At Steel & Co we have an in-depth knowledge of the property market and the many factors to consider when you’re trying to secure a mortgage.
When you first start thinking about buying a house one of the first questions you ask yourself is ‘is my credit score good enough to secure a mortgage?'.
This is a good question because your credit rating gives lenders an idea of how good or bad of a borrower you would be. In addition to this, your credit score is placed in the context of your age & income.
As a general rule, you’re expected to become more financially stable as you age but it of course helps if you’ve had a consistent sense of stability throughout your life.
But there is not one single credit score measurement. This is down to the fact that there are three main credit reference agencies that mortgage lenders typically use, each of them having a different scoring system:
- Experian: 0-900
- Equifax: 0-700
- TransUnion: 0-710
As you can see, each company assesses your credit worthiness by using an individual metric but in all cases, the higher the number, the better.
It’s also worth noting that lenders aren’t confined to using one credit rating agency either, they can get a value from multiple agencies and use the middle value which they’ll then use to draw up their mortgage offering.
Any score considered to be ‘fair’ or above typically will allow you to secure a good mortgage deal with decent interest rates. The cutoff for a fair score is between 721-880 for Experian, 380-419 for Equifax, and 566-603 for TransUnion.
This doesn’t go to say that you’re ineligible for a mortgage if you fall below these margins, just that your scope is relatively narrower and the interest rates you’re offered won’t be as attractive.
Again, this is only one factor of your application that will be taken into consideration. Just because you have an excellent credit rating doesn’t guarantee that you’ll be offered an excellent deal, it just increases the likelihood, as other positive variables do.
A bad credit score is a value that is labelled as ‘very poor’ or ‘poor’ by the three separate credit score agencies. A very poor credit rating is a value that falls between 0-560 for Experian, 0-279 for Equifax, and 0-550 for TransUnion.
A credit score considered to be poor is distinguished as being between 561 - 720 for Experian, 280 - 379 for Equifax, and 551 – 565 for TransUnion. If you fall into one of these two categories then you may be seen as having adverse credit. Factors leading to this include things such as whether you’ve had a CCJ or IVA, as aforementioned, or if you’ve previously filed for bankruptcy.
You might think that having adverse credit rules you out of being accepted for a mortgage loan, but this is not always the case.
Although your options might be limited, relative to those who have an excellent credit score, we stress that there are lenders out there for whatever your financial situation is and a mortgage advisor such as Steel & Co. is even more valuable in these instances.
How can I improve my credit score?
There are a number of actions you can take that go towards improving your credit score. Firstly, it’s a good idea to ensure that you’re registered on the electoral roll. Even if you don’t plan on voting, being on the electoral roll helps lenders to confirm your name and address, it, therefore, reflects well on your credit rating.
Secondly, avoid applying for credit 6 months prior to making a mortgage application, a hard credit check is recorded on your report every time you apply for credit, making it easy for lenders to see.
Other things you can do to improve your credit score include;
- Be sure that you’re in the clear of any bank account overdrafts.
- paying off any outstanding debts and paying your bills on time will show them that you are a reliable borrower.
- don’t forget to keep checking your credit report to make sure that everything’s up to date.
This isn’t something that happens overnight, you must work to improve your credit rating over time. Missing payments will leave a mark on your report for 6 years,
for instance, so things like this need time. #
If you’ve been rejected for a mortgage application in the past for this reason then it may be that you simply applied to the wrong provider. Likewise, you may not have accounted for how a Help to Buy scheme could benefit you.
Mortgage advisers like the team at Steel & Co. are specialists in finding the lender that’s right for you and your individual needs.
In advance of any progress with the mortgage front, use our free tool – Check My File to review your current status. It’s free for the first 30 days, but you can cancel at any time.
If you’re ready to start looking for a mortgage, please call Steel & Co. on 01502 806996 or email
Think carefully before securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage.
We will receive a small commission from Check My File for any referrals.