It can be difficult to get a mortgage if you have no credit history. Lenders want to know that you’re a low risk borrower, and one way to measure this is by looking at your credit score. A high credit score shows that you’ve been responsible with your money in the past, and lenders are more likely to give you a loan if you have a good score.
If you don't have any credit history, or you have a low credit score, fear not — you may still be able to get a mortgage. In this guide, we'll cover everything you need to know about mortgages and credit history, including how to go about getting a mortgage with no credit history.
The Topics Covered in this Article Are Listed Below:
Is It Difficult to Get a Mortgage Without a Credit History?
Some people may find it difficult to get a mortgage without a credit history, as many lenders prefer applications that are easy and straightforward. Some ways to show that you’ve been good with credit in the past include paying off credit cards, utility bills and phone or internet bills registered in your name on time. For this reason, it’s probably unlikely that you don’t have any credit record at all.
The reason why lenders may reject people with no credit history is that they have no information to go by that they can use to determine if the mortgage applicant is high or low risk – again it’s unlikely that you have no credit history if you’ve paid for things like phone bills or are registered on the electoral roll.
A poor credit score is one possible outcome if you have no prior or very little credit history. While most lenders place great importance on your credit score, others can consider lending to you even with a below average score. These lenders assess applications on a case-by-case basis and so are often less strict than high street lenders – however because of their flexibility they tend to offer products at higher rates and some may require a larger deposit.
At John Charcol, we’re an independent, specialist mortgage broker who can connect you with these adverse credit lenders when you have little credit history. Our expert team review your situation and advise on the best course of action for you. When it comes to mortgages, we have access to the whole market, giving you more choices to find the right lender for you.
Reasons Why You Might Not Have a Credit History
There are various reasons why someone may have no credit history:
You've Just Moved to the UK
The most obvious one is that you’ve just arrived in the UK and are yet to establish a credit score. This may be because you're a foreign national who’s recently moved here, or because you've been living abroad and have only recently returned. Even if you've been in the UK for a while but have never taken out any form of credit or haven't registered on the electoral roll, it's likely that you won't have an established history. You may have built a good credit history abroad, but it doesn't mean much to high-street lenders in the UK.
You've Just Turned 18 or Still Live at Your Parents
Given that the cost of living is expensive, it's not surprising that more young adults are opting to live with their parents for longer periods of time. Data from Statista shows that in 1997, 35% of young adults lived with their parents. By 2021, that number had risen to 42%. This can help save costs in the short term, but it can mean that young adults haven't established their credit records. They won't have any proof of who they are on the lender's radar yet, such as utility bills, so lenders won't be able to assess their credit rating. Likewise, if you've just turned 18, you're unlikely to have a credit history yet.
You're Not on the Electoral Roll
If you're not on the electoral roll, lenders may struggle to verify your identity. Being on the electoral roll can help you to avoid identity theft. It's quick and easy to register — simply head over to GOV.UK and search Register to Vote.
Your Credit History is Outdated
Another possible reason why you may have no credit history is if it's been a while since you've taken out credit. If it's been a few years since your last loan, overdraft or credit card, lenders won't be able to see an up-to-date record of how you manage your finances and so aren't able to assess your creditworthiness.
You Don't Have a Permanent or Fixed UK Address
If you don't have a permanent, fixed UK address — for instance, you're staying in temporary accommodation or moving around a lot — then lenders may be hesitant to loan you money. Without an address which they can verify and cross-check against the electoral roll and other records, it's easy for them to mistake you for someone else and this can damage their own reputation.
You Come from a Wealthy Background and Haven't Needed Credit in the Past
If you've been living with parental support and have never needed to take out any form of credit, then you're unlikely to have an established credit history. This is because lenders usually assess individuals based on their past borrowing behaviour — or lack thereof. So, it stands to reason that if you've never borrowed money in the past, lenders won't be able to tell how you're likely to behave when it comes to paying back any credit they may offer.
You've Recently Been Released from Prison
If you've recently been released from prison, then it's likely that you have a poor credit score. This is because lenders view anyone with a criminal record as high-risk and may be less inclined to lend money or offer credit facilities without first carrying out extensive checks. The fact that you may not have had a UK address while in prison may also put off lenders and make it more difficult for you to get a mortgage. If you’ve had a previous history of defaulting on payments, this may also negatively impact your credit score.
How Can I Build a Credit History?
Whatever your situation, rebuilding a credit history from scratch can seem like an intimidating task. But don't worry — here are a few tips and tricks to help you get started:
Register on the Electoral Roll
The easiest way to start building up your credit history is to register on the electoral roll. This will help you quickly prove your identity to lenders and make it much easier for them to assess you as a reliable borrower. In fact, your credit applications are more likely to be accepted if you’re registered on the electoral roll and your personal details are correct.
