What is a Credit Score?
Your credit score is a number that represents how reliable you are when it comes to borrowing money and making repayments.
It’s calculated based on your credit history–things like credit card payments, past loan repayments, missed bills, etc.
The higher the score, the better.
Credit reference agencies like Experian, Equifax and TransUnion each use their own scoring systems. So the number you see can vary between them.
What Credit Score Do I Need for a Mortgage?
There’s no single “magic number” that guarantees mortgage approval. But generally, here are the scoring ranges you need to aim for:
| Credit Status | Experian | Equifax | TransUnion |
|---|---|---|---|
| Excellent | 961-999 | 811-1000 | 781 – 850 |
| Very Good | – | 671-810 | – |
| Good | 881-960 | 531-670 | 721 – 780 |
| Fair | 721-880 | 439-530 | 661 – 720 |
| Poor | 561-720 | 0-438 | 601 – 660 |
| Very Poor | 0-560 | – | 300-600 |
An “excellent” credit score puts you in the best position to get approved for the most competitive mortgage rates.
But even with a “poor” score, you may still be able to get a mortgage – it just might have higher interest rates.
Other Factors Mortgage Lenders Consider Besides Your Credit Score
While your credit score is very important, it’s not the only thing mortgage providers look at.
They’ll also consider:
- Your income and outgoings
- How much your deposit is
- Your employment status
- The amount you want to borrow (loan-to-value ratio)
- Any other existing debts you have
So even with an excellent credit rating, you could be declined if your income isn’t high enough to afford the repayments. Conversely, a low score doesn’t necessarily mean a rejection – especially if you have a large deposit, high income and no other debts.
Image to show the factors that affect your mortgage other than a credit score.
What Can Hurt Your Credit Score For a Mortgage?
There are certain things that can really damage your credit score and chances of mortgage approval:
- Missed or late payments on credit cards, loans, etc.
- Applying for too much credit in a short space of time
- County Court Judgements (CCJs) or bankruptcy
- Not being on the electoral roll at your current address
- Existing debt close to your credit limits
To boost your chances of mortgage success, it’s wise to minimise these before applying.
How Can I Check & Improve My Credit Score for a Mortgage?
You can get a free copy of your credit file from various CRAs such as Experian, Equifax, and TransUnion
You can also get a free financial health check here to identify areas for improvement before a mortgage application.
If your score needs improving, here are some tips:
- Register on the electoral roll at your current address
- Pay all bills on time, every time
- Pay down existing debts as much as possible
- Don’t apply for other new credit in the 6-12 months beforehand, as hard credit checks can lower your score and affect your mortgage approval.
- Fix any errors on your reports with the relevant lenders
- Close any unused credit accounts
Following these steps shows lenders you’re a responsible borrower – making you a lower mortgage risk.
Image to show how to improve your credit score.
Do All Mortgage Lenders Use Credit Scoring?
Not all mortgage providers use strict credit scoring models when assessing applications.
Some take a more holistic view, looking at the individual circumstances around any adverse credit, rather than just a numerical score.
Your age, reasons behind any credit issues and their severity are factored in. You may still be approved if the problems were isolated historical incidents.
The Bottom Line
At the end of the day, every mortgage application is unique. The “required” credit score can vary considerably based on your individual financial situation.
That’s why it’s wise to speak to an experienced mortgage broker. They’ll look at your credit reports, income, debts and future plans to recommend suitable lenders and give you the best chance of approval success.
With their expert advice and by taking proactive steps to maximise your credit score, getting that dream mortgage is an absolutely achievable goal.
Need a broker? Get in touch with us. We’ll connect you with a qualified mortgage broker who can find the BEST mortgage deals and help with your mortgage application.
