What is a bad credit score for a mortgage in the UK? | WIS Mortgages
What is a bad credit score for a mortgage in the UK? image

What is a bad credit score for a mortgage in the UK?

When you’re ready to buy your first dream property, having a bad credit score can seem like an insurmountable barrier to getting a mortgage. Lenders look at a variety of criteria, including your earnings, job stability and credit history. So, if you have a low credit rating, that can make some lenders warier.

When lenders agree to a mortgage, they want assurance that they are going to get their money back and if you have a poor credit score, that could indicate that you are more likely to default on the debt. However, there are options for people who have a poor credit history. So, what is a bad credit score for a mortgage, what can you do if you have a poor credit history, and how can you improve your credit rating?

Do lenders carry out a credit check before agreeing to a mortgage?

Before a lender agrees to give you a mortgage, they will run a full credit check. This means that they will become aware of your credit history, any current or past loans or debts that have impacted your score and your reliability when it comes to making repayments.

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Why are credit scores important to lenders?

Your credit score is an indication of how you manage your money. If you have a good credit score, that could indicate that you do not rely on high levels of credit to pay your bills or buy goods. However, if you have a poor credit score, that could be a sign that you don’t manage your money well, that you are heavily reliant on credit or that you miss repayments. Consequently, a bad credit score can be a sign that you are more of a risk if they were to lend money to you.

What is a bad credit score for a mortgage in the UK?

To get an indication of what is a bad credit score for a mortgage, it is essential to understand how credit scores work. Different credit reference agencies use different scoring systems. FICO credit scores are the most popular credit scores that mortgage lenders use and the most commonly used credit reference agencies are Experian, TransUnion and Equifax. With Experian, for example, a score of between 561 and 720 is considered to be a “poor” credit score. If your credit rating falls into this band, you may be accepted for a mortgage but you may have to pay higher than normal rates of interest on your repayments. If you have a credit score below 560, then your chances of getting accepted for a mortgage are significantly lower.

Can you still get a mortgage with a bad credit score?

It is still possible to get a mortgage if you have a bad credit score, especially if you are applying for a mortgage with a partner who has a good credit score. However, you may need to shop around when it comes to finding a mortgage. If you have a bad credit score, there are still lenders that will accept you for a mortgage, but it could take more work on your part to find the most suitable lender. It’s an excellent idea to use an affordability calculator to see how much you can afford for mortgage repayments and what size of mortgage you would be eligible for. Doing this groundwork will allow you to get a clear idea of precisely what scope of mortgages are available to you. Please note: mortgage calculators will give you an idea but will be subject to lenders’ criteria.

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How do CCJs, IVAs and bankruptcies impact on getting a mortgage?

County court judgements, individual voluntary arrangements and previous declarations of bankruptcy are extremely detrimental to your credit score. Consequently, if you have any of these in your history or any that are currently pending, it could have an extremely negative impact on your credit score and make it significantly more difficult to get a mortgage.

How to boost your credit score?

One of the most important ways to boost your credit score is to pay off some of your existing debts. If you can reduce the amount of debt that you have before you apply for a mortgage, then your credit score could receive a boost that will make it easier to secure the mortgage you want. The lower the utilisation rate of your available credit, the better. Always ensure that your bills are fully paid on time. Late payments are recorded on your credit file and have a negative impact on your credit rating. However, if you believe that there is a mistake on your credit file, check to have it rectified. You can also improve your credit score by registering on the electoral roll. You can do this whether you currently own a home, live in rented accommodation or social housing or live with your parents. Getting credit is substantially easier when you are registered.

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How to improve your chances of getting a mortgage if you have a bad credit score

Firstly, save up a bigger deposit. This might sound simple, but offering a larger down payment on your new home could increase your chance of acceptance with some lenders. This will demonstrate that you have the available funds to save up enough money for a sizeable deposit and reduce the total amount of the mortgage too. Furthermore, take a break from applying for credit for at least three months before you apply for your mortgage. Credit rejections negatively impact your credit score, so if you already have a poor score, you will not make it any worse. Get in touch with us at WIS Mortgages for free advice or use our

mortgage calculators today. As a mortgage is secured against your home/property, it may be repossessed if you do not keep up with the mortgage repayments.