A lot of customers come to checkmyfile because they plan on applying for a mortgage – your Credit Report is, after all, a key component in lender decision-making. But often the question is raised: "what Credit Score will I need to get a mortgage for my dream home?”
Unfortunately it’s not as simple as saying "a Credit Score of 862 guarantees you a mortgage.” Even lenders won’t be able to give you that elusive number. But there are lots of elements that you can control and improve upon to ensure you have the best chance of getting the finance you need.
What determines the score I need?
Before jumping into what makes you sufficiently creditworthy – a person that mortgage lenders are financially attracted to – it’s important to quickly dispel a 21st century myth. The truth is that your Credit Score only shows you part of the picture.
Your Credit Score can be incredibly useful – it’s a fast and easy way to understand the health of your Credit Report at a glance.
When it comes to applications though, especially those as important and thorough as mortgage applications, there are far more significant factors that need consideration. These include vital details within your Credit Report, which we will cover later, but also factors entirely separate to the credit checking process, like your employment status and salary, the amount you’re asking for, your deposit, and so much more.
Your Credit Score forms just a part of what makes up your overall Credit Report – which itself contains the actual data any prospective mortgage lender will assess. The Credit Score you see online (no matter where you check it) won’t be visible to a lender, so they’re not going to know or care what number you saw when checking online. They may use a ‘Bureau Score’ from one of the Credit Reference Agencies to aid their assessment, but it won’t be the Credit Score you’re familiar with, and it’s certainly not the only thing they rely on.
Instead, it’s the makeup of your Credit Report that underpins a significant chunk of what a mortgage lender is looking for. It’ll want to see a long, consistent history of you repaying your credit agreements on time, as this suggests you’ll be a reliable borrower in the future – exactly what they want.
Important Credit Report entries like Financial Associations, which can make or break applications, don’t even influence your Credit Score (more on these later) so by relying only on a Credit Score, you wouldn’t even know if you have a Financial Association or not.
So instead of focusing on the number and giving yourself a headache because it’s not improving as fast as you’d like, it’s better to dig into the data on your Credit Report.
You can try our Multi Agency Credit Report free for 30 days, then just £14.99 a month, which you can easily cancel online at any time, or by freephone or email. It’s the most detailed Credit Report in the UK, having complete information from the three Credit Reference Agencies, so you can compare everything you need in one easy-to-use format.
Here are some of the most important Credit Report factors that you should ensure are in order and reflect your financial standing correctly. You can check for each of these following things by viewing your Credit Report.
Electoral Roll status
Ensure that your Electoral Roll listing lists you correctly at your current address. Prospective lenders search Electoral Roll information for two main reasons. Firstly, an active listing on the register demonstrates to lenders a level of stability in your living arrangements. Lenders are primarily concerned with finding a reliable, predictable customer and a long-running active Electoral Roll entry will support this.
Secondly, the Electoral Roll register was historically how the Credit Reference Agencies found and formatted addresses into their database. This is still partly true, meaning that if an Electoral Roll listing isn’t matched to you when a prospective lender performs a credit search, there may be concern that it hasn’t found your full Credit Report. Lenders gain confidence when seeing an applicant’s full Credit Report as they can assess the data to gauge the customer’s creditworthiness. Finding a missing entry on the register may mean the lender isn’t fully confident with the data they have access to.
The three Credit Reference Agencies will also receive and upload Electoral Roll information completely independently to one another (as they do with all information), so just because one CRA has your Electoral Roll information correct doesn’t necessarily mean they all do. It’s for this reason that checking your Credit Report will all three CRAs is vital – and checkmyfile makes this process hassle free.
People with high Credit Scores often have a long running and active Electoral Roll listing, but it’s no guarantee. To be certain that your Electoral Roll information has been recorded correctly, you’ll want to check your Credit Report for yourself.
Credit Account Information
Once a prospective mortgage lender has found your Credit Report, it’ll assess how you’ve managed your credit agreements – both historic and current.
A long history of credit repayments made on time and in full will instil the lender with confidence that you are likely to make monthly repayments reliably. This positive influence can go even further if you have a wide range of account types showing on your Credit Report: credit cards, loans, and mobile phone contracts show that you have experience managing different obligations. Even an old mortgage account showing perfect repayment behaviour will go in your favour, as this demonstrates that you have managed a mortgage perfectly before.
The flipside of all the sentiment you can enjoy from positive information is the potential damage from negative information. Adverse entries on a Credit Report can harm creditworthiness and give lenders reason to doubt an applicant’s ability to repay what they borrow.
Negative entries usually arise following a breach of the agreed repayment terms for a credit account. For example, missing a scheduled monthly payment will be reported as a late payment and this negative marker will make getting accepted for credit even more tricky.
