If you’re just starting the home-buying process, you’ve probably read stories about just how much your credit score can influence your ability to get a mortgage. While it’s true that you need a good credit score for the best interest rates and loan terms, less-than-perfect credit doesn’t have to be a roadblock in your journey to owning a home.
By knowing the ins and outs of how your score can affect your mortgage rate, you can build and improve your credit before you apply. Before you continue, you can check your current credit score here.
There’s no magic number, but all credit scores sit within a range, such as “excellent” or “fair”. We’ve shown these ranges below. You’re much more likely to be approved for a mortgage if you have a credit score that is “good” or “excellent”. If your credit rating is “fair”, you should also be eligible for a mortgage provided the rest of your application is up to scratch.
However, if you have a “poor” or “very poor” credit score, you may find it difficult to get approved by a mortgage lender or will only be offered a loan with an extremely high interest rate and unfavourable terms.
Of course, your credit score is only one of the factors considered by lenders and even a perfect credit score can’t guarantee that you’ll be approved for a mortgage. If you don’t have a large enough deposit or are asking to borrow too large an amount, you’re unlikely to be approved regardless of your credit score.
The wider lending climate can also impact your chances of getting a loan. For example, lenders may be less likely to approve large mortgages during times of economic uncertainty, even if your credit score and overall application would likely be approved in more stable times.
There’s no such thing as a universal credit score and each credit reference agency uses its own rating system to determine your credit score. There are three major credit rating agencies used by lenders in the UK: Equifax, Experian and TransUnion. What is considered a good score with one agency won’t necessarily be the same with another (to make life more interesting).
Depending on your score, you’ll be classified as having excellent, very good, good, fair, poor or very poor credit:
| Agency | Score | Rating |
|---|---|---|
| Experian | 0–560 561–720 721–880 881–960 961–999 | Very poor Poor Fair Good Excellent |
| Equifax | 0–438 439–530 531–670 671–810 811–1,000 | Poor Fair Good Very good Excellent |
| TransUnion (formerly Callcredit) | 0–550 551–565 566–603 604–627 628–710 | 1: Very poor 2: Poor 3: Fair 4: Good 5: Excellent |
Your credit score is among the more important factors a lender considers before deciding whether to approve you for a mortgage, but it’s not the only factor. They’ll also consider the following when assessing your application:
Beyond helping to determine whether you’ll be able to get a mortgage, your credit score also plays a large role in the interest rate and payment terms you’ll ultimately be approved for. If your credit score is below average, lenders may factor in risk-based pricing when quoting your mortgage, when means you could end up paying more.
To offset the perceived risk of taking on a borrower with a low credit score, a lender may also increase the interest rate on a mortgage. For example, if you have an Experian credit score of 750, you might get a higher interest rate than someone with a credit score of 900, which could cost you tens of thousands more over the life of your mortgage.
If your score is in the zone of “poor” or “very poor”, then getting a parent, spouse or someone else with better credit to act as a guarantor for your loan could improve your chances of approval for a traditional mortgage. Otherwise, you may need to work on improving your credit before applying for a mortgage.
Credit scores are broken down into categories that can help you gauge the quality of your creditworthiness and how far you must go to improve it:
Yes, it’s definitely a good idea to check your credit report and credit rating before you apply for a mortgage. With your credit report and score in hand, you can:
If your credit isn’t where you’d like it to be to get you access to the lowest interest rates and best terms, there are a few tactics you can use to improve it before you apply for a mortgage:
| Response | Yorkshire and the Humber | West Midlands | Wales | South West | South East | Scotland | Northern Ireland | North West | North East | Greater London | East of England | East Midlands |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| No | 60% | 64.35% | 59.09% | 63.77% | 43.05% | 56.58% | 50% | 49.59% | 54.76% | 41.67% | 49.43% | 46.59% |
| Yes | 40% | 35.65% | 40.91% | 36.23% | 56.95% | 43.42% | 50% | 50.41% | 45.24% | 58.33% | 50.57% | 53.41% |
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