The best credit score for a mortgage

Posted by Jamie Mackenzie Smith in Mortgages on 8 August 2018

A lot of customers come to checkmyfile because they plan on applying for a mortgage – your Credit Report is, after all, the best place to start as it’s helpful on more than one occasion. But often the question is often 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 will have trouble giving you that elusive number. But there are lots of elements that you can control and improve upon, making sure you have the best chance of getting the finance you need.

What determines the score I need?

The Credit Score you need is unlikely to match the one that you see on your Credit Report because each lender has their own unique scoring criteria which decides whether or not they will grant a mortgage. Because this number is different to the one shown alongside your report, you shouldn't worry too much about getting that number up to a certain level, and instead should focus on making sure that the information that goes on to your report.

The Credit Score required by the lender will depend on the lender themselves, as the product they are offering will most likely have its own lending criteria attached to it. If you are looking for a fantastic, low-rate mortgage, you will most likely need either a lot of equity to put into your home, or a great credit history (but ideally both).

Your score reflects positive information on your credit file; not missing payments, having been in your job for a long period and even being registered to vote tell lenders that you’re the kind of secure, stable customer they dream of. While a high score reflects this, it isn’t the be all and end all of whether you’ll be granted a mortgage. Making sure you’re doing the right things with the following bits of information on your credit file will go a long way to help your application:

Electoral roll status

Make sure you are on the electoral roll at your current address. Electoral roll registry shows lenders that you have stability in your living arrangements, and it also helps when your accounts are all held at your current address. Make it as easy as possible for lenders to tally everything up and leave them with as few questions to ask as possible.

Credit account information

Are your credit accounts in good order? Late payment markers, arrears, Arrangements to Pay, debt management plans and Defaults will all raise questions with most lenders. For some it will depend on how old they are, but for others it will impact whether they automatically decline you, so it’s worth being aware of what is held.

If there’s a marker that you don’t recognise or think is incorrect, get in touch with the lender as soon as possible. It can take weeks to get incorrect information updated, so don’t leave it until the last minute to get this done.

Court records

Some mainstream lenders might steer well clear of those with court records appearing on their Credit Report, but there are some lenders who will lend to people with this information on their file, though often at an inflated rate to cover the heightened risk of defaulting on payments.

This can also depend on the age and type of court record: if you do have an old CCJ it may still be worth checking with more mainstream lenders; most will regard a CCJ as a deal-breaker, but some may consider older judgments as being less damaging. If you are using a mortgage advisor, they will be able to confirm which lenders might do this.

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 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 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.

So play it safe until you’ve got your mortgage – you don’t want your new car or new sofa purchase to impact on the comfort of your new home.

Also, applying for lots of mortgages in a short space of time will also 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, an association can be made on your Credit Report. Even if you haven’t seen this person in years, their name on your report will allow lenders to check their Credit Report as part of your application.

And if a financial association, whether someone from uni who has gone bankrupt since you last saw them, or a difficult ex with a shared bank account has a less than rosy Credit Score, this can impact your chances of getting credit as lenders will look upon associations as if they are current. You can dispute these 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 at houses, look at your Credit Report first. Getting this part of the admin out of the way will allow you to look at potential homes 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 because of something that could have been easily fixed earlier in the process.

Make sure you’re giving yourself the best chance

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 full Credit Report, you can try checkmyfile free for 30 days then £14.99 a month afterwards, and cancel 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.

Original article by Kelly Luff, updated by Jamie Mackenzie Smith 08/08/2018

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