What kind of credit score do you need to be a first-time home buyer

You’ve been saving for a deposit on a new home for years. You’ve been waiting for the right opportunity. It’s finally arrived. It’s just a matter of securing your mortgage. We will show you how to do it. We’ll go into how credit scores work and what kind of score you’ll need to buy a house.

What is a credit score?

Experian, Equifax, and TransUnion are the three credit reporting services that calculate the credit score.

Since these organisations are independent of one another, you’ll get different results from each. Experian will give you a score out of 999, while Equifax will give you a score out of 700.

You can receive a different score from each mortgage lender as they have their own credit scoring system, but this will have little bearing on your ability to borrow if the information they have on you is accurate.

As a general rule, the lower the mortgage deposit, the higher your credit score must be for lenders to approve your application.

What is a good credit score?

Every credit reporting agency has its own concept of a “healthy” credit score. A good score can differ from one credit agency to the next because different credit agencies use different rating systems. A score of 881-960 is considered decent by Experian, while a score of 961-999 is considered outstanding. Equifax considers a score of 420-465 to be fine and 466-700 to be outstanding. A credit score of 604-627 is considered decent by TransUnion (formerly known as Callcredit), while a score of 628-710 is considered excellent.

With a high score, lenders are more likely to see you as a low-risk borrower.

Want to know more?

Get in touch with of our mortgage saving experts today.

What credit score is needed to buy a house?

In the United Kingdom, there is no minimum credit score needed to purchase a home. If you’re buying a house with a mortgage, though, your credit score must be good enough for lenders to consider you for a loan.

If you want to buy a house, you’ll need a credit score that’s good enough to qualify for a mortgage. Your credit rating (also known as a credit score) is a snapshot of how you’ve handled money in the past, including previous spending, repayments, how much of your available credit you use regularly, how many payments you’ve skipped, and a variety of other variables. The higher your credit score, the better your chances of getting a better mortgage rate.

All mortgage companies have their own credit scoring system so they will give you more points if you are registered on the electoral roll and you get more points if you are working as a doctor or accountant in comparison to a builder or most other occupations. The lenders take into account around 150 different things when giving you a credit score and that differs massively from lender to lender. Some lenders do not even have a credit scoring system, but their rates are higher due to the higher risk.

There are three main credit reference agencies (CRAs) in the United Kingdom, each with its own scoring system. As a result, it’s a good idea to review your credit score with all three to see how you stack up. That way, you’ll know if you’ll be able to get a loan.

Since lenders’ risk appetites differ, the exact score you’ll need varies by lender. Some will need higher scores than others.

How can you protect your credit score during the COVID-19 (Coronavirus) Crisis?

Taking steps to protect your credit score is more crucial than ever during the coronavirus (COVID-19) crisis. This is particularly true if you plan to purchase a house.

As a result, it’s important to stay on top of your finances throughout this trying period. That means paying your bills on time and contacting lenders and service providers if you get into financial difficulties. Here are a few ideas to get you started:

  • Make a budget to see where you stand financially.
  • If you think you’ll have trouble paying your loan or credit cards, get in touch with them right away to discuss your options.
  • If you think you’ll be late paying your phone, electricity, or other service providers, let them know and work out a payment plan with them.

Please be aware that if you do come into financial difficulty and start to make lower payments or go into debt management plans etc then this will have an adverse effect on your credit score and your score will decrease so please think carefully when considering this. If you are in financial difficulties the best thing to do is always contact the lender to discuss your options.

Related Links

What is a bad credit score, and how will it affect my chances of getting a mortgage?

Your mortgage application is more likely to be denied if you have a poor credit score. If your credit score is lower than you anticipated, don’t think you’ll be turned down for a mortgage, but it does mean you may not be able to use a high street lender and may have to use a lender who can only be accessed by mortgage advisers, and you may end up paying a higher rate than most. We can advise you accordingly to get you back on track though.

Other considerations may be considered by lenders when assessing your mortgage application.

It will help if you have a strong track record with them as a client and if your income is consistent and sufficient to meet your monthly repayments. Having a substantial deposit, usually 10% or more of the property’s value, would also help you.

If you’ve recently had problems, you may be able to get a mortgage from a lender that specialises in lending to people with bad credit, so it’s a good idea to get professional guidance on many lenders might be able to help. It would be best if you also considered improving your credit score. Our advisers are specialists in these areas so why not give us a call and have a free chat about your options.

Can you still get a mortgage with a bad credit score or no credit history?

Another suggestion is to talk with lenders who specialise in buying houses with credit problems. Many mortgage lenders are willing to assist with difficult-to-place mortgages, including self-employed workers who cannot fulfil the requirements.

Your mortgage application is less likely to be successful if your credit rating has room for improvement or if you don’t have a history of borrowing. It would be best if you searched for a bad credit mortgage in addition to raising your credit score to increase your chances of qualifying.

Since this form of mortgage is considered a higher risk by lenders, the loan terms (particularly the interest rate) would likely be less favourable than if you have a good credit rating. Most of these lenders do not deal with the public directly and require you to use an independent mortgage adviser which we will be happy to assist.

