Why Do Some People Have No Credit History?

Let’s take a closer look at why someone might have no credit history. The reasons can be varied and often include:

  • Being new to adulthood, i.e., just turning 18
  • Recently relocating to the UK
  • Returning to the UK after an extended time abroad
  • Not owning a UK bank account
  • Not being listed on any utility bills or mobile phone contracts
  • Having no permanent UK address
  • Lacking any employment history in the UK

No credit history can create a ripple effect on your financial capabilities. The most apparent impact is the potential difficulty in securing financial products, such as loans, credit cards, and most importantly, mortgages. 

As mentioned before, lenders might find it challenging to assess your reliability as a borrower, leading to hesitations in approval.

Can I Get a Mortgage without a Credit History?

Yes, you can. It’s a common belief that you need a well-established credit history to secure a mortgage. But that’s not strictly true. 

While a good credit score can make the process easier, lacking one doesn’t necessarily bar you from getting on the property ladder.

Mortgages without a credit history are indeed a possibility. Many lenders are willing to consider other financial factors outside of your credit history.

For instance, they might look at your income, your employment stability, and your day-to-day financial management.

However, you should be aware that you need a credit history to avoid certain restrictions. For instance, you might need to put down a larger deposit, or you may encounter slightly higher interest rates.

But remember, every lender has a different approach. So it’s essential to do your homework and find a lender whose policies best fit your situation. 

Better yet, seek out a specialist broker who can guide you through the process and help you find the right mortgage product for you.

So yes, getting a mortgage without a credit history is a hurdle, but it’s one that can be overcome with the right strategy and guidance.

How to Secure a Mortgage with No Credit History? Step-by-Step

While getting a mortgage with no credit history might seem like a challenge, it’s not insurmountable. Here’s a roadmap to guide you:

Step 1: Building Your Credit History 

You can start establishing your credit profile without applying for credit. Simple actions like opening a bank account in the UK, registering to vote, taking responsibility for utility bills, and showing evidence of regular payments can all contribute to this. We will talk about this more later in this article.

Step 2: Seeking Specialist Brokers

A specialist broker can provide invaluable assistance in this process. They have the knowledge and experience to guide you through the application and can connect you with lenders more likely to approve your mortgage despite your lack of credit history.

Step 3: Finding the Right Lender

The ideal lender for a borrower with little to no credit history varies from person to person. Your broker can help identify the lenders most likely to consider your unique situation and accept your application.

Step 4: Applying for a Mortgage

With the assistance of your broker, you can submit your mortgage application to the chosen lender. During this stage, it’s crucial to provide complete and accurate information to increase your chances of approval.

Which Lenders Will Lend to You?

The lenders that might consider your application will depend on why you haven’t built up a credit history. 

It’s worth noting that each lender has their own eligibility criteria, so it’s important to speak to a good broker who can help you understand these different requirements.

If you’re returning to the UK after living overseas, some lenders may consider your application, but most will want you to have either secured employment or been back in the country for a certain period of time.

Some lenders have specific criteria. For example, Precise Mortgages typically require applicants to have lived in the UK for at least 3 years.

But, there may be exceptions in cases where an applicant’s job required a temporary assignment overseas.

It’s important to remember that this is general advice, and every situation is different. It’s always best to seek personalised advice based on your specific circumstances.

Understanding Lenders Criteria

From a lender’s point of view, granting a mortgage to someone with no credit history is a bit like stepping into the unknown. They prefer to lend to individuals with a proven track record of managing credit responsibly. 

But don’t lose hope – there are lenders willing to consider your application, even if your credit history is a blank page.

Different lenders use different eligibility criteria, but some common factors can make you more appealing:

  • Stable income to show you can afford the repayments
  • A substantial deposit to increase mortgage chances and pool of lenders.
  • Regular bill payments to show you’re a responsible borrower.
  • Voting registration to show proof of your residence and identity.

What are the Challenges in Getting a Mortgage with No Credit History?

Here are some hurdles you may encounter while applying for a mortgage with no credit history:

Size of the Deposit

This is the initial amount you contribute towards buying the property. A larger deposit lowers the risk for the lender, potentially boosting your approval odds.

Your Income

Lenders generally factor in your earnings while deciding the mortgage amount. They typically offer around 4 to 4.5 times your annual salary, although this isn’t a fixed rule and can differ between lenders.

Higher Interest Rates

In the absence of credit history, lenders may see you as a higher risk, which could result in higher interest rates for your mortgage. A proficient broker, however, can aid in securing more favourable rates.

Availability of Lenders

When you have no credit history, fewer lenders might be willing to offer you a mortgage. This could limit your choices and make the process a bit more complicated.

Proof of Bills Payment

Some lenders might want to see evidence of regular bill payments as an alternative way to assess your reliability. If you’ve been living with parents or sharing a flat and don’t have bills in your name, this could pose a problem.

Time and Effort

Without a credit history, getting a mortgage can take longer and require more effort on your part, as you may have to provide additional documents and details to lenders.

Each of these challenges underscores the importance of personalised advice from a good mortgage broker when you’re dealing with a lack of credit history.

Infographic detailing the hurdles to overcome when applying for a mortgage without a credit history.

Building Your Credit Rating: A Step-by-Step Guide

If you don’t want to face some of the hurdles mentioned about, it’s worth considering building your credit rating first.

Although these steps do not guarantee success in your mortgage, they offer a few advantages before applying for a mortgage. These may include:

  • Higher loan amounts
  • Higher mortgage approval rates
  • Better interest rates
  • Wider access to lenders and mortgage products.

As for building a credit rating in the UK, here are some practical steps:

  1. Register to Vote

Registering on the electoral roll at your current address provides proof of address and stability, which lenders view favourably. You can click here to register.

  1. Open a UK Bank Account

This can serve as proof of your financial activity and establish a financial footprint.

  1. Pay Bills on Time

Regularly paying bills such as utilities, broadband, and mobile phone bills can help to build a positive credit history.

  1. Take out a Credit Card

Use a credit card responsibly for small, manageable purchases and pay off the balance each month. This shows that you can handle credit effectively.

  1. Avoid Excessive Debt

Having too much debt or frequently maxing out your credit cards can negatively impact your credit score.

  1. Check Your Credit Report Regularly

This allows you to spot errors and track your credit-building progress. You can get a copy of your credit report from these Credit Reporting Agencies – Experian, Equifax, and TransUnion.

The Bottom Line

Let’s get this straight: securing a mortgage without a credit history isn’t a pipe dream. It’s entirely possible. However, success lies in careful preparation and the right help. 

As you’ve seen, it involves understanding lender perspectives, meeting their criteria, and diligently building your credit rating.

But you’re not in this alone. Expert advice tailored to your situation is invaluable in this process. A specialist broker can significantly enhance your chances of securing that much-coveted mortgage.

They can also help you understand the often complex language of mortgages, making the whole process more manageable. So while getting a mortgage without a credit history is possible, it’s a lot simpler with the right broker by your side.

Don’t hesitate to reach out and inquire about your unique situation. We’re here to match you with the right guidance to make your mortgage dreams a reality.