There are a range of different negative markers, each with their own severity and influence. Have a look at our guide on negative payment markers for more on this.
If you have any negative information on your Credit Report, it’s not to say that your application will definitely be declined. All lenders have their own unique lending criteria they need to meet when assessing your application and some lenders will naturally be more stringent than others.
That said, if you find what you believe is an incorrect negative entry, it’s definitely worth disputing with the organisation that reported the information to request it is taken off. If one of your lenders has reported a missed a payment incorrectly, it is required by law to correct the error. You’ll want to ensure that your Credit Report properly reflects how you’ve managed your past accounts ready for any applications you’re going to make, so you can be confident that the prospective lender is seeing only accurate, up to date information.
All repayment history is removed once six years pass from date of account closure. If the account defaulted, the entry will be removed once six years pass from date of default, regardless of whether the outstanding balance is settled or not.
Court Records
Any Court Records on your Credit Report have the potential to seriously damage your creditworthiness, especially for larger applications like mortgages. As prospective lenders are so focused on finding reliable borrowers, the red flags raised when court information is evident can be enough to spoil an application. These Court Records carry a great deal of ‘perceived risk’ and most lenders will avoid applicants that have them.
Again, it’s not to say it’ll be impossible to find a mortgage while you have court entries on your Credit Report (some sub-prime lenders target this segment of borrowers), but it will definitely be easier to be accepted if your Credit Report is clean.
The types of Court Records you’ll find on a Credit Report range from County Court Judgments (CCJs) to insolvencies like bankruptcies and IVAs. Even liability orders issued for missed Child Maintenance can be flagged up on a credit check.
CCJs remain on Credit Reports for six years from date of issue, regardless of whether the judgment is satisfied. Insolvencies last for six years from the start date, providing they’re marked as ‘Discharged’.
Credit Searches
Tempting though it might be to immediately furnish your soon-to-be new home with furniture bought on credit or a new car to adorn the driveway, lenders might not be as easily swayed. That’s because lenders tend to look at lots of credit-based spending in the lead up to an application in a negative way, particularly if they don’t have any history showing that you are able to repay this debt.
Credit searches on your Credit Report can be seen as possible debt that hasn’t yet made it onto your account history – for all a mortgage lender knows, you might have taken out all five of the credit cards you’ve applied for and are currently racking up debt that could impact on your mortgage repayments.
Also, applying for lots of mortgages in a short space of time will show up on your credit searches, and could imply to a lender that you’ve been turned down, or that you’re desperate for credit. This may then give them cause to look further into why you may have been declined. This is another case where an experienced mortgage advisor can help ensure that you aren’t applying for products you’ll never be accepted for.
Financial Associations
If you’ve shared any debt with someone else, whether it’s a bank account, a mortgage, or in some cases guarantor loan, a Financial Association with that person can be made on your Credit Report. Even if you haven’t seen this person in years, their name on your Credit Report will allow lenders to check their information as part of your application.
If the Financial Associate has a less than rosy Credit Report, such as a flatmate from university who has since gone bankrupt or perhaps a difficult ex, you can expect the link between you and them to hurt your applications. You can dispute these Financial Associations with the Credit Reference Agencies to get them removed if there are no longer any open accounts with this person or we can dispute these on your behalf.
If you are looking to buy a home, check your Credit Report first. Getting this part of the admin out of the way will allow you to look at potential properties without worrying that it might be a problem further down the line. And it’ll prevent the heartache that can occur if you do get declined for a mortgage because of something that could have been easily fixed earlier in the process.
Make sure that your Credit Report accurately reflects you
There’s far more to a successful application than just having a high Credit Score. We’ve covered the significant factors of the credit checking process when you apply for a mortgage, but there’s a host of other important parts that mortgage lenders will also look at. These will be your income, outgoings, and Loan to Value Ratio to name just a few. Speaking to a whole-of-market mortgage advisor is in many cases the best bet for your first mortgage. They will be able to look at all of your personal details and advise on suitable products to prevent you being unnecessarily declined.
If your salary makes your mortgage repayments look easily affordable, you’ve cancelled all your unnecessary Direct Debits and you’ve got your deposit saved, checking your Credit Report is the most important element remaining. Any problems can take weeks to have investigated and updated, so it isn’t worth leaving it until you’ve found your dream home to get this sorted, since a good property at a good price isn’t likely to hang around for long.
To see your Multi Agency Credit Report, you can try checkmyfile free for 30 days then £14.99 a month and cancel easily at any time. You’ll get complete access to the UK’s most detailed Credit Report, along with help from our friendly team of professionally qualified Credit Analysts who are here to help online or by phone.
Updated by Sam Griffin 23/01/2020