What Credit Score Do You Need to Buy a House in the UK?

When you first start thinking about buying a house one of the first questions you ask yourself is ‘is my credit score good enough to secure a mortgage?’. This is a fundamental question because your credit rating gives lenders an idea of how good a borrower you would be, i.e., if you are likely to successfully make mortgage repayments consistently or rather there’s a chance you might default on your loan. In essence, your credit rating comprises your financial history and gives an indication as to whether you have a good track record or not.

Things may start to seem a little ambiguous, however, when you find that there is no minimum credit score required to buy a house. And moreover, how other factors also determine whether your credit rating is healthy such as your annual income, age, and what credit reference agency is used to measure it. At this point, answering the question of if you appear to be a reliable borrower becomes a little more difficult. It’s for this reason why we recommend employing an expert mortgage broker to help you assess your options and find a product that’s best suited to your personal situation.

We at The Mortgage Genie have an in-depth knowledge of the property ladder and the factors which come into play when you’re trying to secure a mortgage. It’s what has enabled us to find housing happiness for each and every one of our clients regardless of their credit score. If you’re a prospective homeowner then don’t hesitate to give us a call at 01915809890 today.

We’ve put together this guide to dispel any of your doubts regarding what credit score you need to buy a house and guarantee that, after reading it, you’ll come away feeling a lot more informed and confident about your position. We’ll be addressing the following questions:

What is a credit score?

As we already mentioned briefly, a credit score is a value which lenders and agencies use to measure your trustworthiness as a borrower. It represents how well you manage your finances and thereby indicates how dependable you’d be at making your mortgage repayments. Your credit rating is informed by both positive and negative financial behaviours. For example, paying your credit card debts on time and in full would increase your score whereas going over your credit limit and missing payments would have the adverse effect. It also takes into account the nature of the types of credit you take out and the total amount you owe.

In addition to this, your credit score is placed in the context of your age & income. As a general rule, you’re expected to become more financially stable as you age but it of course helps if you’ve had a consistent sense of stability throughout your life. It’s designed in such a way that, over time, you can make up for any poor credit history you may have.

We suggest reviewing your Credit File. The easiest way to do this is by using a trial at Check My File. It’s free for the first 30 days (£14.99 per month after the free 30-day trial), but you can cancel at any time once you’ve downloaded your report.

What credit reference agencies do mortgage lenders use?

It might be surprising that there is not one single credit score measurement. This is down to the fact that there are three different credit reference agencies that mortgage lenders typically use, each of them having a different scoring system:

Experian: 0-900
Equifax: 0-700
TransUnion: 0-710

As you can see, each CRA assesses your credit worthiness by using an individual metric. Similarly though, the higher the number, the better. You could be looking at getting the best mortgage rates if you have an excellent credit rating, the cutoff for this being between 916-999, 466-700, or 628-710 by Experian’s, Equifax’s, and TransUnion’s standards, respectively. On the other hand, if your credit score is between 0-560, 0-279, or 0-550 by the same token then you can expect to pay higher mortgage fees and charges and interest rates.

It’s also worth noting that lenders aren’t confined to using one CRA either, they can get a value from multiple agencies and use the middle value which they’ll then use to draw up their mortgage offering.

What is the minimum credit score I need to get a mortgage?

The bottom line is that there isn’t a set minimum credit score you need to get a mortgage. With that being said, the higher your rating is, the easier it will be to secure a loan as lenders will view you as being ‘low risk’. Moreover, with a higher score comes access to better interest rates and deals whereas a low score will leave you with a limited number of options or being outright rejected.

It is important to keep in mind, however, that your credit score is not the only factor that determines your eligibility for a mortgage loan. Your affordability will play a role along with the size of the mortgage deposit you’re willing to put down – a larger deposit could work to offset any negative credit history you have, for instance. More adversely, if you’ve dealt with a county court judgement (CCJ) or IVA in the past this will work against your favour.

What is a good credit score?

As we’ve outlined, what is considered a good credit score varies from agency to agency since they use different rating systems. Generally though, any score considered to be ‘fair’ or above will allow you to secure a good mortgage deal with decent interest rates. The cutoff for a fair score is between 721-880 for Experian, 380-419 for Equifax, and 566-603 for TransUnion.

