What Credit Score Is Needed to Buy a House?

Written on 12 January 2022 by Sophie Waugh

What Credit Score Is Needed to Buy a House?

When you take out a mortgage to buy a property in the UK, the lender assessing your application will look at your credit score. A poor or even fair credit score could result in the lender declining your application.

What’s a Credit Score?

A credit score is a 3 digit number that’s scored out of 1000 and is based on your financial behaviour and borrowing from the past 6 years.

Find Out Your Credit Score

You can find out your credit score by using a credit reference agency, such as Equifax, Experian or TransUnion. They grade your credit score from very poor to poor, good, very good and excellent.

It’s worth noting that lenders don’t use the credit score given to you by a credit reference agency. They put together their own credit score for your application at the DIP (Decision in Principle) stage of the mortgage application process. The lender uses the information credit reference agencies hold about you, your payment history and answers to questions they ask on your DIP to make up this credit score.

You can use credit reference agencies as a guideline should you want to try and improve your credit score. We explain ways you can try to improve your credit score below.

Alternatively, for more information on credit reference agency reports and when else your credit score may be checked, see Guide to Credit Scores from Sainsbury’s Bank - Money Matters.

Credit Score Needed for a Mortgage

There’s no set minimum credit score required for a mortgage. The score you need will vary from lender to lender based on their own systems. However, it’s unlikely your mortgage application will be accepted if a credit reference agency grades you below very good.

Even though a lender won’t use the grade given to you by a credit reference agency, they’re still useful for customers and good indicators of whereabouts your credit score is.

Lenders will put together your credit score at the DIP stage of the mortgage process. They won’t release which questions on the DIP give you the most points as that could enable some consumers to try and manipulate the system by attempting to secure more points in certain areas.

For a mortgage, you want your overall situation to be as appealable as possible to the lender. Lenders like reliability, stability and financial solvency as these traits indicate you’re more likely to keep up your mortgage repayments.

Ways to Improve Your Credit Score

Here are some things you can do to try and improve your credit score to get a mortgage:

  • Pay all bills on time – the lender needs to make sure you’re going to make your mortgage repayments and a history of late or missed bill payments indicates unreliability
  • Put all credit commitments onto direct debt as opposed to ad hoc payments – a history of direct debits that were taken on time highlights financial stability
  • Don’t use all available credit – i.e. don’t max out your credit cards as this suggests you push your finances to the limit
  • Register on the electoral roll - sometimes called the “voters roll”. Try to be registered on the electoral roll for at least 3 years before you apply for a mortgage as this makes it easier for lenders to trace your recent address history
  • Don’t use payday loans – the need to take out a payday loan indicates financial instability
  • Always pay rent on time – if you miss rent payments, you risk your landlord taking out a CCJ (county court judgement) which greatly reduces your chances of having a mortgage application approved

You Don’t Just Need a Great Credit Score for a Mortgage

Even if your credit score is excellent, a lender could still decide not to lend to you if you don’t meet their other criteria. For example, lenders don’t like it if you change jobs or addresses too frequently as this could indicate instability. Remaining in your home and job shows stability which may improve your lender’s credit score.

Furthermore, although your credit history is only ever the last 6 years, some lenders may ask if you’ve had credit problems like bankruptcy, CCJs, defaults, etc. in the past. Be aware of this and speak to your mortgage broker if you have any concerns. You can call us on 0330 433 2927 or make an enquiry.

Categories: General, Sophie Waugh