What Credit Score Do You Need for a Mortgage?

Written by Adele MacGregor Reviewed by Emma Lunn

30th Mar 2020 (Last updated on 14th Mar 2024) 9 minute read

What is a Credit Score?

A credit score is a numerical score that represents your “creditworthiness” and how responsible you are when it comes to your finances. It is a tool used by lenders to determine whether or not you qualify for a loan, such as a mortgage to buy a house.

A credit score takes into account your payment history (for example, payments made to a credit card), your income and outgoings, any loans you have taken out previously, if you are on the electoral register and if you have or have had debts.

In the UK there are three credit reference agencies used by lenders, which individuals can also use to check their own score. Each of these agencies produce their own scores based on information they hold on you and this information may differ between credit reference agencies. These agencies are:

• Experian
• Equifax
• TransUnion

Understanding Your Credit Score

Being on top of your credit score is essential when looking to buy a home. It is advisable that you understand and know your credit score regardless of your upcoming financial decisions and commitments, but more so than ever when applying for a mortgage.

Analysis from Credit Score company Experian in March 2019 revealed that nearly half of Brits have never checked their credit reports, with young people even less likely to do so, with 72% of people aged 18-24 not having done so. They also found that of those who had checked their credit scoring, 20% hadn’t done so in the last three years.

This shows that a large majority of the British public are not only not making a habit of checking their credit score, but that they are unaware of the money they could save by improving. Experian estimates that the annual percentage rate (APR) offered on a loan could fall by at least 2% on average when someone improves their score by just one band on their credit scale.

“Our annual consumer research reveals that the public’s awareness about credit scoring and the role it plays in their finances remains relatively low. Getting to know your credit report means you can understand what’s affecting your score so you can start to manage it and access the best deals”, Clive Lawson, Managing Director of Experian Consumer Services said.

A good or bad credit score can be the difference between securing a mortgage for a home.

Although there is no universal credit score, each credit reference agency will have a scoring system. The higher the score, the better your credit rating is. It is your financial history and habits which determine your individual credit score.

Your credit score will also affect the different types of mortgages that are available to you and how much mortgage you will be able to borrow. A “bad” or low credit score will make lenders less keen to lend to you. You may need a bigger deposit, be charged a higher interest rate, or be refused a loan altogether.

What Credit Check Do Mortgage Lenders Use?

Before applying for a mortgage, you will need to obtain a mortgage agreement in principle. This will give you an idea of how much you could potentially borrow and is largely based on a credit check. Your chosen lender will carry out either a soft credit check or a hard credit check to determine if you are eligible for a mortgage with them.

There are key differences between these checks and it is always worth checking beforehand to see which one your chosen lender will use to assess you.

A Soft Credit Check

This is a preliminary credit check. The lender will see some information about you – but not all of it. This type of credit check can’t be seen by other lenders, won’t leave a “footprint” on your credit report, and won’t impact future applications.

A Hard Credit Check

This is when a lender sees a full overview of your credit report. This type of credit check can be seen by other lenders, will leave a “footprint” on your credit report, and will impact future applications. Too many hard checks can make you appear desperate to borrow money – this is not attractive to lenders.

Before you apply for a mortgage agreement in principle, ask your lender whether it will be carrying out a soft or hard credit check. Lenders will likely do a credit check when porting your current mortgage too, so it's important to be prepared.

What is a “Good” Credit Score and Does It Guarantee a Mortgage?

It’s important to remember that there isn’t a specific score or credit rating required for a mortgage in the UK. This is because there isn’t just one credit score and the exact score you need to qualify for a mortgage will vary from lender to lender. It will also depend on which credit reference agency your lender uses to obtain your credit score.

Each of the credit reference agencies in the UK have their own scoring system and will be able to tell you where your own credit score stands. Below is a table featuring the three main credit references in the UK and their scoring systems:

In general, the higher your credit score, the more likely you are to be accepted for a mortgage. Furthermore, an “excellent” credit rating can make you eligible for a wider range of mortgages and better deals.

However, as we have stated above, ultimately your score will need to reflect good financial habits. Just having a good credit score does not automatically guarantee you a mortgage with any lender. Keep in mind that other factors such as your employment, financial commitments and whether or not others are financially dependent on you will all come into play when it comes to your eligibility for a mortgage and what a lender is willing to loan you.

Can I Get a Mortgage with a Bad Credit Score?

If a credit check shows a poor credit score, you’re likely to be rejected for a mainstream mortgage or at best, offered a mortgage with less than desirable interest rates and minimum benefits.

There is a range of factors which can have a negative impact on your credit score. Common reasons for a poor credit score include:

• Failing to pay at least the minimum on your credit cards each month
• Not making debt repayments on time
• Failing to pay household bills on time
• Using too much of your available credit (known as credit utilisation)

A poor credit score might not mean you can’t get a mortgage at all. Some mortgage lenders specialise in offering mortgages to people with bad credit. However, any mortgage offer is likely to mean:

• You need a bigger deposit
• You will be charged a higher interest rate

As a result, getting a mortgage with a less than desirable credit score will cost you more money in the long run. If you have been refused a mortgage or are concerned that your credit score may impact your application, hiring a mortgage broker may be worthwhile. A mortgage broker will be able to advise you on the best lenders to apply to for your individual credit history.

There are also a number of ways you can improve your credit score, which we have detailed in the section below.

How Can You Improve Your Credit Score for a Mortgage Application?

If your credit score is currently poor, or if it is “good” but you want to raise it to “excellent”, there are a number of steps you can take to boost your credit score. Although many of these may seem like common sense, they will all contribute to your overall credit score. One missed payment could be the difference between a good and a poor credit score.

Justin Basini, CEO and co-founder of ClearScore, told the Metro earlier this year: “Missing just one month of repayments on your credit card could cause your credit score (how lenders judge your financial suitability for credit products) to drop by 21 points, so it’s always worth ensuring that you make at least the minimum repayments on any debts you may have”.

Below are a few suggestions of how you could boost your credit score:

1. Pay Bills On Time

It sounds obvious, but when life gets busy, paying something on time may slip between the cracks. Set up direct debits to ensure you don’t miss payments on utility, broadband, mobile and any other bills you have going out.

2. Your Credit Score Profile

Make sure all your details are correct on your credit file, including your current address. The smallest of details could be impacting your score so make sure everything looks as it should when checking your credit score and the details held on you.

3. Register to Vote

Being on the electoral roll at your current address is another way to improve your score so check where you are registered. If you are not registered at all, do so as soon as possible. This can be done via the UK government website.

Steer Clear of Payday Loans

Avoid payday loans and other high-cost short-term credit at all costs. These will have some of the highest interests rates on the market. Despite tempting “buy now, pay later” incentives, these can be detrimental to both your credit score and your financial health.

4. Use a Credit Card Responsibly

Having a credit card can actually boost your credit card, providing you are using it responsibly. This means regularly using the card and paying the bill in full each month. Having an open credit card which is unused will also contribute to a poor rating.

5. Keep Your Credit Utilisation Low

Keeping your credit utilisation low - below 30% if possible - is another way of improving your credit score. Your credit utilisation is the percentage of your available credit you actually use. For example, if your limit on a credit card is £1,000, 30% would be £300.

6. Financial Associations

Being careful about “financial associations”. You create a financial association if you take out credit jointly with someone else. If the other person has a poor credit score, it will affect your credit score and ability to get a mortgage.