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29th May 2019
Your credit rating is actually one of many factors that will be considered when applying for a mortgage; we’ve written about the factors affecting mortgage approvals in our recent market trends report. But if you do have poor credit, what can you do to boost your score? Whatever you do - don’t worry, it’s never too late to change your situation.
How can I improve my credit score for a mortgage application?
The most important thing to remember when trying to improve your credit score is to make credit payments on time. Additionally, there are 3 simple steps that you can take to improve your credit rating:
Register to vote
According to Equifax, the reason why being on the electoral register may improve your credit score is because it allows any interested party to check that you are who you say you are; it helps lenders avoid problems with fraud and identity theft. This is a simple way to improve your score and you can check to see if you’re registered on About My Vote. If you aren’t registered - it’s easy to do. You can sign-up on the Gov.uk website (just make sure that you have your national insurance number handy).
Don’t ask for credit in the six months before applying for a mortgage
Experts including Money Saving Expert have said that doing this will boost your chances of getting a mortgage. This is because lenders will search your credit file every time you apply for a loan, overdraft, credit card - or even a mobile phone. The more searches you have in a short time, the less likely you are to be granted credit. This is because you may be seen as needing to borrow.
Stay within your credit limits
Research from ClearScore suggests that you shouldn’t use over 30% of your credit balance. If you use less than this, lenders will feel more confident that you can repay the balance. As a general rule, try and keep balances at 25% or less of your limit to improve your score.
What is the minimum credit score needed to buy a house?
There isn’t a minimum credit score needed for buying a house. What’s more, the amount varies from lender to lender.
So, does it matter?
Yes. The higher the credit score, the greater your chances are of getting a good mortgage deal.
What is a good credit score to get a mortgage?
The following numbers have been taken from the Experian Credit Score system:
Excellent (961-999): you’re in line for the best deals and lower interest rates
Good (881 - 960): you can get most but not all of the best deals
Fair (721 - 880): it’s possible to get a mortgage with reasonable interest rates
Poor (561-720): you may get a deal, but the interest rates will be higher
Very Poor (0-560): you may be declined or could find it harder to get a mortgage without very high interest rates
Where can I check my credit score?
You can check your credit score for free at all of the leading credit agencies. Experian, TransUnion and Equifax will give you an independent score based on:
Your past borrowing
Payment history
How much credit you use (and how frequently you use it)
Missed repayments
Your electoral roll status
Credit mix (a diverse blend of investments)
Hard inquiries (where a lender reviews your credit)
Unfortunately, there isn’t a universal score or credit rating. To see the full financial picture, you should check your score with all three agencies. Barclaycard has written more about how to check your credit rating.
Can I get a mortgage with bad credit?
Yes. According to Money you may still be accepted for a mortgage with bad credit record. However, fewer lenders are likely to let you borrow money. This means that:
There will be a smaller range of mortgages to choose from
Mortgages are likely to be more expensive
They will need a higher deposit (often 15% more)
You may still be accepted for a bad credit mortgage. Alongside your credit record, lenders will also check your income, outgoings and general financial situation.
If you’re worried about your credit rating, talk to our in-house mortgage advisors for independent financial advice. Get in touch.