What affects your credit score

Lenders consider a variety of variables in addition to your credit score when deciding whether or not to grant you a mortgage. They measure the risk of lending to you by looking at your wages, debt, and savings, as well as your credit score. If you have a strong track record with your bank and have been a consistent customer for a long time, this will help.

Your annual salary (or net profit or salary and dividends if self-employed), as well as your ability to make monthly payments, would be considered. The longer you’ve been in employment and paying your debts, the more likely it’ll be that you’ll be accepted for a mortgage.

Using a credit-building credit card is one way to increase your credit score. Spend a small sum on it, then pay it off completely each month. This would help you improve your credit score while also demonstrating to lenders that you only use a limited portion of the available credit – a crucial aspect that credit agencies consider. Please do not get a credit card and max it out as this will not help.

Want to know more?

For more details, call our Mortgage Saving Experts today.

How to boost my credit score

Making many individual changes to your financial life is a good way to increase your credit score. These changes show credit reference agencies that you can be trusted to repay what you borrow, leading to better interest rates from banks and other credit providers. Start with stuff you should do right away, such as registering on the electoral Role and reviewing your credit report for errors or fraud.

Staying on top of bills with text alerts and using a credit card to show you’re a good creditor are two moves you should take in the long run. The easiest way to ensure you pay your bills on time is set up direct debits for all of your debts such and loans and credit cards.

Things you can do right now to improve your credit rating

  1. Check your file for mistakes

To boost your credit score, make sure it isn’t being harmed by mistakes or fraud. If you notice something, contact the organisation that made a mistake. They’ll inform the credit reporting agencies, and your file will be updated.

  1. Break free from past financial partners

Remove all financial associations between you and someone whose low credit rating could be affecting you from your credit sheet. If you don’t notify all three credit bureaus that you’re no longer financially attached to that individual, their debts can have an impact on your credit score. On the other hand, being associated with a responsible creditor with a strong credit history will help you look good. If you have a joint account or debt with a bad creditor, you will not be able to financially disassociate yourself from them because you have joint debt.

  1. Register to vote

Sign up to the electoral register to help credit agencies confirm your personal details. It only takes a few minutes.

  1. Opt-in for text reminders

Activate your credit or debit card’s text reminders. Real-time alerts help you keep track of and better monitor your spending, as well as avoid fraud by flagging fraudulent activity immediately.

  1. Reach out to your lender

You don’t have to go it alone when it comes to improving your credit score. If you’re having trouble making credit card payments or have other financial problems, talk to your lender about it. They might be able to assist you in getting back on track by making recommendations such as adjusting due dates and setting up a Direct Debit to eliminate the hassle of remembering when to make repayments.

Know that a direct debit can only assist you if you have sufficient funds in your account. These strategies will assist you in paying off unpaid credit balances, which will improve your credit score.

Things you can do over time to raise your credit rating

Be prepared to make longer-term adjustments to your finances if you want to improve your credit rating.

First and foremost, do all you can to reduce your unpaid debt. This will show the credit bureaus that you’re trying to resolve any problems and boost your creditworthiness.

If possible, remain at the same address for an extended period of time. This demonstrates stability, which is something lenders appreciate.

Keep track of bills, fees, and contracts. It can’t be stressed enough. Make a note of your debit dates in your calendar to ensure you have enough money to cover your expenses and don’t go overdrawn or fall behind on your payments.

There are credit cards specifically designed to assist you in improving your credit score. Using one responsibly for a long time will help you improve your credit rating with credit bureaus.

The key to successfully using one is to remain within your credit limit and make at least the required minimum monthly payment. It would be better for you to use the card for items such as shopping or petrol and when you do use the card, transfer the money out of your bank account into a savings account.

Then at the end of the month you will have enough money in your savings account to pay the whole balance of the card when the statement comes in. If you don’t make at least the minimum payments on time and adhere to the credit limit at all times, your credit score can suffer – the exact opposite of your goal.

Things you should do to raise your credit rating

  • Pay the bills on time. Late and missed payments may have an impact on your credit score, so make sure you pay on time.
  • Pay more than the bare minimum. This would not only help you pay off your debt sooner, but it can also demonstrate to potential lenders that you are trustworthy.
  • Maintain a low credit card balance. To stop generating unmanageable debt, use your credit card on what you can afford to pay back.
  • Keep an eye on your credit report monthly. This will ensure that you are notified as soon as possible if there are any errors or fraudulent activities.

Things you shouldn’t do if you want a better credit rating

  • Make an excessive number of credit applications. Multiple lenders conducting credit checks at the same time will lower your credit score and increase your chances of being rejected.
  • Don’t take cash from your credit card
  • Don’t go over your agreed overdraft limit. An overdraft, including credit cards and personal loans, is a credit agreement, so don’t go over the limit.
  • Have no credit history to speak of. Lenders want to see that you’ve borrowed money in the past before lending to you now, which might sound a little unfair, but it’s just because they want to see that you’re a responsible borrower.

Mortgage Lenders

Want to know more?

For more details, call our Mortgage Saving Experts today.

Want to know more?

Get in touch with of our mortgage saving experts today to find out how we can help.

Get in touch