Credit Score & Mortgages – What Credit Score Do You Need for a Mortgage?

In this guide, our team here at The Mortgage Heroes explain everything you need to know when it comes to credit score and mortgages.

What is Credit Score?

Credit score is a number that represents your creditworthiness and how much of a financial risk you might be to lenders. Largely based upon your credit report (a record of how you’ve managed credit* in the past), lenders use this number to help them determine whether they should accept you for a mortgage. It evaluates the probability that you will repay loans in full and on time.

The higher the credit score, the more appealing you are to lenders.

*credit is when you borrow money on the condition that you will pay it back either at a later date or in regular instalments.

Importance of Credit Score

Your credit score will be instrumental in a lender’s decision to offer you a mortgage. When applying for a mortgage, you are required to supply documents like payslips, P60s and bank statements to lenders so that they can see your current financial situation. This gives them an understanding of how much you earn and what you can be expected to repay on a monthly basis. However, your credit report enables lenders to predict how you might behave in the future and how likely you are to meet payments.

It’s also worth noting that your credit history can affect your mortgage interest rate. Special introductory rates and other types of attractive mortgage offers may only be available to those whose credit history meets certain criteria. It’s therefore important that anyone looking to buy a property gets their finances in order before applying for a mortgage.

What Credit Score Do You Need for a Mortgage?

There isn’t a set in stone or universal credit score figure that you need in order to qualify for a mortgage. The minimum score you need to achieve will vary from lender to lender and depend on each lender’s individual criteria.

A higher credit score is favourable and indicates to lenders that you are low risk. Your report demonstrates that you’re able to pay bills on times so you’re therefore more likely to appeal to a wider range of lenders. Your mortgage application will have a better chance of being accepted and you’ll also be offered cheaper rates of interest.

Mortgages with Bad Credit Score

You can still get a mortgage with a bad credit score, however, the options available to you are likely to be limited.

If you have a lower credit score, lenders will view you as a higher risk. Therefore, the deals offered to you will probably include higher interest rates and/or a limit on how much you can borrow. You may even be required to pay a larger deposit of around 20-25% of the value of the property.

Mortgages with No Credit History

If you have no credit history, it may be possible to get a mortgage. However, it is worth pointing out that it can be more difficult since the lender has no evidence to go on. There’s no proof that you’re a trusted and responsible owner and they can’t be sure that you’ll pay back the money you owe, leaving lenders with doubts. Lenders like to know beforehand whether a borrower can manage credit, so even if they do offer you a deal, it might not be the type you were wanting, and the deal may contain high interest rates.

How to Improve Your Credit Score for a Mortgage

Here are just 5 ways you can improve your credit score.

If you haven’t already, apply for a credit card, then spend a small amount and pay it off in full each month. Not only will this help raise your credit score, but it also shows lenders that you only use a small percentage of the available credit on offer.
It goes without saying that you should avoid missing any payments. Missing payments suggests that you are incapable of managing your finances and paying bills on time, which is far from ideal when applying for a mortgage.
Keeping any credit cards you no longer use poses a fraud threat. It can also be misleading as to how much available credit you have, so be sure to cancel any accounts you don’t use and cut up the card before throwing it away.
If you’ve opened a joint account with another person in the past, their credit score can have an influence on yours. Ensure that you’re not financially connected to anyone you shouldn’t be – like an ex-partner – and ask for any outdated links to be broken.
The simple and easy act of registering on the electoral roll will improve your credit score. Lenders like to see that applicants are registered to vote because it enables them to easily confirm your identity, which is seen as a sign of stability.

Also, making sure all of your bills are registered to your current address makes everything easy to trace back to you and is another way of confirming your identity.

Get Started with The Mortgage Heroes

The Mortgage Heroes specialise at helping people in all situations find the right mortgage. If you’re looking for the best possible mortgage – even if you have a bad credit score – please don’t hesitate to get in touch with our team today. We’re expert advisers with years of experience in successfully helping people like you secure a mortgage. From start to finish, we’ll make the entire mortgage application process simple, smooth and hassle-free.

Bad credit mortgages, fast mortgages and declined mortgages are just a few of the types of mortgages we help people to secure.

See more: Remortgages FAQ – The Ultimate Guide to Remortgaging

See more: Mortgage Declined – What to Do Next?

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