Property Press Online

Applying for a mortgage can be a stressful time. The majority of us don’t have the cash to buy a house so we need to borrow money from a mortgage lender. Your credit score affects which mortgages and which mortgage lenders are available to you. If you have a bad credit score it is still possible to get a mortgage, but usually you need good or excellent credit to have the best terms open to you.

Why do credit scores matter?

When applying for a mortgage, the lender will work out a credit score for you determined by previous credit history; are you likely to be reliable and pay the debt back on time? Someone with a higher score is lower risk, and therefore more likely to be accepted for a mortgage with better rates.

How does a lender decide who to approve?

Each mortgage lender may have different conditions for approving someone for a mortgage. Some of the factors they take into account are:

• credit report information which includes your credit history and public record data
• your application form information you’ve provided them
• any information they already have about you, such as already having a bank account with them
• their own lending policy

Your credit report will show a mortgage lender information such as what you owe on credit cards, if you’re registered to vote and if you’ve missed any previous payments. Using all of this information, they’ll give you a credit score.

Affording a mortgage

Mortgage lenders don’t only look at your credit history and use a credit score to decide your suitability for one of their mortgages. They also want to ensure you can afford the monthly mortgage payments going forwards. They will look at how much you earn, and how many fixed payments go out of your accounts on a monthly basis. This can include council tax, season tickets, child care, and more.

Getting a mortgage – what’s a good credit score?

As mentioned previously, mortgage lenders assign you their own credit scores. However we can look at Experian Credit Scores to get a good idea of how lenders are likely to view you. Remember – the higher your score, the more likely you’re going to be able to get better mortgage rates as you’re seen as lower risk. Below is a general idea of how lenders may consider you in terms of a mortgage, but other factors are also involved such as your deposit amount.

• Excellent 961-999: The top of the table, you could have the best mortgage deals with lower interest rates available to you
• Good 881-960: You may get most but not all of the best mortgage deals
• Fair 721 – 880: You may get good mortgage deals with reasonable interest rates
• Poor 561-720: You could get mortgage deals, but they’ll likely have higher interest rates
• Very Poor 0-560: You could have a mortgage declined or find it more difficult to be approved for one without very high interest rates

What if my credit score is poor?

It can be frustrating and difficult, but you may still be able to get a mortgage. It does mean it’s likely to have high interest rates and require a large deposit though.

Sometimes it’s just your situation in life which causes you to have a poor credit rating. It can be as simple as being a young adult who has a short credit history, or someone who’s not been in the UK for very long.

Showing mortgage lenders that you can manage a credit card, mobile phone contracts and monthly utility bills go a long way in boosting your score. This is because it shows them that you can keep up to date with monthly repayments and not go into debt.