Purchasing a home or other property needs financial planning. It’s not just about how much you
can pay or what kind of mortgage you’ll need; getting ready takes much more preparation than
that. If you’re looking for a mortgage, you’ll need to show that you’re creditworthy to lenders, and
make them have faith that you’ll be able to make your mortgage payments on time. This is usually
done by multiple factors, but one of the biggest being your Credit Score.
What is a Credit Score?
Your credit score is accumulated through your personal credit history, and this takes into account a
variety of different things, the biggest being: how much you owe, how often you apply for credit,
and whether your payments are made on time.
Some companies have different metrics for credit scores, for example on one site a perfect score
may be 999, whereas on another site a perfect score may be 700. You may find you get a different
score from each agency, but as long as the information they have about you is correct, this won’t
affect your ability to borrow.
What is a good Credit Score?
As mentioned above, the number meanings for credit scores can vary depending on the company
you’re checking through. The definition of a ‘good’ credit score is different for every credit reference
agency. For example, according to Experian, a credit score of 700 or above is generally considered
good, while your score is excellent if it is 800 or above. An excellent score with Equifax would
usually be around the 475 mark.
What is a bad Credit Score, how will it affect the mortgage process, and how can I improve
it?
Your mortgage application is more likely to be rejected if you have a poor credit score. However, if
your credit score is worse than you expected, don’t assume you’ll be instantly denied a mortgage.
There are different things you can do to boost your credit score and get you back on the right track,
but we must warn you, it can take a long time.
Something that you might find surprising, is that being on the electoral roll can positively impact
your credit score. If you aren’t on it, you can register online at https://www.gov.uk/register-to-vote.
Also living at the same address for a few years can help your credit score, so if you’re hoping to
apply for a mortgage soon, it’s a good idea to stay put rather than move around. Another thing you
can do is if you no longer use a credit card, make sure you close the account, and although its
easier said than done, try to pay down any significant credit amounts you have and make sure you
never miss a payment, as paying on time helps increase overall credit score.
In terms of how your cred score will affect the mortgage process, lucky for you, lenders will take
other factors into consideration when assessing your mortgage application. If your income is both
stable and comfortable enough to cover your monthly repayments, and you have a good-sized
deposit (10% of the property value or more) you still have more of a chance at getting at getting
your mortgage application approved.