Your credit score reflects your reliability when it comes to borrowing money. Credit reference bureaus will assign you a credit score depending on how you manage your repayments properly. For example, paying your debts on time will improve your credit score, while paying late will damage it.
Your credit score will differ depending on the credit reference bureau you chose since each has its scoring system. Nevertheless, your credit file will continue to function in the very same manner. The main purpose of maintaining a credit score is so that potential creditors can verify your credit history before lending any cash to you.
IS THERE A MINIMUM CREDIT SCORE REQUIRED FOR A MORTGAGE?
There is no minimum credit score required to obtain a mortgage. It is a widely held misconception, qualifying for a mortgage is feasible regardless of the credit score. Creditors often use your credit score as a component of their mortgage appraisal. If you have a poor credit score, your application is great; chances are your mortgage feasibility won’t be adversely affected.
You can boost the lenders’ perception of you with a good credit score by suggesting that you are a responsible borrower who can certainly repay your loans on time. But, unfortunately, different lenders have their peculiar scoring algorithms for determining a decent credit score. In other words, the same credit score may be regarded as excellent by one creditor but downtrodden by another.
CREDIT REFERENCE AGENCIES USED BY CREDITORS
Most mortgage creditors use the following credit reference agencies;
- Experian
- Equifax
- TransUnion
Lenders may assess borrowers using only one or a blend of credit reference agencies. Therefore, it is critical to review each credit report because they may differ because credit agencies all utilize distinct scoring algorithms.
GOOD CREDIT SCORES FOR OBTAINING A MORTGAGE
No precise score assures you a mortgage because credit bureaus employ distinct scoring systems. Despite this, having a good score can improve your chances.
A score of 420-465 is regarded as good for Equifax, whereas 881-960 is deemed good for Experian. According to TransUnion, a credit score of 604-627 denotes a good credit score. Credit scores above this level are regarded as excellent.
Having the highest possible credit score does not guarantee you a mortgage. Furthermore, a poor credit score does not preclude you from qualifying. Lenders consider a lot of things, which we’ll go over next.
IMPROVING YOUR CREDIT SCORE FOR A MORTGAGE
The following steps are sure to help you improve your credit score;
- Make certain that you are listed on the electoral roll.
- Examine your credit reports for mistakes or nefarious practices.
- Pay your bills promptly, ideally with a monthly bank transfer.
- Confirm your address history is correct, particularly if you’ve recently relocated.
- Check if you have any CCJs that need to be satisfied.
- Try not to rely on loans or overdrafts.
- Do not submit applications to several mortgage lenders.
CONCLUSION
Having a low credit score doesn’t imply that you are ineligible to qualify for a mortgage loan; however, it won’t be simple. Lenders tend to consider more than just the credit score. Some applicants have never used credit, so while this can result in a very poor score, it signifies that they haven’t borrowed much money before.
Acknowledging this to a lender and providing compelling evidence may help your request. You can also improve your chances of success if you possess a payment of at least 15%.
We are a mortgage broker Leicester who is always here to help.