Can I Get a Mortgage With No Credit History?
We all know that having a poor credit rating can have a negative impact on your ability to get a mortgage, or the deals you’ll have access to. But, what if you have no credit history at all?
If you’re looking to buy your first home and have never taken out a line of credit, this can make it difficult for mortgage lenders to judge whether you’ll be reliable when it comes to making your repayments. This can then lead to them being wary of allowing you to borrow from them. Building up a strong credit record can take a lot of time and effort, though, so you might be wondering if it’s totally necessary, or if you’ll be able to buy your dream property in your current situation.
Here at The Mortgage Genie, we have a team of expert mortgage brokers who are used to handling situations just like yours. So, if you’re wondering “Can I get a mortgage with no credit history?”, we’re here to help. We’ll be able to assess your current position, advise you on whether you need to take any steps to increase your chances of having your mortgage application accepted, and hold your hand through the entire process until you finally complete on your new home.
We know you’ll probably have a lot of questions in the meantime, though, which is why we’ve put together this guide to help you determine whether you’re going to be able to get a no credit mortgage. We’ll cover:
- Can I get a mortgage with no credit history?
- Why you might have no credit history
- Should you work on improving your credit score before applying for a mortgage?
- What can you do to build up your credit history before applying for a mortgage?
- How long will it take to build your credit history?
- Will I need a larger mortgage deposit if I have no credit history?
- How to get a mortgage with no credit
Read on to learn more.
Can I get a mortgage with no credit history?
The short answer is yes, it is possible to get a mortgage loan without any credit history. However, it’s likely you will find that a high street bank or online mortgage firm won’t consider your application. This is because, without a credit file, they won’t be able to see any evidence that you have a track record of keeping up with your existing bills and other financial obligations. This can then make you appear to be a high-risk borrower.
Having no credit history will also mean you may need to do more preparation before applying for a mortgage. This is because you’ll want to assemble whatever you can to prove that you’re going to be able to manage and make all of the necessary repayments. This could be proof of you having paid rent for so many years without any arrears, for instance. The idea is to show that you’re financially stable and reliable. Plus, you’ll want to work with an experienced mortgage broker with a strong network of partners who will be able to help you find the best lender and deal to suit your needs.
It’s also worth noting that you may have some credit history without even realising it — for example, if you’ve taken out a phone contract or paid your own utility bills, this is typically considered to be a form of borrowing. Therefore, paying these on time each month can help to boost your credit rating. It’s a good idea to conduct a free credit check (free for 30 days, then £14.99 a month - cancel online any time) ahead of your application to get a clear idea of where you currently stand.
Here are just some of the documents and forms of evidence you could use to show lenders you’re going to be a reliable borrower if you don’t have a credit file:
- Records of your employment, such as your contract, payslips, invoices, or bank statements
- Proof that you’ve always paid your rent on time, which could include your tenancy agreements, bank statements, and even a letter of confirmation from your landlord or letting agency
- Any utility bills or statements that clearly show you’ve paid all of your bills on time
The mortgage broker you work with will need to build a strong case for you to show prospective mortgage providers that you’re worth lending to. And, the more evidence you have to back up your case, the more likely you’ll be to have your application accepted.
Why you might have no credit history
If you don’t have any credit history, this means there’s currently nothing on your credit report or you haven’t taken out any lines of credit for seven years.
If you have no credit history because you’ve consistently lived within your means and managed your money responsibly, the fact that having a thin credit file can work against you might seem unfair. But, look at it from a lender’s point of view: if they can’t see any evidence that you’ve borrowed money in the past and successfully paid it back as agreed, how can they possibly know that you’ll manage to pay back your mortgage?
There are lots of different reasons why you might not have any credit history, but here are some of the most common:
- You aren’t registered on the UK’s electoral roll
- You don’t have a permanent or fixed address in the UK
- You have no UK employment history
- Your UK credit history is too old (this will be the case if you have no records from the last six years)
- You don’t have a UK bank account
- You don’t have any utility bills in your name
- You’re under 18
- You live with your parents
- You’re from a wealthy background and have therefore never needed to borrow money
- You’ve recently moved to the UK
- You’ve lived outside of the UK for a number of years and have recently returned
- You’ve recently been released from prison
While some of these factors — such as not being on the electoral roll — can be easily addressed, others may take a lot of time or effort to overcome. Fortunately, with the help of the right mortgage broker, you could still be in a position to buy a property, even without any credit history.
