Written by 1:59 pm Buying, Featured, First Time Buyer, Mortgages

Everything You Need To Know About Credit Scores

If you’re moving along the mortgage journey, there’s no doubt you will have heard about credit scores.

That three digit number that can often be the main stumbling block for many prospective homeowners. 

When it comes to your credit, issues range greatly and the good news is that a poor credit score doesn’t necessarily put a stop to your mortgage journey.

There are a wide variety of deals on the market, even for those who don’t have a squeaky clean credit score. So, if you think there is an opportunity to better your credit score and proceed with the borrowing process, here’s some of our best advice and guidance. 

What exactly is a credit score?

A credit score is a three digit number in your credit report that is usually reflective of the scoring systems your mortgage lender will use to determine whether you qualify for a mortgage. The higher the number, the higher your credit score. A higher number lowers your risk and indicates to lenders how you’ve managed your credit in the past.

A higher score usually means you will be viewed more favourably to lenders and may therefore be eligible to better deals and rates.

There are three main credit reference agencies in the UK – Experian, Equifax and Callcredit. Lenders may use one, two or all three to check your credit report so we would recommend checking with each of them and ensuring all the information is correct. You can access your score for free from these agencies via ClearScore and Noddle.

It’s important to note that even if you have an excellent credit score, it doesn’t mean you’ll be automatically be approved for a mortgage, as it is just an aspect of a lender’s wider criteria.

What is included in your credit report?

  • Your full name
  • Current address
  • Previous addresses
  • Financial associations (people you share a joint credit account with)
  • Your presence on the electoral roll 
  • Bankruptcies and court county judgments
  • How much you owe
  • Whether you have paid on time
  • The age of your credit accounts
  • Credit checks (the number of times a lender has performed a credit check)
  • Any fraudulent activity

What negatively affects your credit score?

Applying for credit

Everytime you apply for credit, a ‘hard’ search will be carried out on your credit report. This leaves a mark on your file. Several applications in a short space of time will have a negative impact. If you personally make your own credit report check (a ‘soft’ check), this will not negatively affect your report. 

Multiple Addresses

Lenders want to lend to people who are reliable and one way they check this reliability is by seeing how long you’ve lived at your address and if you’re on the electoral roll. If you frequently move address, this could negatively affect your credit score

The age of your accounts

Lenders also see stability through the age of your accounts.If you have a lot of newly opened bank accounts or credit facilities this could pull your credit score down. If you have had at least one of your credit accounts for several years, this will show that you have been trusted by another lender.

Missing debt

Missing a payment or paying late on a debt could harm your credit score. If you miss several payments, your lender may place your account into default. Defaulting on a debt has a much more negative impact than missing a payment. Missing and default payments will be marked on your credit report and will stay there for the maximum time of 6 years. You should repay any debt you have – even if the payment is late and it’s not for the full amount. Any effort is preferable.

Your credit limit

If you are using a large amount of your total available credit (or too much of one single credit source), this could harm your credit score. You should aim to use under 30%. For example, if your credit limit is £1000, you should aim to use less than £300 and spread it evenly across all your cards or accounts.

Public records

If you have a County Court Judgement, an Individual Voluntary Arrangement or bankruptcy against you, this becomes part of your credit report and may mean that fewer deals will be available to you. If this is the case, pay close attention and follow any restrictions that you were given, so as to avoid more serious consequences.

Errors on your report

Mistakes can happen but if you notice an error in your details, such as your name or address, some of your accounts may not appear on your credit report. We recommend taking a good look through your account to make sure everything adds up and if something is wrong, you can raise a dispute with the credit reference agency online. But please note, it can take a few weeks to get a response. 

No credit history

If you don’t have any credit agreements, lenders will have no information about your ability to borrow and repay credit. Even though there are no issues or ‘bad marks’ on your report, lenders could see you as a risk. If this is the case, a credit builder card could help you.

Are certain credit issues worse than others?

In the eyes of the lender – yes. Not all credit issues are equal. For example, most lenders are likely to look more favourably on a missed phone bill than bankruptcy. 

0-12 months1-2 years2-3 year3-4 years4+ years
Mortgage arrearsnomaybeyesyesyes
CCJsnonoyesyesyes
Defaultsmaybemaybeyesyesyes
Reposessionsnonononomaybe
Late paymentsyesyesyesyesyes
Debt management plannomaybeyesyesyes
IVAnonomaybeyesyes
Bankruptcynonononomaybe

Can you get a mortgage with bad credit? 

This is a very common question and the answer is, well… it depends. Some lenders will judge the severity of your credit issues and assess how you measure up when it comes to other eligibility and affordability criteria. If you have been previously been declined a mortgage based on your credit, we recommend focusing on rectifying any issues or errors carefully.

How to improve your credit rating for a mortgage – top tips

  • Check your credit reports will all three agencies and make sure all the information is accurate.
  • Dispute any inaccurate information. The agency has 28 days to address the incorrect details and during that time it will be marked as ‘disputed’ on your report and lenders can not rely on this. 
  • Reduce any debt you owe.
  • Pay all your bills on time and set up alerts for yourself if necessary
  • Don’t apply for or open credit accounts just for the sake of it.
  • Be aware that closing an account doesn’t make it disappear from your credit report.
  • Register on the electoral roll.
  • Consider a credit builder card, specifically if you have little credit history

If you need any further help or advice about credit scores and reports, contact PropertyPal Mortgages on 028 90 999 999 or email mortgages@propertypal.com 

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

PropertyPal Mortgages Ltd, registered in Northern Ireland at Unit 2D, Jennymount Business Park, North Derby Street, Belfast, BT15 3HN (NI632933). PropertyPal Mortgages Ltd is an Appointed Representative of PRIMIS Mortgage Network. PRIMIS Mortgage Network is a trading name of First Complete Ltd which is authorised and regulated by the Financial Conduct Authority for mortgages, protection insurance and general insurance products. The Financial Conduct Authority does not regulate some forms of Buy to Let.

PropertyPal Mortgages Ltd and First Complete Ltd are not responsible for Estate Agency or Legal services.

The guidance and/or advice contained within this website is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK.

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Last modified: 10/08/2022

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