Open a Bank Account in the UK
Opening a bank account in the UK can also help you start to build up credit. A current account with an overdraft facility will demonstrate to lenders that you’re able to manage your money sensibly and pay off your debts in a timely fashion. It also shows that you have a regular income and are able to stay on top of your outgoings.
Take Out a Credit Card
If you're just starting out on building your credit history, it's a good idea to take out a credit card with a low limit that you can afford to pay off regularly. This will help you demonstrate that you can handle borrowing responsibly and improve your credit over time. Just remember to always make payments punctually.
Have Utility Bills in Your Name
Having an up-to-date utility bill in your name is also a great way to show lenders that you’re actively managing your finances and paying them on time.
If you're a young adult still living at home, a mobile phone contract in your own name might be a great place to start, as this is also a type of credit. Avoid late payments at all costs, as it could lead to defaults and even CCJs, which negatively impact your credit score.
Set Up Regular Subscription Payments
Having regular subscription payments — such as gym memberships or streaming services — and sticking to them will help you show lenders that you can manage credit in a responsible way. So, if there's any type of subscription service you could use, don't hesitate to set it up and start showing lenders that you can be trusted with their money. That said, make sure these are small and manageable payments.
How Does Having No Credit Score Affect Your Lending Criteria?
Having no credit score can make it difficult for lenders to assess your creditworthiness and decide whether you're a reliable borrower. Without any evidence of past borrowing, lenders are much less likely to approve your application. It could also mean less favourable interest rates and fees than someone with a responsible credit history would have access to.
Here are a few ways in which having no credit score can affect your borrowing criteria:
- Deposit amount – to make up for the risk, lenders may ask for a higher deposit. You probably won't qualify for a 10% deposit, so save up as much as you can before beginning the process
- Maximum borrowing – due to a decreased number of lenders available to consider your application, you may find that the maximum amount you could borrow is reduced compare to if you had a good credit score and more lenders available
- Interest rates – if you plan to get a mortgage with no credit, you may have to budget for interest rates that are higher than average — at first. Once you’ve made regular payments throughout your first deal period, talk to your broker aboutremortgaging to a cheaper deal
It's important to keep in mind that the type of mortgage product you're eligible for will also vary from lender to lender. You may struggle to find a lender that offers shared ownership and can cater to bad credit applicants for example.
What If I'm a First-Time Buyer with No Credit History?
If you're a first-time buyer and concerned about your credit history and how it can affect a mortgage application, the first thing you should do is obtain your credit record from a credit reference agency. You’ll probably find you have more on your credit history than your first thought – particularly if you’d paid for things like rent, or your phone bill.
Once you have you credit report, speak to a mortgage broker about your potential options. One of our experts can walk you through your next steps and advise you on what products may be available for your situation.
Which Lenders Will Consider My Application for a No Credit History Mortgage?
The required credit history and specific eligibility criteria will differ between lenders, so it’s helpful to talk to a specialist mortgage broker. It's typically more difficult to obtain mortgages from high street banks such as HSBC or Lloyds if you have no credit history. However, there are adverse credit lenders who may be willing to consider your application — even with a modest credit report.
If you reside in a foreign country and are looking to relocate back to the United Kingdom, there are creditors who will examine your application. Nevertheless, most of these lenders prefer it if you gain employment in the UK immediately or you have been living within the UK for a set period of time.
Some companies have very specific criteria that applicants must meet. For example, there are lenders that may require that applicants have been living in the UK for a minimum of 36 months. However, they may make an exception if the applicant has been temporarily posted overseas as part of their employment duties.
It's important to do your research and be aware of the criteria that each lender has for no credit history mortgages. At John Charcol, we do the heavy lifting for you. We know which lenders are likely to accept your application based on your own circumstances, and we can help you get an offer that suits your needs and budget.
How to Get a Mortgage with No Credit History
Getting a mortgage with no credit history – or a modest one - can be tricky, but it’s not impossible. It's important to have realistic expectations and remember that you may have to pay higher fees and interest rates than someone with an established credit record.
To increase your chances of approval, make sure that you’re as financially stable as possible. Save up for a larger deposit, reduce your debt-to-income ratio and be clear about the reasons why you have no credit history. Taking these steps will demonstrate to lenders that you’re a responsible borrower.
It's a good idea to speak with a specialist mortgage broker who can provide advice tailored to your individual needs. At John Charcol, we can guide you through the process while securing a mortgage with no credit history. We can also help you find the most competitive deal and make sure that you get the best mortgage for your situation. Simply contact us today on 0330 433 2927 or enquire online to get on the path to homeownership.
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