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What credit score do I need for a mortgage?

Written byKoyo Loans
Last Updated26th October 2022
Contents
  • In 30 seconds…
  • Introduction 
  • What credit score do I need for a mortgage?
  • What credit score is needed to buy a house?
  • What is a good credit score for mortgage UK?
  • Does a mortgage in principle affect credit score?
  • Do you need a good credit score to rent?
  • Does changing address affect credit score?
  • Can your address affect your credit score?
  • Conclusion

In 30 seconds…

When you’re in the process of buying a house, your credit score plays a big role. The better your credit score, the easier it will be to access the best mortgage deals. Most lenders will only issue a mortgage to applicants with a fair credit score or better, but there are some lenders that will consider applicants with a poor credit history. If you’re seeking to rent a property, the landlord is likely to run a credit check before approving your application. Therefore, it’s best to check and work on your credit score before buying or renting a house.

Introduction 

Deciding where to live can be stressful enough. But if you don’t have a great credit history, it can make life even more difficult for you. So, to help you plan for your mortgage or rental application, we take a look at some of the ways in which your credit score is likely to influence your chances of approval and what you can potentially do about it.

 

What credit score do I need for a mortgage?

The credit score that you need to get a mortgage varies. This is largely down to the fact that each of the three major credit bureaus in the UK – Equifax, Experian, and TransUnion – scores your credit in different ways. 

That being said, people with ‘good’ credit scores are more likely to have a mortgage application approved than those with ‘poor’ credit scores. Using Experian as an example, they consider scores between 881 and 960 to be good, which should enable you to access most mortgage deals. If you have an excellent score – between 961 and 999 – you stand the best chance of accessing excellent mortgage deals with low-interest rates. 

If you have a poor or very poor credit score, you will probably struggle to get a mortgage. If you are offered a mortgage, it is likely to come with high-interest rates. Therefore, if you’re considering applying for a mortgage, it’s a good idea to take steps to improve your credit score over time so you have a good chance of accessing the best possible mortgage offers when you submit an application.

What credit score is needed to buy a house?

In the UK, there’s not necessarily a minimum credit score you need to buy a house. As explained above, each credit bureau scores differently, meaning you don’t just have one credit score. 

That being said, if you’re planning to buy a house with a mortgage, the chances are that you will need at least a ‘fair’ credit score with most lenders to stand a chance of accessing a decent deal. There are so many mortgages out there that you can apply for, and the better your credit score, the better the mortgage you will be eligible for. 

One of the key things to think about with any mortgage is the interest rate offered. People with higher credit scores are likely to be offered lower rates of interest, which makes borrowing cheaper over the course of your mortgage. So, if you’re planning to apply for a mortgage in the near future, consider checking your credit score to see where you stand and take the necessary steps to improve your score before submitting a mortgage application.

What is a good credit score for mortgage UK?

Each of the three major credit bureaus in the UK has its own way of scoring credit. This is why it’s impossible to provide one number as a good credit score, as it depends on which bureau you receive the score from. 

For instance, a good credit score from Experian is between 881 and 960, while Equifax considers anything between 420 and 465 as good. Finally, TransUnion considers credit scores between 604 and 627 as good. As you can see, this is often why people get confused when looking for their credit score, as what is good at one bureau isn’t necessarily positive at another. 

Ultimately, to access a good mortgage with relatively low-interest rates, you should aim to have at least a good credit score before submitting an application. Of course, the higher your score, the better, but you might even be approved with a fair or even poor credit score. But in these instances, you are likely to be offered higher interest rates as a result. 

Does a mortgage in principle affect credit score?

A mortgage in principle doesn’t affect your credit score. Also known as an agreement in principle, a mortgage in principle is a simple way that you can find out if you can borrow the amount of money you need to buy or remortgage a house. 

A mortgage in principle is completely non-committal and is often one of the first steps homeowners take before being approved for a mortgage. The reason it doesn’t affect your credit score is that lenders only need to perform a soft inquiry on your credit file to offer you an agreement in principle. Soft inquiries don’t appear on your credit report and will not affect your score. 

