What credit score do you need for a mortgage?

Do you need a good credit score to get a mortgage?

A mortgage is a kind of loan, and may well be the biggest loan you ever take out. Just like any kind of borrowing, the kind of mortgage you can get will depend on your financial situation, and your credit score will play a big role in deciding how much you can borrow, and what interest rate you’ll be asked to pay back. 

We look at everything you need to know about how your credit score affects your mortgage, as well as those things you can do before applying to give you the best chance at getting a good deal.

What is the minimum credit score you need for a mortgage?

There isn’t any set credit score you’ll need to achieve before being approved for a mortgage, however the better your credit score, the better the deal you could be offered. 

Mortgage providers will use your credit score to decide if you’re a risk. If they can see that you’re a responsible borrower who always pays back their debt on time (good credit score), they’ll trust you to make your monthly mortgage payments on time too. If you regularly miss payments or have large outstanding debt (bad credit score), they might not want to lend you the money, and you could have to shop around for mortgages with higher interest rates. 

So while there isn’t a minimum credit score for mortgage approval, as with any kind of lending, the better score you have, the better deals you’ll be offered.

How does your credit score affect your mortgage deal?

When you apply for a mortgage, your lenders will check your credit score to see what kind of borrower you are. They’ll use credit reference agencies, such as Equifax, Experian and TransUnion, to rate your credit history from ‘Very poor’ to ‘Excellent’ depending on how you’ve paid back previous debts. 

If you have an ‘Excellent’ credit score, this will show lenders that you can be trusted to pay back your mortgage on time, every month. This will mean you’re less of a risk for them to lend to, giving you access to better rates of interest with a lower deposit. 

If you have a ‘Very poor’ credit score, you’ll be more of a risk and therefore be offered less good deals, often involving higher rates of interest that require you to put down a larger deposit. 

You should also remember that it’s not just your credit score that mortgage lenders will be looking at. They’ll want to see that you can afford your mortgage before they give you one, so they’ll also look at your earnings, your monthly outgoings, any fixed costs and things like car repayments, school fees and council tax to paint a full picture of your mortgage affordability. 

How can you improve your credit score before applying for a mortgage?

It’s a good idea to get your credit score in good shape before you apply for a mortgage - this will give you access to more affordable deals with lower interest rates, meaning you pay less in interest every month. 

There are a few good habits to get into to get your credit score looking its best. 

• Make all your regular payments on time
  This will show credit reference agencies that you’re reliable when it comes to paying off debt, which will increase your chances of a higher credit score.

• Make limited mortgage applications
  Do your research before applying for a mortgage, as too many applications in a short space of time will have a negative impact on your credit score. 

• Register on the Electoral Roll at your current address
  This looks good on your credit report and allows you to vote in any UK elections. 

• Check your credit report is up to date
  Credit reference agencies sometimes make mistakes, so it’s important you check all your information is correct and that no errors have been made. 

Does having debt stop you getting a mortgage?

Having debt on its own won’t stop you from getting a good mortgage deal - it all depends on how well you manage current debt payments and whether you can afford to take on more. If you can show lenders that you’re managing your debt well, making regular payments and not maxing out your limit, this will prove that you’re a responsible applicant. Mortgage providers want to see that you can make your debt repayments and still have enough money left over to pay for your mortgage deal. If you can show them that, they’ll be happy. 

Can you still get a mortgage with a bad credit score?

A bad credit score doesn’t stop you from getting a mortgage, but it might stop you from getting a good deal on one. There are mortgages specifically designed for people with low credit scores, called ‘bad credit mortgages,’ ‘adverse credit mortgages’ or ‘sub-prime mortgages’. These often come with a much higher rate of interest, will require you to make a larger deposit on your new home, and may even limit the amount you can borrow. 

While a typical mortgage might expect you to make a deposit of 5-10% of your home value, bad credit mortgages could ask for between 20-25%, making buying a home much more expensive up front. 

Is your credit score affected by having a mortgage?

Just like any kind of borrowing, your mortgage will have an impact on your credit score. The difference with your mortgage is how long it will last - the average mortgage lasts between 25 and 40 years, making it much longer than your average loan. If future lenders can see that you’re managing this correctly, making your monthly repayments without any issue, and budgeting effectively to ensure you can always afford your mortgage, your credit score could be improved for years to come. 

On the flip side of this, if you default on your mortgage or miss payments, this will have an adverse effect on your credit score. 

How can you check your credit score before applying for a mortgage?

There are lots of things to think about when you’re trying to buy a home, and your credit score should be high up on your to-do list. There are a few ways you can check it before putting your mortgage application in, such as using credit reference agencies like Experian, Equifax and TransUnion. But did you know you can also check it on the Boshhh Mobile app? This is completely free, and you don’t even need to sign up to one of our SIMs to access your credit score and report. 

If you’re looking to improve your credit score, signing up to one of our credit building SIMs is definitely a good way to start.