How Far Back Do Lenders Look at Credit History?

It can be confusing if you are borrowing money for a mortgage to know whether your credit score will be good enough for a lender. This is especially true if your credit score is rated average or below.

Many lenders have strict credit score thresholds and even mortgage providers that cater to adverse credit borrowers will still have cut off points where a borrower represents too much risk.

This article explains credit history in detail including how lenders use it and what you can do to improve your chances of obtaining a mortgage.

What is Credit History

In a nutshell, your credit score is a record of your financial commitments and payments over the last 6 years.

Lenders use credit scores to check how responsible you have been in the past with your financial obligations.

credit score

A credit score is only one factor considered when getting a mortgage and you will need to show you can afford the mortgage and have a deposit too.

Lenders will check your credit score at two points normally during the mortgage process. The first is when you get a Decision in Principle and the second when you make a full mortgage application.

How Many Years Do Lenders Look Back When Checking Credit History?

Every lender has different credit history guidelines. Most high street lenders have extremely strict credit scoring and only accept borrowers with good or excellent credit scores.

In practice, when a lender obtains your credit score, they will be checking your entire credit profile over the last six years. Your score will reflect how well you have managed your finances over that time.

For example, if you have missed payments, defaulted on a loan, or have extensive credit card debt, this will detrimentally impact your overall credit score.

Beyond the actual credit score, lenders have varying rules when checking specific elements of your credit profile. For example, some lenders might only be concerned about defaults in the last three years whereas others will be concerned about any defaults.

The Six Year Rule

The six-year rule is not a fixed cap to your financial history which can be confusing for borrowers.

In theory, any debt older than six years’ old will drop from your credit record. However, if you have had contact with a creditor in the last six-years, the debt can stay on your record for longer. Ongoing contact could keep a debt on your record perpetually as a creditor is able to re-apply for County Court Judgements, mark your account in default or otherwise damage your credit profile.

Lastly, some debts do not drop off your credit record automatically after six years. Some debts are exempt such as Council Tax or Income Tax and other debts where a CCJ has been previously obtained can be continued if a creditor seeks to enforce the judgement after six years has passed.

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Why Do Lenders Look at Credit History?

Lenders assess credit history because they want to keep their risk as low as possible.

All lenders accept that lending any money has an inherent risk. There is always a risk your circumstances could change, and you lose your job through sickness or redundancy. In such cases you may not be able to meet your mortgage obligations and the house could be repossessed.

Every single mortgage loan carries this risk. To combat this risk, lenders charge interest rates that mean if one mortgage fails, there will be other mortgages on their books to cover the loss.

In some cases, the interest rate spread is not enough to cover the risk of lending to people and lenders will add further safeguards to filter out adverse borrowers.

Credit scoring is one such method that all lenders use to combat risk. You may not know, but lenders also need to demonstrate to the Financial Conduct Authority they are lending responsibly, by conducting a credit check they are ticking a box to show the regulator they have been responsible.

What is On a Credit Report?

credit report

Your credit report contains a diverse range of datapoints.

Most notably, any money you owe to other companies and how well you have kept up with those payments.

It will also note if you are registered to vote at your address and any court action taken against you.

Do Lenders Use Other Credit History?

Some lenders take additional steps when confirming your credit history.

Your overall credit score may not be enough for them to assess the risk of lending to you. Some lenders use internal credit scoring, which is information they have collated on you privately. For example, if you bank with the lender you want to borrow from, they will be able to assess how well you have managed your bank accounts over the time you have banked with them.

Internal credit scoring is for private institutional purposes only and a lender will not necessarily disclose how they have reached a decision if they have used internal scoring.

Lenders may also request further information for any areas that flag on your credit profile, such as a confirmation a debt has been settled from a historic creditor if it still shows as outstanding on your credit history.

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What to Do If Your Credit History is Poor?

If your credit history is poor, the best step you can take is to go through your report creditor by creditor and fix each problem in turn.

You can contact creditors to arrange payment plans or use a debt management charity like StepChange to help you if you are employed and want approved debt advice.


poor credit

Speak to a Mortgage Broker

Whatever your credit score might be, you should always contact a mortgage broker to discuss your financial history and current circumstances.

You may not be aware that even something as slight as overdraft usage can cause a mortgage application to decline. Mortgage brokers also have access to a panel of lenders specialised in providing loans to adverse credit borrowers.
Boon Brokers is a Whole of Market Mortgage, Insurance and Equity Release Brokerage. Boon Brokers provides fee free mortgage advice with no client fee at any stage.

Boon Brokers is a Whole of Market Mortgage, Insurance and Equity Release Brokerage. Boon Brokers provides fee-free no obligation Equity Release advice.Contact Boon Brokers to discuss your credit history and book your initial mortgage consultation today.

Gerard BoonB.A. (Hons), CeMAP, CeRER

Gerard is a co-founder and partner of Boon Brokers. Having studied many areas of financial services at the University of Leeds, and following completion of his CeMAP and CeRER qualifications, Gerard has acquired a vast knowledge of the mortgage, insurance and equity release industry.