What credit score do I need for a mortgage?

If you’re hoping to buy a house at some point in the future, you may be wondering what credit score you need to get a mortgage.

Do you need a high credit score to buy a house? Can you buy a house if you have a low credit score? And what’s the minimum credit score required to get on the housing ladder?!

The short answer is… it’s complicated.

Within this guide, we will take a look at this interesting world and offer some handy advice to boot.

How do credit scores work?

First things first, what is a credit score and how do they work?

Put simply, your credit score is a number that’s designed to represent whether you’re a reliable borrower or someone who’s unlikely to pay lenders back.

Lord knows what kinda mess Anna Delvey’s credit score must be in!

There are a number of things that can impact your credit score. For example, if you miss payments on a loan, your credit score will go down. On the other hand, if you borrow money and keep up to date with the repayments, it will have a positive impact on your credit rating. 

While that may sound straightforward, things can get pretty confusing. Small, seemingly insignificant things—like registering to vote—can impact your score in a good way. At the same time, using ‘too much’ of your available credit can be have a negative impact on your credit rating.

How do I check my credit score?

To check your credit score, create an account with one of the three major credit reference agencies in the UK. They include Experian and Equifax and TransUnion.

Since there are three credit reference agencies (sometimes referred to as credit bureaus), you technically have three credit scores rather than one universal one. This is because each credit reference agency has a different method for scoring you.

So while you might have a credit score of 500 with one, the others might give you credit scores of 575 and 610!

Often enough, these websites will also offer you advice and support surrounding how to improve your credit score. It’s worth making the most of these features once you’ve created your accounts.

What is a good credit score for a mortgage UK?

A good credit rating is subjective, since each credit agency has its own criteria. Each company ranks credit scores in bands, ranging from ‘very poor’ to ‘excellent’. Here’s a breakdown of the different bands/scoring systems.

Experian credit score bands

Very Poor - 0 - 560

Poor - 561 – 720

Fair - 721 - 880

Good - 881 - 960

Excellent - 961 – 999

TransUnion credit score bands

Very Poor - 0 – 550

Poor - 55 1– 565

Fair - 566 – 603

Good - 604 – 627

Excellent - 628 – 710

Equifax credit score bands

Poor - 0 - 438

Fair - 439 - 530

Good - 531 - 670

Very good - 671 - 810

Excellent - 811 - 1000

Getting into the ‘good’ bracket is a savvy move when you’re hoping to buy a house. However, if you’re looking for the best mortgage rates (cheaper repayments and less money spent on interest) you may want to try to push your score up into the ‘excellent’ bracket instead. 

Do you need good credit to buy a house?

So, do you need a good credit score to buy a house? Well, the short answer is no.

Some people manage to buy a house with a less than perfect credit score, but they usually increase their chances by…

• Putting down a large deposit
• Using a specialist mortgage broker (more on this later)
• Getting a mortgage from a specialist lender with flexible lending criteria
• Agreeing to a higher interest rate

What credit score do I need for a mortgage?

As far as we’re aware, there’s not really a minimum credit score required to get a mortgage. If there is, it’ll vary from one lender to the next and each lender is unlikely to publicise theirs.

It’s good to remember that your credit score is just one piece of the puzzle. Lenders are less concerned with your score and more bothered about your credit report as a whole. They want to see that you’re a responsible borrower who can make credit card payments, car repayments and loan payments on time.

Incidentally, being a sensible borrower will have a positive impact on your score. Whereas taking out lots of payday loans, maxing out your credit card and defaulting on your personal loans will give you a bad credit score.

Try to see your credit score as a quick representation into the health of your credit report. It doesn’t give lenders the whole story, but it gives them glimpse the type of borrower you are.

The better your credit score is, the more chance you have of landing a mortgage. What’s more, the best mortgage deals are saved for people who have high scores.

For that reason, you should do everything in your power to boost your credit score.

Ahead of signing on the dotted line and buying your dream home, there are some tricks you can try…

How to improve my credit score for a mortgage?

If you’ve checked your credit score and it’s less than ideal, there’s no point losing sleep over it. Rather than fretting over the numbers, let’s take a look at some solutions.

The good news is that there are some simple ways to improve your credit score. Here are a few approaches you may want to give a whirl:

Get yourself on the electoral roll 

Are you registered to vote? If the answer is no, you’re missing a trick. This small and simple change can improve your credit score more than you imagine. You can put your details on the electoral roll by going straight to the government website and filling out a short form.

The whole thing takes less than five minutes. Being on the electoral register won’t boost your credit score immediately, you may notice you have a better credit score within a few months.

Hot tip: Before you start the form, make sure that you have your National Insurance number handy. If you don’t know it, you may need to send identity documents through the post.

Use a credit card to boost your score

If you already have a credit card, you can improve your credit score by using it for regular purchases and paying it off in full at the end of each month. By doing this, you can show mortgage lenders that you’re good at borrowing money - and paying it back.

If you don’t already have a credit card, getting one could help you improve your score over time and get a mortgage. However, if you have a poor credit rating, avoid applying for the first credit card you see. If you get rejected because of bad credit, this could cause even more credit issues.

It’s a good idea to use price comparison websites and eligibility calculators to find the right credit card before applying. I’d strongly recommend Money Saving Expert’s credit card eligibility calculator. You can type in your details and get a rough estimate of how likely your application is to be approved.

Don’t withdraw cash on your credit card

Here’s a tricky one… If you are using your credit card and paying it off, that’s good for your credit score. However, if you start withdrawing cash from your credit card (using an ATM), that could negatively impact your credit score. Confusing, right? We know. The reason is that some mortgage lenders see this as a sign that you can’t manage your cash flow. 

How else can I improve my chances of getting a mortgage?

Pay off outstanding debt

This one might sound contradictory to ‘get a credit card’, but if you have lots of outstanding debt and it takes up a significant portion of your income, paying it off can boost your chances of getting a mortgage. Paying off what you owe shows lenders you can be trusted.

Get a mortgage broker

Whether you’ve got a poor credit score or a great credit score, I’d strongly recommend using a mortgage broker when you decide to start the mortgage application process.

I used a mortgage broker to buy my apartment and they made the process so much easier than if I was to apply to mortgage lenders individually. They guided me through the whole process, helped me find a good interest rate and did most of the paperwork for me.

Mortgage brokers know the mortgage market and lenders’ scoring systems like the back of their hand. They’ll know which lenders are flexible and understanding versus which ones are strict and fussy.

If you’ve got bad credit, you may benefit from a specialist mortgage broker. By this I mean a broker who spends most of their time helping people with a sketchy credit history to buy a house.

Your specialist broker will do a deep dive into your finances. They’ll take a look at your income, expenses, credit file, and sometimes even your utility bills, before helping you identify the mortgage lenders who are most likely to approve your application. If a certain lender requires a specific credit score, they’ll help you avoid them like the plague.

TL;DR

Yes, unfortunately your credit score can impact whether you can buy your first home. That’s why it’s important to stay on top of your personal finance game. If your score happens to be low, there are some ways you can boost it. Get started today and put yourself in a better position to land that mortgage and get those keys.