Once a mortgage in principle is in place, you will need to decide if you wish to proceed with your mortgage application with this lender. At this stage, the lender will perform a hard inquiry into your credit report, which will cause your credit score to dip slightly in the short term. It’s also important to remember that a mortgage in principle is not a guarantee of acceptance; rather, it’s an indication of what you can potentially borrow to buy your home. 

Do you need a good credit score to rent?

In the UK, you don’t need a specific credit score to be able to rent a property. However, keeping an eye on your financial health and working on your credit score is likely to improve your chances of securing the rental agreement that you want. 

When you apply for a rental property, there isn’t a magic number that your credit score needs to be. That being said, your application is more likely to be approved if you have a good or excellent credit score with one of the UK’s three credit bureaus. If you’re unsure of your credit score, it’s best to check it before submitting a rental application, so you know where you stand. 

Most landlords require a credit check because they want to know whether or not you’re likely to pay your rent in full and on time. If you have a poor credit score, they will reasonably doubt your ability to meet your monthly rental payments and will be hesitant to accept your application. So, if you’re in the process of looking for a rental, it’s best to work on your credit score before submitting an application.

Does changing address affect credit score?

Changing your address does not affect your credit score. Credit bureaus use your address to verify your identity, so provided your address and other personal details are up to date and accurate, changing the address on your file won’t have a negative impact on your score. 

When you move home, it’s really important to update your personal details and ensure the credit bureaus have an up-to-date account of your current residence. Your personal address should be a consistent common denominator across all of your accounts, so ensuring it is up to date is important as it can affect your credit score if it’s not. 

The best way to check that your address and other personal details are accurate is by requesting a copy of your credit report. You can then notify the bureaus of any errors or issues that you identify. This simple step can have a positive impact on your credit file, so it’s worth taking the time to check that there are no issues. 

Can your address affect your credit score?

Provided your address is up to date and accurate on your credit report, it shouldn’t affect your score. There is no such thing as an address blacklist when it comes to your credit score, and moving to a specific area won’t influence your score. 

Rather than using your address to calculate your credit score, the credit bureaus use it to confirm your identity. This is why it’s so important that the address on your credit file is accurate. One thing to note, however, is that if you’re constantly on the move, this might come across as instability. Lenders like to see stability when issuing credit, so bear this in mind if you’re submitting an application for a personal loan or any other form of credit. 

In addition to updating your address, the simple act of registering on the electoral roll is an effective and incredibly simple way of boosting your credit score. You can do this by signing up on the government’s website, and it takes a matter of minutes. So, ensuring your address is accurate and registering to vote can actually have a positive impact on your credit score.

Conclusion

There’s so much to think about in relation to your credit score, and it can be difficult to keep up. The bottom line is that when you’re looking to buy or rent a property in the UK, a higher credit score will help you access better terms. So, it’s a good idea to regularly monitor your credit score and take the necessary steps to improve it where possible. 

Koyo Loans is the trading name of BETR Technology Ltd. Company No. 11483187. Registered Office: Huckletree Soho, Ingestre Court, Ingestre Place, London, W1f 0JL

Key Takeaways

Although there’s no magic number that your credit score should be, people with better credit scores will be able to access the best mortgage deals. Therefore, before submitting a mortgage application, it makes sense to check your credit score and take the necessary steps to improve it where possible. If you have a good credit score, you will be able to access low-interest mortgages. Bear in mind that every credit bureau has a different scoring system, so what is ‘good’ with one is not necessarily ‘good’ with another. 

If you’re renting instead of buying, your credit score is still important. This is because most landlords will run a credit check before approving your application, as they want to know whether you’re likely to meet your monthly repayments. 

As for your address, changing it doesn’t affect your credit score in itself. However, if your address is inaccurately listed on your credit report, it could impact your score. Therefore, it’s worth checking the accuracy of your credit file once in a while, and if you haven’t done so already, registering on the electoral roll is a quick and easy way of boosting your credit score.

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