That said, it is possible to get a mortgage without credit score by finding a specialist bad credit mortgage advisor or no credit rating mortgage advisor who can access parts of the UK mortgage market that are not available on the high street in order to get you the best possible deal.
What sort of credit score do I need?There is no official minimum credit score required to obtain a mortgage and lenders routinely amend the scores they approve depending on the state of the economy. The ideal minimum credit score required to get a mortgage will depend on which scoring system your lender is looking at. In most cases, this will be the FICO score, which is used by approximately 90% of lenders when deciding whether to approve you for a loan.
Another scoring system used is VantageScore, which has been gaining popularity over the last few years. This system looks at aspects of your financial stability including payment histories, debt levels and the age of outstanding accounts to give you a total score between 300 - 850.
The two scoring systems both offer the same range of scores (300-850), however, as they take into account different factors, you may find a discrepancy in your ratings. Lenders will also want to look at your employment, yearly income and the size of the deposit you are able to put down in determining whether you’re able to make repayments.
They will also consider the area in which your new home is located in considering external risk factors. In general terms, lenders will be looking for applicants with a credit score of around 600 or higher to approve a mortgage, although this can vary depending on a range of factors.
How can I improve my credit score?If you have bad credit mortgage lenders are less likely to approve you for a loan as you pose a risk. This is particularly true if you have a poor track record of paying debts on time or have a lot of outstanding, unpaid borrowing.
If instead of poor credit, you have no credit rating mortgage lenders might still be reluctant to offer you a loan as, although you’re not in debt - which is a good thing - you haven’t got a track record for lenders to check through; so they don’t know whether you will be reliable or not. If this is your first time taking out credit, there may also be a question as to whether you’re ready to handle this responsibility, as it can take time to get the hang of making repayments.
That’s not to say it’s impossible to improve your credit rating! Making some small adjustments to your finances can make a dramatic difference to your credit score and thus make you far more attractive to lenders.
Firstly, if you have a credit card, make sure you remain within your credit limit and pay off the card insofar as possible each month. Keeping your balance at less than 30% of your limit will dramatically improve your credit rating, as well as making sure you don’t receive any late payment penalties. If you don’t have a credit card, try to get one and make small purchases on it regularly: just make sure you pay it off on time!
Secondly, direct debits are a great, simple way of improving your credit score and ensuring those pesky monthly bills always go out on time. Just check that you have sufficient funds in your account to cover any direct debits as bounced payments will negatively affect your credit score.
How to get a mortgage with no credit historyFor those who don’t have the time to improve their credit rating and are looking to enter into a mortgage without credit score there are still some options open to you. Utilising government schemes such as Help to Buy equity loans and the Right to Buy government scheme for people renting through the council can give you a good foothold into the property market. Just remember, these schemes won’t be appropriate for everyone and some conditions still apply.
Another option could be going down the route of a shared ownership, whereby you purchase a share in a property and pay rent to the landlord, with the opportunity of buying more of a share over time until you own the entire property.
Alternatively, you could consider getting a joint mortgage with friends to decrease your personal financial burden by sharing it. This could also help your approval if your friends have good credit scores. That said, be careful with whom you buy as purchasing a home is a major commitment. It is sometimes possible to agree a Guarantor Mortgage with some lenders. With this type of mortgage, a parent, guardian or close relative agrees to be legally responsible for your repayments if you default. In this case, the guarantor must prove that they will be able to meet repayments if required and, clearly, must be willing to do precisely this if the need arises.
Remember, before you apply for a mortgage without credit score make sure you’re confident that you will be able to afford the repayments to put you in the best possible position of being approved. Remember that any credit searches conducted as part of the application may count against your rating if you don’t go ahead with the loan.
Using our mortgage calculator can give you a good idea as to the sort of loan you might be able to expect, however, please note that this calculator should only be used for illustration purposes and a full assessment of your needs and personal circumstances will need to be undertaken before any accurate figures can be provided.
If you need any further information on applying for a no credit rating mortgage, please speak to one of our advisors today to discuss what options may be available to you and how to get the best possible rates.