Whilst there is no definitive minimum credit score needed to obtain a mortgage, there are main credit agencies used by mortgage lenders, and each of these have different scoring, so it’s wise to be aware of them to ensure your credit rating meets the lender’s requirements.
Before a lender makes their decision, they need to work out a credit score for you to help them decide if you're a risk worth taking. Usually a higher score suggests that you're more likely to be responsible, make your payments on time and be a more responsible borrower. In general, the higher your credit score, the more chance you have of being accepted for a mortgage at better rates.
What are the main credit reference agencies used?
Mortgage lenders in the UK tend to use three credit reference agencies; Experian, Equifax and Callcredit. Each of these agencies use different scoring systems, and each one has different ‘minimum’ requirements.
Credit reference agencies obtain information from you from various different sources and in general, keep the following information:
- The Electoral Roll. This shows how long you've been registered to vote at your given address
- Public records. This shows any county court judgments, bankruptcies, IVAs, Debt Relief Orders and Administration Orders.
- Account information. This shows the financial status of your existing accounts, how much you've borrowed and whether or not you've paid on time
- Home repossessions. This shows if you've information This is information from members of the Council of Mortgage Lenders about homes that have been repossessed
- Associated financial partners. This shows all of the people who you are financially connected to. For example, you could have a joint bank account
- Previous searches. This shows companies and organisations who you have looked at in the last 12 months. For example, if you made an application for credit in the last 12 months, it would show here
If you do consent to a credit check, your details are then shared with the relevant third-party using the principles of reciprocity which takes into account the responsible use of data.
Each of these credit agencies hold online platforms where you're able to gain access to your credit report whenever you wish.
What credit score is considered good?
Each credit agency use a slightly different scoring system to work out your credit rating.
Experian, for example, score you out of 999, and a credit score of 700 or above is considered good. If you have a score of 800 or over, your credit score is considered excellent. Equifax score you out of 700, and a score of 475 and above is generally considered good. Callcredit bases your credit score out of five, with five being the best and one being the worst. The closer you are to 5, the better.
So, if I meet these minimum credit scores, I’ll be accepted for a mortgage?
You are more likely to be accepted if you meet these minimum scores, yes. Lenders work across a lot of different criteria, and your credit score is just one part, so even if you do not meet the ‘minimum’ levels, you should speak to one of our specialist mortgage advisors to see how we can help.
What if my credit score is low? Can I get a mortgage?
The short answer is maybe! Most of the high street banks will use credit scores to make lending decisions, this is because they will process such large volumes of applications.
If however you have a low score, it's not the end of the road for you. Smaller and specialist lenders will ignore credit scores and instead look at the overall merits of the application. For example, if you're applying for a mortgage with bad credit, they might still approve your application if there was a genuine reason behind the bad credit or if the problem is now resolved.
Improve your credit score for a mortgage
There's many ways to improve your credit score but in general, it's important to follow these best practices:
- Make all of your credit card payments on time. This will avoid any late marks on your credit report and impact
- Don't make any applications for credit within 12 months of a mortgage application. These are recorded as 'hard searches' where too many of these look like you're relying too much on credit which can impact your overall score
- Ensure your credit card utilisation is low - aim for keeping your balances below 25% as this can help your score and gives the impression that you're in control of your spending
If you're looking for a mortgage or wonder if you can get one, it's best to speak with one of our team, either on the telephone or in person to work out what options are available. Click here to arrange a call.