Do I Need a Credit Score to Buy a House?

There isn’t a minimum credit score you need to buy a house in the UK or get a mortgage – in fact, you don’t need much of a credit history at all. This is because some lenders don’t consider your credit score when assessing your application. Nonetheless, having a good credit score can significantly impact your ability to secure a mortgage and influence the terms of the loan.

In many countries, lenders use credit scores as one of the key factors to assess an individual's creditworthiness.

Your credit score will vary between lenders. The majority of top credit rating agencies have 5 categories for credit scores: excellent, good, fair, poor and very poor. Ultimately, the higher your credit score, the better the chance of getting the mortgage you need.

Here's how credit scores can affect the home buying process:

• Mortgage Approval

Lenders typically use credit scores to evaluate the risk of lending money. A higher credit score is often associated with lower risk, making it more likely for you to be approved for a mortgage.

• Interest Rates

A good credit score can help you qualify for lower interest rates on your mortgage. This can result in lower monthly payments and potentially significant savings over the life of the loan.

• Loan Terms

Credit scores can also influence the terms of the mortgage, including the deposit required and the type of mortgage you qualify for.

• Access to Certain Products and Mortgage Schemes

Higher LTV (loan-to-value) or mortgage schemes such as shared ownership mortgage have specific credit score requirements. A higher credit score can expand your eligibility for these programs.

It’s a good idea to check with the main credit reference agencies (Equifax, Experian, TransUnion) before applying for a mortgage to get a picture of your credit score.

However, even if you have no credit history there are still options for you.

No Credit Mortgages

There are mortgage options for people with no credit history - including some first-time buyers, returning expats and foreign nationals who can remain in the UK. These options are sometimes informally referred to as “no credit score mortgages” or “no credit mortgages”.

To explain how they work, we must first explain that a credit score is a 3 digit number that’s scored out of 1000 and based on your credit history – i.e. your borrowing and financial behaviour from the last 6 years.

There are 2 kinds of credit score you need to be aware of:

• The credit score provided by a credit reference agency
• The credit score assigned to your mortgage application by a lender

The credit scores provided by credit reference agencies - like Experian, Equifax or TransUnion – are useful for borrowers to see what level their credit score is and the overall state of their credit history. These scores don’t dictate whether a lender will give you a mortgage though. Lenders don’t tend to base their decisions solely on these credit scores. Instead, they assign their own credit score to your mortgage application after they’ve carried out a credit check and reviewed the information you’ve given to them.

What’s more, not all lenders use a credit scoring process. They still perform credit checks to see if you have any adverse credit – e.g. missed payments, CCJs (county court judgements) or arrears - but they don’t assign an actual credit score to your application. They underwrite applications manually which gives them the insight they need to judge them on a case-by-case basis, without attributing a certain credit score to either pass or fail or your application. These lenders offer mortgages that can be suitable for people with limited credit histories and are sometimes called “no credit score mortgages” or “no credit mortgages”.

Credit Scores for First-Time Buyers

If you’re a first-time buyer who has only recently started looking into purchasing a property, you may not have actively built up your credit history yet – but that doesn’t always mean you don’t have one.

If you’re on the electoral roll at your current or previous addresses, have a current account and haven’t moved around too much in the last 3 years, then you may have a better credit profile than you first thought.

It’s also worth bearing in mind that even if you do have a very limited credit history, your low credit score may be due to this rather than the existence of any adverse credit. Adverse credit is often a genuine problem for most lenders, whereas a lack of credit history simply means you need a lender that understands and accepts that this is normal for many first-time buyers.

We usually recommend you first look at lenders that do credit score and perform a credit check with a soft footprint, just in case your credit history is sufficient for their purposes. A soft footprint means that only you and the company performing the search can see they did a search, which in turn means it shouldn’t affect your credit profile with other providers. Credit checks typically show up on credit files and too many can negatively affect your credit score. If this kind of lender still declines your application, then you should consider looking at lenders that don’t have a credit score.

As we mentioned earlier, there are lenders that only perform credit checks to see if you have any adverse credit, rather than attribute a credit score to your application. They consider applications on a case-by-case basis which can sometimes help you obtain a mortgage if you have a limited credit history.

Nonetheless, we always recommend you try to build up your credit history and improve your credit score before taking out a mortgage, as this will give you access to more lenders, and therefore better deals. Building up your credit history will typically take at least 6 months. It may mean you have to wait a little longer before you purchase your first home, but you’ll be paying your mortgage for 20+ years so it’s worth aiming to secure the best deal possible.

We go through some tips on how to improve your credit score a little later on.

Expats and Foreign Nationals

Your overseas credit history doesn’t count when you buy a property in the UK. However, it may still be possible to take out a UK mortgage if you’re putting down a significant deposit, have a good job with a steady income and don’t want to borrow beyond your means.

You’ll need a lender that doesn’t score your credit history or require that you’ve been living in the UK for a minimum time - although many expat lenders require that you have a UK bank account to make mortgage payments from.

It’s unlikely you’d be able to secure a mortgage in this niche without the help of a specialist broker.

As a broker that specialises in expat mortgages, we’re able to look at your situation and help you put together a good case for why someone should lend to you. We know how to increase your chances of getting a mortgage with no credit history and which lenders offer “no credit score mortgages” for expats and foreign nationals.

How to Improve Your Credit Score

Although you can get a mortgage with no credit history, it’s worth – if it’s possible - trying to improve your credit score and overall credit profile. This is especially true if the reason you have no credit history and a low credit score is because you’re a first-time buyer.

To give yourself the best chance of getting a mortgage, you can:

• Make sure you’re registered on the voters roll
• Always pay rent and bills on time
• Set-up direct debits for regular bills, like your phone, gas, electricity, etc.
• Make small purchases on a credit card which you always pay off every month

Next Steps: Check Your Credit Score and Ask About Your Options

Before you start a mortgage application, it's advisable to check your credit report and score. If your credit score needs improvement, you might consider taking steps to boost it, such as paying bills on time, reducing outstanding debt and addressing any errors on your credit report.

Even if you have a less-than-perfect credit score, some lenders may still work with you, but you may face higher interest rates or other less favourable terms. John Charcol and our experienced mortgage advisers can provide insights into your specific situation and help you understand your options based on your credit history and financial profile.

For more ways to improve your credit score see our post: What Credit Score Is Needed to Buy a House?