Should you work on improving your credit score before applying for a mortgage?
The main downside to not having a credit score when applying for a mortgage is that the number of products you’ll have access to will be much more limited. This is because a lot of the biggest banks and mortgage providers won’t even consider your application if they can’t check your credit file.
The mortgage products you can secure are also likely to be more expensive due to higher interest rates — after all, you’ll be seen as a high-risk borrower, so your chosen mortgage provider will want to cover their back and reward themselves for taking a chance on you.
If you do wish to gain access to the widest range of products possible and secure the best deal out there, working on improving your credit score can help with this. And, it will make your application more robust. However, we know that not everyone is in a position to wait to buy a house — perhaps you need to move very soon and won’t have the time to build up your report. In this case, you will still be able to get a mortgage, but it’s likely you will need a specialist loan that’s designed for people in your position, which will typically cost you more in the long-run.
What can you do to build up your credit history before applying for a mortgage?
If you do have the time to build your credit file and boost your credit score before applying for a mortgage, we would highly recommend doing so. Here are some of the simplest ways you can do that:
- Add yourself to the electoral roll
- Open a UK bank account if you don’t have one already
- Consider a credit card — credit builder cards are specifically designed to help you in this area. You need to ensure you’re able to pay back any spending on this card in the correct fashion, and ideally within the same month to avoid any interest charges
- Put a utility bill in your name
- Consider a mobile phone contract - if the contract is affordable and suitable for your needs
Taking any of these steps may help you to get a start on building your credit report from the ground up, and it won’t be long before you’re in a much better position to apply for a mortgage.
How long will it take to build your credit history?
If you’ve decided that you would rather take some time to build up your credit to give yourself access to a wider range of mortgage products, you might be wondering how long you’ll have to wait to buy.
Typically, any open and active account will take around six months to start improving your credit score, but you’ll also want to keep your lines of credit active throughout the mortgage application process to ensure your rating remains healthy.
Will I need a larger mortgage deposit if I have no credit history?
While putting down a larger mortgage deposit will typically give you access to better and more affordable deals, having no credit history doesn’t necessarily make this a requirement.
To secure a residential mortgage, you’ll typically need a deposit that’s 10–20% of the value of the home you’re looking to buy. And, even without any credit, as long as you’re able to pay this upfront, there will be mortgage products out there that you’re able to secure. Although every situation is unique, so it’s a good idea to speak to a specialist mortgage broker ahead of time to get an idea of how much you should save before applying.
How to get a mortgage with no credit
When you have no credit but want to secure the most favourable mortgage rate possible, it’s vital that you work with a specialist mortgage broker who will be able to introduce you to lenders that offer products designed specifically for people in your position. While most high street banks and well-known lenders won’t consider your application at all, there are companies out there that will.
Going to the wrong lender when you don’t have a credit score can lead to you paying far too much for your mortgage, while having applications turned down can have a detrimental impact on your rating, making it even harder for you to get the loan you need. So, it’s important to work with someone who knows the landscape, has strong connections with a great network of mortgage providers, and can support you at every step of the process.
Pulling together as much evidence as possible that shows you’re financially responsible and saving a healthy deposit will also help to put you in a strong position and reduce the risk of your application being denied.
In advance of any progress with the mortgage front, we suggest reviewing your Credit File. The easiest way to do this is by using our free tool - Check My File. It's free for the first 30 days, but you can cancel at any time once you've downloaded your report.
We hope you now have a much better understanding of what the process will be like if you’re planning to take out a mortgage but currently have no credit history. Here at The Mortgage Genie, we’ve helped countless people just like you to buy the homes they’ve always dreamed of, and we would love to help you with your mortgage application, too!
If you would like our support, get in touch with us today. You can give us a call on 033 33 44 33 72 or use the handy chat option on our website to get started. We’re looking forward to hearing from you!