The role of credit scores in mortgage approval

Your credit score is a numerical rating of how you have handled your personal finances over the last six years, including the repayment of credit. Credit reference agencies hold this information and adjust your credit score based on reports they receive from third parties, such as energy companies, banks and other lenders.

There are three leading credit reference agencies and they all use a different rating system, so it is often best to look at the category rather than the number. For example, your credit score will be deemed very poor, poor, satisfactory, good, very good or excellent by most credit reference agencies, but not all.

Mortgage lenders consult your credit score to understand how you have previously managed your money and debt repayments. They cannot ensure you will repay the mortgage on time but they can get an idea of your likelihood of sticking to the agreement by looking at how you previously repaid debts.

A mortgage provider could reject a mortgage application based on the applicant’s credit score or specific events recorded on the credit report. In some cases, credit scores may affect the type of mortgage deal offered and they could affect the interest rate applied to the loan.

Did you know…

There is no benchmark credit score required to get approved for a mortgage. Each lender can apply its own eligibility criteria. The better mortgage deals and lowest interest rates are usually reserved for people with at least a good credit score. Yet, those with an unsatisfactory credit rating may still be able to get approved for a mortgage.

If you have a poor credit score, you may wish to speak with a mortgage broker specialising in securing “bad credit mortgages”. Our team has already helped many clients overcome their credit reports to secure the most suitable mortgage.

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There is no benchmark credit score required to get approved for a mortgage.

How to improve a credit score for mortgage approval

There are ways to improve your credit score for a mortgage application. Some strategies will improve your score swiftly, while others can take several months or longer. Here are five of the most common:

  1. Check your score for errors and have them removed
  2. Ensure you’re on the electoral register (this can improve your score)
  3. Work on paying off existing debts which may require a technique like the snowball method or avalanche method. However, be aware that some debt solutions, such as a DRO or IVA, can harm your score
  4. Use a monthly budget to monitor your finances and prevent future debts
  5. Close dormant bank accounts

For more personalised advice on improving your credit score and mortgage chances overall, consider booking a consultation with our trusted mortgage advisers. Despite an unsatisfactory credit history, we have a track record of helping people get a mortgage.