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 mortgage lenders understand your credit history and past financial history.

To learn what minimum credit score is needed and how the 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 good credit score to buy a house?

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?

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 minimum credit score requirements.

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.

We have come across many examples where there is incorrect information and errors on clients’ credit reports. Therefore check each company whether it be conventional loans, credit cards or history mortgage payments.

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

It’s especially important to check your 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.
  

Who are the main UK Credit agencies?

There are three main credit agencies in the UK: Experian, Equifax, and TransUnion (formerly known as Callcredit). These agencies collect and maintain information about individuals’ credit histories and financial behaviour, which is used by lenders, landlords, and other organisations to assess creditworthiness and risk.

These UK-based credit agencies gather and maintain records of individuals’ credit histories and financial conduct. With this information, they create credit reports and scores that are utilised by lenders, landlords, and other organizations to determine creditworthiness and risk when making lending and rental decisions. In addition, they offer a variety of products and services to assist individuals in monitoring and safeguarding their personal information and credit scores.

• Experian
• Equifax
• TransUnion (formerly known as Callcredit)

Introducing Checkmyfile UK

Checkmyfile UK is a privately owned company that was established in March 2000 with the goal of helping individuals gain a better understanding of their credit history through a detailed online credit report. To generate their detailed Multi Agency Credit Report, Checkmyfile utilises information from credit reference agencies. They pledge to never sell or share personal data for marketing purposes, making them a trustworthy choice for easy credit report monitoring. Currently, Checkmyfile is the top credit reporting service in the UK. If you are looking to improve your credit score, whether for a mortgage or other type of loan such as car finance, we highly recommend Checkmyfile.

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.

What’s the UK’s average credit score?

As mentioned above, there are three main credit reporting agencies that provide credit scores: Equifax, Experian, and TransUnion. Each agency has its own method for calculating credit scores, which results in slightly different average scores or near prime scores. For example:

• Equifax scores range from 0 to 1,00
• Experian scores range from 0 to 999
• and TransUnion scores range from 0 to 710.

Although Equifax and Experian use similar scoring methods, they may differ in how they calculate your score. For instance, a good score on Experian is typically between 881 and 960, while a very good score on Equifax is usually between 671 and 810. Here is the UK’s average score range for each credit scoring agency.

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 credit score that is good is an indicator that you’re a reliable borrower.

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

Learn how much mortgage you can get here.

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 credit score that is good 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 toward your down payment, the better. Having a larger deposit may help or counteract the fact you have a credit history and credit scores that are poor. You will then be eligible for the best mortgage deals, with the lowest interest rates and reduced monthly mortgage payments.

A higher deposit gives access to more deals

If you don’t have higher credit scores, 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 10 – 20% of a property’s value being a common request. Having a 15% deposit for example would mean that you would have an 85% loan to value mortgage. Loan to value is also referred to as LTV, if you’re confused about LTV then we recommend you read the information on this page next –  What does loan to value mean?

What it comes down to is the amount you will need for a deposit really depends 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.

With over 40 years of experience, our mortgage advisors will know what credit score is needed. Our observation is the credit score needed will depend on the loan value you require and also what mortgage lender you are wanting to use. Our experience is that a credit score with Experian of 850 will be enough to get you a mortgage up to 75% loan to value however you may need a higher score for a higher loan to value.  So draw on our expert experience and don’t leave it to chance. Let us give you professional mortgage advice. – Stephen Roberts

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 to an average credit score. 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 conventional loans, 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 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 loan.

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.