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What Credit Score Do You Need for a Mortgage?

Written by

30th Mar 2020 (Last updated on 18th May 2020) 6 minute read

When it comes to getting a mortgage, there isn’t a particular credit score required by mortgage lenders. 

Essentially, lenders want assurance that the person taking out the loan will be able to make their monthly repayments without issue. To ensure the person applying for the mortgage is financially responsible, lenders will run a credit check on the person. This will look into their spending habits and financial health. 

Compare My Move has created this guide with everything you need to know about the credit checks done by mortgage lenders and how you can improve your credit score before starting your mortgage application. 

This article will cover the following:
  1. What is a Credit Score?
  2. What is Considered a “Good” Credit Score?
  3. What Credit Check Do Mortgage Lenders Use?
  4. What If My Mortgage Credit Check is Poor?
  5. How You Can Improve Your Credit Score for a Mortgage Application?
  6. Save on Your Property Purchase and Home Move with Compare My Move

What is a Credit Score?

A credit score is a numerical score that represents your creditworthiness and how trustworthy you are with money. This is created based on your financial history and is essentially your financial CV.    

A credit score is a tool used by lenders to determine whether or not you qualify for a loan, such as a mortgage when it comes to buying a house.  When you apply for credit of any kind, the lender will want to make sure you can manage and repay the amount you are borrowing.

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 debt in recent years.  

You are able to check your credit score for free via sites like Experian. There are also future plans for both Monzo and NatWest to let customers view and track their credit scores for free within their apps, making it easier than ever to check your credit score.

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What is Considered a “Good” Credit Score?

It’s important to remember that there isn’t a universal score or specific credit rating required for a mortgage. 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 the scores of various credit referencing agencies (CRAs). There are three main CRAs in the UK and each score consumers differently. 

That said, the higher your credit score, the more likely you are to be accepted for a mortgage. An excellent credit rating can make you eligible for a wider range of mortgages and better deals.

As an example, Experian will score you out of 999. If your score is over 700, it is deemed to be a good credit score. If you have a credit score of over 800, your credit score is considered excellent. 

The credit score is worked out by the lender to help them decide if you are financially mature enough to take out a large loan - and that you will be able to make your monthly repayments on time and without issue. From this, they will be able to see the different types of mortgages that are available to you and how much mortgage you can afford

A “bad” or low credit score will mean you are more of a “risk” for a loan, therefore less likely to be approved by a lender. 

What Credit Check Do Mortgage Lenders Use?

A credit check is one of the aspects you can expect in a mortgage interview. Before you can apply for a mortgage, you must first be approved for a mortgage agreement in principle. This will give you an idea of how much you could potentially borrow and is based on a credit check. 

When it comes to the type of credit checks lenders will use, this will either be a soft or a hard check:

A soft credit check - This is like a background check for your finances, getting an overview of your financial history, outgoings and income. This type of check cannot be seen by other lenders and will have no impact on future applications. In short, it will not leave a “footprint” on your credit score or impact it in any way.

A hard credit check -  This will leave a footprint and this can be seen by other lenders. It is essential that you do not have too many of these, as multiple hard credit checks will impact your score negatively. Too many of these” footprints” can potentially look like you have an alarming requirement to borrow money or that you rely on credit.

If this is a concern, it is worth asking your chosen lender what check they will use before you proceed with your application. 

Lenders will likely do a credit check when porting your current mortgage too, so it's important to be prepared.  

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What If My Mortgage Credit Check is Poor?

If a credit check shows a poor credit score it can be disheartening. A mortgage lender may not wish to proceed with the mortgage application with the credit score as it stands. 

Common reasons for bad credit include paying the minimum on your credit cards each month, failing to stick to your credit agreement and taking out payday loans. 

It’s worth noting that every lender follows a different policy when it comes to credit scores. So if you don’t meet the criteria of one lender you may do so for another. That said, first explore why you were turned down on this occasion and take action on improving your credit score before applying again. Aim to leave 3 to 6 months between applications for any kind of credit.

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

There are a number of steps you can take to improve your score, whether you’re applying for the first time or applying for a mortgage after an initial rejection. Your chosen lender may be willing to reassess your situation further down the line if changes are made.

We’ve put a list together below with the ways you can boost your credit score so that you can be prepared when it comes time to apply for a mortgage. 

  • Pay all bills on time and in full. Setting up automated payments will ensure you don’t miss a payment and incur a late fee
  • If you’re not already signed up to the electoral register, do so now. Being on the electoral register will boost your credit score.
  • Avoid payday loans of any kind.
  • Having a credit card which is used responsibly will also work in your favour. Ensure that this is paid off in full at the end of every month.
  • Close any unused credit cards or credit accounts with no balance. 
  • Aim to keep your credit utilisation low, if possible 30% or less per month. Your credit utilisation is the percentage you use for your current credit limit (such as on a credit card). For example, if your limit is £1,000, 30% would be £300. 
  • Make sure all your details are correct on your file. Even the slightest mistake or typo in your address can affect your score negatively.

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Save on Your Property Purchase and Home Move with Compare My Move

When it comes to organising your house purchase and move, we’re here to help. From comparing conveyancers and hiring a chartered surveyor, to helping you find a moving company, Compare My Move can save you up to 70% on the costs. Using our forms to compare professionals will also save you time so that you can focus on your new home.

Adele MacGregor

Having written for PerformanceIN, WalesOnline, Grazia Magazine and The Olive Press, Adele now writes advice articles for home movers, first-time buyers and house sellers alike.