What’s a good credit score for a mortgage?

Planning to buy a house? Wondering how good your credit score needs to be to qualify for a mortgage? Here is everything you need to know.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

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Credit scores play a big role in determining whether or not you qualify for a mortgage. But what exactly constitutes a ‘good’ credit score for a mortgage? Is there a minimum credit score you need to have to buy a house in the UK?

We tell you everything you need to know.

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What is a credit score?

A credit score is a three-digit number that indicates your creditworthiness. It gives companies and lenders an idea of how reliable you are when it comes to borrowing and repaying the money. The score is based on the information in your credit report.

The maximum score you can have depends on the credit reference agency that compiles your credit report. There are three main credit reference agencies in the UK:

  • Experian
  • Equifax
  • TransUnion

Experian calculates your score out of a total of 999, Equifax out of 700 and TransUnion out of 710. The closer you are to the maximum score, the more attractive you are to lenders.

What credit score is considered ‘good’?

What constitutes a good credit score will vary depending on the credit agency. Here is a snapshot of how the three agencies categorise your credit score.

Rating

Experian

Equifax

TransUnion

Excellent

961-999

466-700

628-710

Good

881-960

420-465

604-627

Fair

721-880

380-419

566-603

Poor

561-720

280-379

551-565

Very poor

0-560

0-279

0-550

Since all three main agencies base their scores on your financial history, you will likely fall into the same rating category with all of them. So if your rating is ‘good’ with Experian, it’s likely to be ‘good’ with Equifax and TransUnion as well.

Is there a minimum credit score needed to get a mortgage?

No. There isn’t a minimum credit score needed for a mortgage in the UK. The score you need will vary from lender to lender.

Your score will, however, have a huge impact on the type of mortgage that you are able to get. The higher your score is, the better your chances of getting the mortgage you want.

As an example, here is how your Experian credit score can affect the mortgage deals you might get:

  • Excellent: You could get the best mortgage deals with the lowest interest rates.
  • Good: You could get most but not all the best mortgage deals.
  • Fair: You might get approval for a good mortgage deal with reasonable interest rates.
  • Poor: You may get mortgage deals but with relatively higher interest rates.
  • Very poor: You may be declined for a mortgage or only be offered one with very high interest rates.

How can I get a mortgage with a poor credit score?

It’s possible to get a mortgage with a poor credit score, but there is also a higher chance that you will be declined.

Luckily, there are lenders who specialise in offering mortgages to people with poor credit scores. If you have a poor credit score and are unsure about your chances of being approved by traditional lenders, these specialist lenders may be worth considering.

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How can I improve my credit score?

There are several steps you can take to improve your credit score and increase your chances of being approved for the mortgage deal you need.

  1. Register to vote. Being on the electoral register proves who you are and where you live.
  2. Apply for new credit sparingly. Making too many credit applications in a short period of time can be seen by mortgage lenders as a sign of financial distress and can make them wary of lending to you.
  3. Pay your bills on time. Late payments will appear on your credit report and negatively affect your score.
  4. Pay down your debt. Lenders might be reluctant to lend to you if you already have significant existing debt. Try to cut it down before you make a new application.
  5. Stay within credit limits. Keeping balances at 25% or less of your credit limit can help keep your score in good condition.
  6. Take out a credit-builder card. These are made specifically for people with no or poor credit, who want to improve their credit score. By spending a small amount on the card and paying the balance in full every month, you can raise your score over time.

As a final note, make a habit of checking your credit report regularly to ensure that the information there is accurate and there are no errors.

Mistakes on your credit report can have an impact on your credit score, so it’s critical to identify and correct them before applying for a mortgage. This will ensure that your mortgage options are not limited by something that’s not your fault.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

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