This doesn’t go to say that you’re ineligible for a loan if you fall below these above margins, just that your scope is relatively narrower and the interest rates you’re offered won’t be as attractive. Again, this is only one factor of your application that will be taken into consideration. Just because you have an excellent credit rating doesn’t guarantee that you’ll be offered an excellent deal, it just increases the likelihood, as other positive variables do.

What is a bad credit score?

A bad credit score is a value that is labelled as ‘very poor’ or ‘poor’ by the three separate CRAs. A very poor credit rating is a value that falls between 0-560 for Experian, 0-279 for Equifax, and 0-550 for TransUnion. Further, a credit score considered to be poor is distinguished as being between 561-720, 280-379, and 561-565, in the same respective order. Although it is a spectrum, if you fall into one of these two categories then you may be seen as having adverse credit. Factors leading to this include things such as whether you’ve had a CCJ or IVA, as aforementioned, or if you’ve previously filed for bankruptcy. Additional influences likewise include a bad track record regarding debts and payday loans.

You might think that having adverse credit rules you out of being accepted for a mortgage loan, this, however, is not the case. Although your options will be limited, relative to those who have an excellent credit score, we stress that there are lenders out there for whatever your financial situation is. If you’re an applicant with a credit score of 0 then this might be down to you never having taken out a loan, and providing clear evidence of this may justify your personal credit rating. Alongside this, putting forward a deposit of 10%-15% and above of the property value will increase your chances of being approved.

On the back of the latter point, if you attempt to secure a 95% LTV mortgage or even 100% LTV mortgage then you’ll find that, although possible, your chances are significantly slimmer. This is especially so if you’re also a first-time buyer. Reason being, that these mortgage types are seen as ‘high risk’, with risk exponentially increasing in lenders’ eyes if you have adverse credit on top of this.

How can I improve my credit score?

There are a number of actions you can take that go towards improving your credit score. Firstly, it’s a good idea to ensure that you’re registered on the electoral roll. Even if you don’t plan on voting, being on the electoral roll helps lenders to confirm your name and address, it therefore reflects well on your credit rating. Secondly, avoid applying for credit 6 months prior to making a mortgage application, a hard credit check is recorded on your report every time you apply for credit, making it easy for lenders to see. As a consequence, an apparent overreliance on credit will lead them to believe that you’re not a trustworthy client.

In a similar vein, ensure that you’re in the clear of any bank account overdrafts. Inversely, paying off any outstanding debts and paying your bills on time will show them that you are a reliable borrower, thus increasing your approval chances. And don’t forget to keep checking your credit report to make sure that everything’s up to date.

Of course, this isn’t something that happens overnight, you must work to improve your credit rating over time, it pays to think in terms of the long run. Missing payments will leave a mark on your report for 6 years, for instance, so things like this are a matter of time. Don’t lose all hope if you have a bad credit rating though, if you’ve been rejected for a mortgage application in the past for this reason then it may be that you simply applied to the wrong provider. Likewise, you may not have accounted for how a Help to Buy scheme could benefit you. People like us are specialised in finding the lender that’s right for you and your individual needs.

In advance of any progress with the mortgage front, use our free tool – Check My File to review your current status. It’s free for the first 30 days (£14.99 after the free period), but the trial and subscription can be cancelled at any time.

Here at The Mortgage Genie we have a comprehensive understanding on how to get a mortgage and are dedicated to helping people secure a loan, whatever their credit score may be. We sincerely hope that this post has answered all of your queries and cleared up any of the concerns you may have had surrounding what credit rating you need for a mortgage.

Each day we help a growing number of people move into the property of their dreams by assisting them in finding a mortgage deal that’s perfectly tailored to their situation and guiding them through every step of the way. If you’re in need of a team of expert mortgage brokers then look no further. Reach us today by calling 033 33 44 33 72 if you’ve got any further questions in need of answering or you’d like to realise your dreams by becoming a homeowner! And why not see how much you could borrow up to today by using our mortgage calculator?