What credit score do I need for a mortgage?

Buying a house is an exciting time for everyone involved, but it doesn’t come without a lot of preparation and thorough considerations. This includes getting your credit score up to scratch!

If you’re wondering ‘what credit score do I need for a mortgage?’ Don’t worry! If you’re new to the whole process as a first-time buyer, we understand that navigating your credit history can be very intimidating at first, so this is where we at RH Financial Consultants come in.

In this handy blog post, our expert mortgage advisors are here to explain how you can improve your credit score for mortgage applications so you can receive the best rates possible.

How does my credit score affect mortgage rates?

When you apply for a mortgage loan, your credit score will be of huge significance to the lenders you’ll be borrowing from. This is essentially due to the fact that lenders base a lot of their loan terms on the ‘risk’ you serve by acting as the debtor.

Your credit score serves as an indication of how reliable you are when it comes to paying off bills and outstanding debts on time, based on your previous borrowing history. If you have a high credit score for mortgage applications, you can expect to see lower interest rates and vice versa.

Is there a minimum credit score for a mortgage?

If you’re wondering ‘what credit score do I need for a mortgage?’, it will be reassuring to know that there’s no set minimum credit score for a mortgage in the UK.

There are a number of reasons for this, but essentially it’s down to the fact that getting a mortgage depends on a number of variables in your situation. Similarly, agencies and lenders can often use very different scoring systems that aren’t always compatible when assessing your suitability.

However, you should also prioritise building your credit score regardless of your situation as this will always influence the likelihood of you getting a mortgage offer and better interest rates than you would otherwise. This is especially the case if your credit score is rated less than ‘good’ on any given report, as you’ll usually struggle to get a mortgage with a competitive interest rate.

What credit reference agencies do mortgage lenders use?

There are several reference agencies that lenders will use when checking your credit score for a mortgage. The majority of lenders will use either Experian, Equifax or TransUnion to conduct their searches.

You may often find that lenders use a combination of these credit reference agencies to make their assessments. To ensure that all bases are covered, you should check each credit report from each agency as all use different scoring systems and will therefore deliver different results.

Can you get a mortgage with a bad credit score?

Using a poor credit score for mortgage applications doesn’t automatically guarantee a rejection, but it’s not advisable to do so in any situation. This is due to the fact that the higher interest rates you can expect would cost you tens of thousands of pounds during your mortgage term – leaving you worse off in the long run.

Despite this, if you still intend on buying a home with a poor credit score, there are several things you can do to improve the interest rates you’ll be offered. Getting preapproved by multiple lenders would usually be effective in these circumstances.

Putting down a larger deposit than the asking price would increase the lender’s trust in you, as would putting down a cosigner with a high credit score. You could also work with a mortgage broker to find a specialised loan scheme that works best for you, such as an FHA Home Loan plan.

Additionally, it would also be beneficial to pay off large credit card loans and other debts before buying – this would also gradually improve your credit score for mortgage applications.

These methods will certainly improve your chances of receiving a mortgage loan without high-interest rates, however, it’s not a concrete guarantee.

How do I check my credit score for mortgage terms?

If you’re considering buying a home in the near future, assessing your credit score for mortgage rates is one of the most important actions you can take. You should always take some time before applying to get your credit ready as this will help the process run a lot smoother.

It’s simple, easy and not to mention free to check your credit score online using one of the top three referencing agencies. If you’re already seeing a credit score rated ‘Good’ or ‘Exceptional’, you won’t necessarily need to work too hard to improve it before you apply for a mortgage in principle. However, if your score is rated ‘Fair’ or lower, you should take the time to make some improvements.

Additionally, check your reports thoroughly for any inaccuracies or false information as these can often lead to a lower score than you’ve earned, and once removed can improve your score quickly.

How do I improve my credit score?

If your score is lower than you’d hoped, there are some things you can do to increase it over time in preparation for the application process.

Paying off your existing debts is a straightforward way to quickly improve your credit score for multiple reasons. Your debt-to-income ratio is often considered during mortgage applications and paying off outstanding credit will reduce this. Similarly, your credit utilisation rate (how much credit card debt you have in comparison to the credit you’re eligible to take) would be reduced in this instance – increasing your credit score and improving your odds.

During this time, you should also avoid applying for new credit as any new inquiries can see your score drop by up to five points. New credit will also increase your debt-to-income ratio – something you should ideally avoid.

Finally, if you have more severe negative marks on your credit history – including bankruptcy or repossession, your credit score will take longer to recover than if you simply had a missed payment on your report. In this instance, we advise waiting until you can gradually build a more solid credit history before you consider buying property.

Mortgage advice you can trust from RH Financial Consultants

If you’re still unsure about what is a good credit score for a mortgage in the UK, our team of specialist brokers can help. We have the specialist industry knowledge you need to help you make the wisest decision for you and your loved ones.

Book a free consultation today to get expert mortgage advice tailored to your unique personal situation.