What Is the Lowest Credit Score Needed for a Mortgage?

Credit scores can play a pivotal role in securing a competitive mortgage. In fact, your your credit score will be assessed at least twice by your chosen lender: firstly when you apply for a Decision in Principle (DIP) and secondly when you submit a full mortgage application.

For many, a less than perfect credit score can be a contributing reasons for a mortgage refusal. Thankfully, while this can be disheartening, it does not mean that your out of options.

In this article, we take a dive into exact what the lowest credit score for a mortgage is, how credit ratings affect your chances with mortgage lenders, and what options are available if you have a poor credit score. Let’s begin.

What Is a Credit Score?

A Credit rating score is created by credit reference agencies using your financial history and public records. This numerical rating can provide an overview to lenders of your creditworthiness and help them to assess how likely you are to be able to repay loans.

In the UK there are three main credit reference agencies that lenders will use. You can also check your credit score with these agencies:

• Experian
• Equifax
• TransUnion

These credit reference agencies will calculate your credit score using a range of factors. At the end of a personal credit check, they will explain what factors impact your credit score.

Here, we have created an overview of each key factor and why it matters:

Let’s take a closer look at how these factors will affect your credit score:

Previous Financial History

An evaluation of you past finances allows lenders to see how responsible you have been with past debt. For example, they will be able to see whether or not payments were made on time, whether you defaulted on a debt, and if any county court judgements are in place.

Electoral Register

Lenders prefer applicants who are registered to vote and are at a stable address. This signals to lenders a financial reliability and reduces any perceived risk.

In short: A fixed location provides lenders a certainty on where to send correspondence and where to locate you if any funds/debt becomes outstanding.

As such, being on the electoral roll at a specific address allows lenders to tie you to a physical location and reduces risk if they want to lend you money.

Current Financial Commitments

Your current financial commitments can have a significant impact on your affordability and credit score. For example, if you have multiple debts your credit score will be impacted.

In addition, any existing debt repayments will also reduce your available finances, reducing your overall affordability.

How Much Credit Is Available to You

This pertains mostly to flexible credit limits like credit cards. For example, if you have a £1000 limit on a credit card and you have maxed the card, this will hurt your credit score. This is because credit reference agencies will see you as living close to your financial means.

Conversely, if you have multiple credit cards with no spending on them, this can improve a credit score. This is because you are managing your debt responsibly and comfortably living within your means.

What Credit Score do I Need for a Mortgage?

Each UK lender sets its own risk criteria, meaning credit score requirements can vary widely between mortgage providers. Understanding these differences helps you find lenders best suited to your credit profile.

Typically, if you’re aiming to secure a mortgage with a lower the interest rate, then the better (higher) credit score you will need to have. In the case that you have a less than perfect credit score, popular high- street lenders can be the most difficult to be approved for a mortgage.

The great news – there are lenders available for almost all credit scores.

Working with a whole of market mortgage broker – like Boon Brokers – can help you match your credit score and financial standing to a lender that fits your needs.

In short: while the interest rates for adverse credit mortgages is typically much higher than standard mortgage products – you can get a mortgage with adverse (bad) credit.

You may run into difficulties if you have multiple or recent County Court Judgements (CCJ), if you are in an Individual Voluntary Agreement (IVA) or if you have been declared bankrupt. But even in these extreme circumstances, it is still worth discussing your financial situation with a mortgage broker as you may be surprised.

At Boon Brokers, we specialise in helping clients with adverse credit find the mortgage that best matches their unique financial circumstances. Our dedicated mortgage advisers have whole-of-market access and will compare products between both specialist and high-street lenders to secure the mortgage offer that suits your needs – no matter your credit history.

What Is Considered a Good Credit Score?

What is considered to be a good credit score will vary between credit reference agencies, as each have their own scoring system. For example, you might find that Experian displays your credit score as good, while Equifax displays it as fair.

As such, if you have a strong credit rating with one credit agency, but a weaker profile with others, it’s worth discussing this with your mortgage broker.

Each mortgage lender has a preferred agency they refer to when assessing your credit file, and so by aligning your application with a lender that uses the agency where your score is strongest, you can potentially improve your chances of approval and reduce borrowing costs.

What Happens if I Have a Bad Credit Score?

If you have adverse credit, it’s important to understand how each credit reference agency assesses your score. This insight can help you identify areas for improvement and explore mortgage options suited to your financial situation.

As we’ve mentioned in the body of this article, different agencies will have different assessments and credit conclusions for you – and you might just find that one agency is more favourable than others.

There are credit score checking services online that compile your credit score from all three major credit reference agencies and display these side by side for comparison. Check My File is one of the most popular online credit score checking services available in the market.

Having a bad credit score does not exclude you from obtaining a mortgage in most cases and it is a great idea to discuss your situation with a whole of market mortgage broker to see what options are available to you.

How Can I Improve my Credit Rating?

It’s no secret – improving your credit score takes time, but small and consistent efforts can quickly make a meaningful difference.

Here are some top tips and effective ways that could help you strengthen your credit file and boost your standing with mortgage lenders:

Pay Credit Commitments On Time

Missed or late credit payments will negatively impact your credit rating. To counter this, set up a direct debit(s) in order to reduce any chance of a missed payment. If you’re worried about your finances and do not wish to setup a direct debit, setting a basic reminder can also help you stay on track with your finance planning.

Lower Your Credit Utilisation

Credit utilisation ratio is the terminology used to assess how much available credit you currently have and are using. A higher credit utilisation will suggest a financial strain, which in turn could negatively affect your credit score.

Conversely, keeping your balances low in relation to your limits supports a strong credit history, which improves your standing with mortgage lenders. As a rule of thumb: using less than 50% of your available credit shows financial discipline and supports a strong credit history.

Check Your Credit Report

In some cases, your credit report may contain outdated or incorrect information that can lower your overall credit score. Reviewing your report with a trusted credit agency (Experian, Equifax, TransUnion) can allow you to spot any mistakes, dispute errors, and track progress. Keeping your credit file accurate is vital when applying for a mortgage loan.

Register on the Electoral Roll

While this might appear like a small task, being tied to a fixed address can actually help lenders verify your identity and improves your credit profile.

Avoid Multiple Credit Report Applications

Submitting several credit applications in a short span can make you appear financially unstable. Every mortgage application will include a “hard” search on your credit report. Too many hard credit searches can suggest financial difficulties, lowering your credit score.

As such, it’s better to space out applications and only apply when necessary – especially if you’re preparing for a future mortgage application.

Speak to a Whole of Market Mortgage Broker

Securing the right mortgage deal can be challenging – especially if you’re dealing with a bad credit rating or complex financial circumstances. But you don’t have to navigate it alone.

At Boon Brokers, we’re a UK-based, Whole-of-Market Mortgage, Insurance, and Equity Release Broker.

Our dedicated mortgage experts specialise in helping clients with a wide range of credit backgrounds find suitable mortgage options – and the best part? Our advice and arrangement services are completely fee-free, from start to finish.

Contact Boon Brokers today for free, no obligation mortgage advice and start your mortgage journey with confidence.