impact your credit history, even if you kept up to date with payments.

 

Every credit reference agency will score you slightly differently, and lenders will also use their own methods to calculate your credit score, so there is no one clear answer. They each use numerous factors to work it out, such as your overall amount of debt or credit, your payment history and even if you are registered on the electoral roll.

By taking out a joint credit account, such as a bank current account, you might be creating a financial association that could in turn possibly affect your individual credit score. Each party to an account could be impacted by the other’s credit rating, but much could depend on how the account is actually used, and any other credit agreements each might hold.

 

A joint bank current account or credit account could create a financial association that might have a knock-on affect your individual credit scores. Each party to an account could have an impact on the other’s credit rating, but much could depend on how the account is actually used, and any other credit agreements each might hold.

It probably will, if just a little. This kind of ‘buy now pay later’ agreement is still a form of credit that allows the payment to be deferred to a set future date without interest being charged. So, it will usually appear on your credit file, but could be a positive event depending on you paying the amount on time, and how it might add to your overall indebtedness.

Lenders will always check your credit history when you apply for a mortgage, in order to gauge how high a lending risk you will be and your ability to meet mortgage payments. Having no history might cause a hiccup, but lenders are likely to look at the full picture of your current circumstances, so it should not prevent you from getting a mortgage.

A person’s credit history covers the last six years of their financial commitments, showing debts, accounts and payments during this time. Anything that happened longer than six years ago is outside its scope, but a lender might still ask you about significant historical events like a bankruptcy.

There is no set answer to this, other than a history that satisfies a lender, whatever their criteria might be, that you are not too high a risk to lend to. Lenders will assess your credit history for the last six years, but will be more concerned about your conduct in borrowing and repaying loans in more recent times. Also bear in mind that they might also want to know about a significant adverse credit event like a bankruptcy, no matter how long ago it was.

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