It’s no secret that your credit history carries significant weight in determining whether or not you’re eligible for a mortgage. But what if you have no credit? Can you get a mortgage with no credit history? Let’s find out.
What is a credit history and why is it important?
Basically, credit history is a record of all the debts you have ever accumulated and how you paid them back. This information is contained in your credit report. Debts can be in the form of mortgages, credit card bills, student loans, utility bills, bank loans or phone contracts.
Why is your credit history important? Well, lenders need to see your ability to pay back your debts to determine whether you can pay back any credit they may offer you.
Typically, credit reporting agencies (CRAs) collect data from lenders to generate a credit score. This credit score is a three-digit number used to determine how reliable you are in repaying money borrowed.
There are three main CRAs: Experian, Equifax and TransUnion.
- Experian rates your credit score out of 999. A score above 881 is good and above 721 is fair.
- Equifax rates your credit score out of 900. A score above 670 is good and above 580 is fair.
- TransUnion rates your credit score out of 710. A score above 604 is good and above 566 is fair.
Can you get a mortgage with no credit history?
You can get a mortgage with no credit history, but it isn’t as straightforward as you might think. These types of mortgages are commonly referred to as no credit mortgages or no credit score mortgages. These mortgages are likely to have very high interest rates to reflect the risk the lender is taking in lending to you.
There may be a number of valid reasons why you might have no credit history. For example, you may have just turned 18. However, if age isn’t a factor, having no credit history might look suspicious to lenders, making it more difficult for you to secure credit.
The first thing you might want to do is determine why you have no credit history. It might be that you:
- Come from a wealthy family and haven’t required credit
- Are under 18 years old
- Live with your parents and don’t have any bills in your name
- Don’t have a UK bank account
- Have recently moved to the UK
- Don’t have an employment history in the UK
- Don’t have a permanent UK address
- Aren’t registered on the electoral roll (electoral register)
It’s highly unlikely that a lender will offer you a mortgage if you’re not on the electoral roll and don’t have a UK bank account. It might, therefore, be important to check these two boxes first.
Next, carry out research to find mortgage lenders who offer no credit mortgages. They are usually a lot more realistic and willing to consider other factors alongside your credit score. For example, are you putting down a significant deposit? Do you have a steady job and income?
Keep in mind, though, that seeking the services of mortgage brokers might be beneficial, especially if you want to make the process easier and increase your chances of success.
What should you do if you have no credit history?
It’s not uncommon for mortgage lenders to insist that you have a credit history. If this is the case, and you can’t get a mortgage with no credit history, it’s never too late to start building a good credit score.