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What credit score is needed to buy a house?

When applying for a mortgage loan, lenders will take a number of factors into account before they approve your application. One factor is your credit score, which lets the mortgage lenders understand your credit history and past financial history.

To learn how your credit score might affect your mortgage, check out our guide below.

If you have any questions after reading this guide, don’t hesitate to get in touch with our expert mortgage team.

What is a credit score?

Your credit score is a 3-digit number that indicates how reliable you are as a borrower. The higher your score, the higher your chances of being offered a better deal on a mortgage loan.

There is a slightly different scoring system across the various credit agencies, but ultimately, your specific credit score will indicate how bad or how good your credit rating is.

Is there a minimum credit score for a mortgage?

Contrary to popular belief, there is no minimum credit score needed for a mortgage. A low credit score can still make it difficult to get a mortgage but there are lenders who will still offer you approval if the rest of your application is strong.

Which credit reference agencies do mortgage lenders look at?

The majority of lenders use three credit reference agencies: Experian, Equifax, and TransUnion.

If you have ever signed up to these agencies to check your credit report, you will have an understanding of the type of scoring system they use.

As we suggested, scoring systems can differ between each credit reference agency but you can still get an understanding of how mortgage providers might look at your application when checking your credit scores. Each lender will have its own different minimum credit score.

Why you should check your credit score before applying for a mortgage

It’s advisable to check your credit report regularly, regardless of whether you’re applying for a mortgage or not, as a lower credit score can inhibit your chances of taking out any loan, such as a car loan and other types of conventional loans.

There might also be a mistake on your credit report, so the sooner you can check for this, the better.

It’s especially important to check your credit report and credit score when you are applying for a mortgage as a bad credit score could affect your mortgage chances. As we suggested, a lender might still give you mortgage approval, but if there are any credit issues, you probably won’t be eligible for the best mortgage rates on the market.

If you do have a low credit score, you should then do what you can to improve it before you make your mortgage application.

What information do credit reference agencies have?

Credit reference agencies obtain information about you from various sources. These include:

  • Public records, such as those that show any county court judgements made against you, as well as information about bankruptcies, IVAs, and Debt Relief Orders.
  • The Electoral Register, which indicates how long you have been registered to vote at your current address.
  • Information about your existing accounts, how much you have borrowed, and whether or not you have made monthly payments on time.
  • Information from the Council of Mortgage Lenders about any home repossessions.
  • Details of people you are financially connected to, such as anybody you hold a joint bank account with.
  • Past credit applications show up as ‘searches’ on your credit file.

What is a good credit score?

Each credit reference agency will use its own scoring system. To get an idea of what is considered ‘good’ or high credit score by the three main agencies, check out the table below.

Credit Reference Agency Very Low Low Fair Good Excellent
Experian 0 - 560 561 - 720 721 - 880 881 - 960 961 - 999
Equifax 0 - 438 439 - 530 531 - 670 671 - 810 811 - 1000
TransUnion 0 - 550 551 - 565 566 - 603 604 - 627 628 - 710

My credit score hits the minimum requirement, will I be accepted for a mortgage? 

If you do meet the minimum score required by a lender, you stand a better chance of being accepted for a conventional mortgage. This is because a good credit score is an indicator that you’re a reliable borrower.

However, meeting the lender’s minimum credit score requirement is just the start.

other lending criteria

The lender will consider other things in addition to your credit report within the mortgage lenders affordability assessments, including your debt to income ratio which is your monthly debt payments divided by your gross monthly income. This is another indicator of whether or not you’ll be able to afford the monthly mortgage payment on your loan amount.

So, while you might meet the lender’s credit score requirements, be aware that it isn’t a guarantee that you will be offered a mortgage. Of course, a good credit score is certainly better than a poor credit score, as it opens you up to better mortgage deals if your application is accepted.

Can I get a mortgage with a low credit score?

Lower credit scores don’t automatically rule out your chances of getting a mortgage. Some lenders will take the reason behind your bad credit history into account and if they think you have made steps to improve your borrowing ability, they might still approve you for a mortgage.

If your application for a mortgage has been rejected, speak to a mortgage broker such as ourselves. We have access to those lenders who will agree to you borrowing money, despite your low score.

How much deposit do I need to get a mortgage with a poor credit score?

When applying for a mortgage, the more money you put towards your down payment, the better. You will then be eligible for the best mortgage deals, with the lowest interest rates and a reduced monthly payment.

Higher deposit gives access to more deals

If you don’t have a very good credit score, this is especially important, as you are more likely to be accepted for a mortgage with a larger deposit. Some lenders will even stipulate the minimum you need for a deposit, with 30% of a property’s value being a common request.

However, the amount you will need for a deposit can also depend on other factors, such as the type of property you want to buy and your age.

Thankfully, there are lenders who are flexible about deposit sizes so if you aren’t able to afford a large deposit, we can help you source those lenders that are more lenient.

How can I improve my credit score rating for a mortgage?

A higher credit score will be considered favourable when applying for a mortgage, you should do what you can to improve your credit score rating. There are many ways to do this but at the very least, you should:

  • Check your credit reports for any mistakes. If any errors are spotted, contact the relevant credit bureaus that hold the incorrect information.
  • Reduce your credit card balances and other debt.
  • Pay off any outstanding debt if it is feasible to do so, such as your student loan and credit card debt.
  • Pay all of your bills on time, including your utility bills and mobile phone bills.
  • Stop making credit applications in the 12 months leading up to your mortgage application.
  • Stay out of your overdraft as this will reduce your credit utilization and prove that you are in control of your money.

     

How can I get something wrong on my credit report removed?

If you spot any mistakes, you can dispute the errors by writing to the credit reporting company in question.

A mortgage broker can also help you to get rid of any mistakes on your report, so speak to a member of our team if you would like to know more.

Get In Touch with a mortgage broker

When determining what is credit score needed to buy a house, there is no clear-cut answer. However, it is always advisable to do what you can to improve your rating and your overall affordability for a mortgage.

Fee Free Broker YesCanDo Money Ready To Help

At YesCanDo Money, we can advise you on these matters. We can also give you other mortgage advice that is specific to your situation. If you would like to know more, browse our website to check out our services and get in touch with our friendly and experienced team.

Request a call back from one of our mortgage advisers, remember our services are always FEE-FREE!

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Steve Roberts
Steve Roberts

Stephen Roberts MAQ is the founder of YesCanDo Money, Hampshire's largest no-fee mortgage brokers. With over 30 years of mortgage experience, he has advised and helped thousands of First-time buyers buy their first home and home movers buy their dream home. Speak to a mortgage expert today by completing our contact form:

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