WHAT IS A GOOD CREDIT SCORE FOR A MORTGAGE UK?

What Credit Score Is Considered Good?

When the borrowers apply for the mortgage, the providers prefer to look at their financial history, particularly the repayment to earlier loans. They do this to judge how much risk is involved in funding these people. Or, it also means they can borrow how much sum on a mortgage?

Thus, the better the credit score, borrowers have more chances of guaranteed approval plus the mortgage interest rates. A good credit score allows an individual to secure a mortgage.

There is no fixed credit score placed by the lenders to allow the mortgage to the borrowers. They use different credit reference agencies to know the credit score of individual borrowers. In the UK, the primary agencies are Equifax, Experian and TransUnion.

These agencies have diverse scoring scales. For instance, Experian considers a good credit score between the ranges of 721-880, Equifax puts individuals in this category that scores 380-419 and finally, TransUnion (Callcredit) gives scores between 566 and 603 in the good category.

How my credit score is calculated?

Even though credit scores matter a lot in mortgage approval, but still, they do not have an alone influence on the application. The ratings from the agencies are only the pointers to judge your trustworthiness.

Credit scores are the part of your overall credit report (it is the profile that carries detailed borrowing history of the past six years of a person) in which several factors are taken into consideration, such as:

• Previous loan applications
• Any CCJ (County Court Judgement)
• Any active debts
• Overdraft limit, if any
• Defaults, IVA (Individual Voluntary Arrangement), bankruptcy
• The Electoral Roll

How Much Impact Credit Score has on Mortgage Rates?

Your credit score has the direct impact on your eligibility for a mortgage rate. For instance, if your credit score is the nearly excellent rating, then qualifying for a mortgage becomes merely a formality. Most importantly, you can avail a reasonable mortgage rate such as 3.75% (an example) for the fixed-rate duration.

If your credit score falls into either fair or bad, then the rates automatically increase like 5%. The digit seems very little to see, but in reality, it proves very large for a more extended period. The better the credit score, the lower mortgage rates are there for the borrowers.

For more clarity, please take a look at the below table:

How Credit Score Shape the Mortgage Interest Rates
Credit Ratings	Status of Interest Rates
Excellent	You have the best chance of availing mortgage on ideal rates.
Good	There is not much impact on the mortgage rates, as they are reasonable.
Fair	The rates get increased slightly than the best possible lowest prices.
Bad	There is an obvious chance of high-interest rate than usual.
Very Poor	Mortgage approval may be available but on very high-interest rates.

*We have not mentioned the credit scores because different banks and lenders consider either of the three credit reference agencies.

You can see that your financial performance has the straight effect on your mortgage deal, particularly the interest rates.

What if my credit score is low? Can I get a mortgage?

A low credit score does bring a lot of limitations in availing a mortgage. But it does not become the reason for application rejected.

As mentioned above, a poor credit score invites high-interest rates or require a bigger deposit. Sometimes, it can be manageable, but many people find it very difficult to handle the obligations. Therefore, the mortgage advisors in the UK always suggest borrowers find ways where they can improve their credit scores.

A small guide to boosting your credit score

If you have the time to wait for buying a home, then it would be better if you do all the possible activities to improve your credit scores. Or, if your score is at the borderline, which means it can get better, then you can go for a mortgage, pay the monthly instalment on time and upgrade your rating.

Here are some tips to follow:

• Never delay all the pending balances for a longer duration. Pay them as soon as possible and get a good credit score before the mortgage
• Regularly analyse your credit report and point out all the measures where there is a possibility of improvement. Try to get free copy of your credit report from any of the three credit bureaus and fix the errors.
• Try not to do over check your credit score, as it leaves wrong footprints on to your credit profile.
• Reduce your credit card utilisation as low as it can be. It is one of the primary factors that can contribute to credit scores.
• Sometimes there is an error in the credit reports, and many people have been suffering from this. It will be best for you to recheck your report to ensure is there not any mistake from the agency end. If there is an error, point it out at the earliest.

Before seeking for the mortgage, you should know that a good credit score does not guarantee the approval, but it maintains significance. Besides, mortgage for bad credit people with good income are also available, and they will need more deposit from your pocket.

For the right guidance, you can have the professional advice of our mortgage experts. They will guide you thoroughly and help in getting the delay-free and hassle-free approval.