mortgage meeting

What credit score do I need for a mortgage?

When applying for a mortgage, you don’t need a specific credit score to be accepted. This is because there isn’t just one credit score. The lender you approach will calculate your mortgage for you so that they can determine if you are a worthy risk. They want to know that you can be trusted and are likely to pay back the mortgage each month. A higher score usually indicates that you come with less risk. As a result, the more points you score, the better the chance of being accepted for a mortgage, and with better rates.

How do lenders make their decisions?

Each lender will have their own method for accepting mortgage applications, but they will generally look at similar key factors to make a decision. These include:

  • Your credit card report – this includes credit history and public record data (CCJs and IVAs)
  • Information provided on your application form
  • Information that they may already be aware of such as if you have a bank account with them
  • Their own lending policy – this could differ from other lender’s policies

By looking at your credit report, the lender will have insight into your credit history and can see things like how much you owe on credit cards, if you have missed any past payments and if you are registered to vote. These are just a few of the main things they will take into consideration while calculating your credit score.

Credit scores and beyond

But your credit score isn’t the only thing that the lender cares about. They will also want to see if you can afford the mortgage you are asking for before they lend you the money. This means that in addition to checking your credit score, they will look at your income and your regular outgoings. This can range from credit repayments to council tax and other things you may pay for on a monthly basis.

This is good because even if you don’t have a high credit score, you could show them that you are financially able to repay your mortgage each month, even if your circumstances change or if the interest rates and monthly repayments go up.

How to monitor your credit score

Although the lender will calculate your credit score for you, keeping an eye on yours beforehand will help give you a good idea of how well your credit is currently performing. Credit report companies such as Clearscore often have a downloadable app that allows you to monitor your score each month and see what you can do to score more points.

What is a good credit score to get a mortgage?

Let’s continue to use Clearscore as a basis for checking for a good score. As the company use Equifax to calculate your score, their lowest score range is anything below 278 and their highest rating is anything over 467. This number may vary for different credit score services, so be sure to check with your chosen provider to understand their rating system.

What if I have a low credit score?

Getting a mortgage with a low credit rating is not impossible, but it will be more difficult and you will likely receive a higher interest rate and need a large deposit. There are numerous reasons behind having a low credit score, whether you are young and have short credit history, or you haven’t been in the UK long enough to build up credit.

Mortgage lenders simply want to be sure that they can rely on you to keep up to date with monthly repayments and not go into debt. Demonstrating that you can manage simple credit cards, phone contracts and some utility services could boost your credit score.

Improve your credit score for a mortgage application

One of the most important things you can do to improve your credit score is to make sure that you repay all your credit cards on time. This will mean that you won’t be faced with extra fees and you will avoid any missed or late payments on your credit report.

Here are three more things to bear in mind:

  • Give yourself no less than six months before you apply for a mortgage to apply for credit – Each time you apply for credit, a hard search is recorded on your report. As a result, too many can demonstrate a heavy reliance on credit.
  • Register to vote – This will help companies confirm your identity and address.
  • Stick to your credit limits – If possible, keep balances below 25 per cent of your limit as this could help your score.
  • Monitor your credit reports – Make sure the information is up to date and accurate, as even the smallest change can have a negative impact on your credit score.

If you do happen to find a small error in your credit report, such as an incorrect address, contact the lender and ask them to amend it.

Are you ready to find your new home?

Once you have boosted your credit score and are financially prepared to find your new home, look no further than Joules Estate Agents. With inside knowledge of the best properties in the Heaton’s, you can relax knowing you will find the perfect property for your lifestyle and budget. Get in touch to find out more.