Your credit score is a three digit number that shows your ability to manage and repay money that you’ve borrowed. This is also called your ‘creditworthiness’. It’s an essential part of the mortgage application process.

If you’re applying for a mortgage, one of the first things a lender will want to know is your credit score, or credit rating. This three-digit number shows how reliable you are when it comes to repaying money. 

A strong credit score can increase your chances of getting a mortgage application approved, while a poor credit score can limit your choice of lenders and deals. 

Read on to see how your credit score is calculated, what’s a good score when applying for a mortgage, and how you can improve your score with a bit of financial housekeeping. 

How is your credit score calculated?

Lenders use credit reference agencies (also known as CRAs) to calculate a potential customer’s credit score.

There are three main CRAs in the UK:

To come up with the final number, a CRA will look at:

  • Your total debts: this is the money you’ve owed over your credit history and how much of it you’ve repaid.

  • Where you owe money: to both the CRA and the lender, different kinds of debt indicate larger or smaller risks. For example, taking out short-term high-interest payday loans is often a red flag. But something like a student loan is OK. Likewise, borrowing up to the limit on your credit card or using all of your overdraft looks a lot worse than borrowing and repaying a small amount each month.

  • Your repayment habits: do you make your payments on time and in full? Lenders are looking for reassurance that you’ll do the same with your future mortgage payments.

  • Your public records: to lenders, a history of County Court Judgements (CCJs), Individual Voluntary Agreements (IVAs) or declarations of bankruptcy don’t point to a reliable and responsible borrower. Though there’s still hope if this is you.

If you made any financial mistakes, the CRAs will take into account how long it’s been. Missed payments generally stay on your record for around seven years, but as time passes and you build up evidence of responsible borrowing, these mistakes can have less impact. 

Likewise, suddenly choosing to take out new cards just before you make your mortgage application will put a far bigger dent in your score than if you used those cards in the past and then cancelled them when you no longer needed to use them.    

What’s a good credit score when applying for a mortgage? 

It’s impossible to give an exact minimum credit score for a mortgage application, mainly because each credit reference agency uses a different scale. 

  • If your lender uses Experian, you’ll get a number between 0 and 999
  • If they go with Equifax, it’s 0 to 700.   
  • If they prefer to work with TransUnion, it’s 0 to 710

The only thing each CRA has in common is that higher numbers mean a better credit score. 

Once they’ve done the sums, your credit score will then be given a rating from very poor to excellent (or sometimes from 1–5, with 5 being the best).

  • For Experian: 961+ is excellent, 881+ is good, and 721+ is fair
  • For Equifax: 466+ is excellent, 420+ is good, and 380+ is fair
  • For TransUnion: 628+ is excellent, 604+ is good, and 566+ is fair

If you have an excellent credit score, your lender will be able to offer you their very best deals, probably allowing you to pay a smaller deposit or enjoy lower interest rates. 

A good score will still get you a wide choice of deals. However, if you have a fair or poor credit score, you’re probably looking at a higher interest rate and a larger deposit. Although there are mortgages for people with poor or very poor credit scores, you won’t have as many mortgage types to choose from, and there’s a higher chance of your application being rejected altogether. 

If you don’t have a good or excellent score, don’t worry. Your credit score is not the only thing that lenders look at. This can be particularly true for first time buyers, who simply haven’t had as long to build up a credit history as those who’ve already climbed a few rungs up the housing ladder. 

Other factors, like the type of house you want to buy, how long you’ve been in your job, and how much of your income your mortgage payments will take up (also known as the loan-to-income or LTV ratio), also play a part. 

A high credit score is beneficial, but it's not the only thing that determines whether your application will be successful. 

How can you improve your credit score? 

Your credit score is built up over time, and improving it is also a process. But if your score is poor or you need to be accepted for a mortgage as soon as possible, there are some steps you can take immediately:

Check your credit report for errors

Everyone makes mistakes, and there may be errors in your credit report that you can fix. If your report says that you missed a bill that you know you paid on time, contact the supplier, and they should be able to have their records changed so your credit score can be updated. 

Close the cards you don’t need

Fewer credit cards or store cards always look better on a credit report. Just be sure that you don’t get rid of them all – having a credit card that you borrow a small amount on and repay on time each month is one of the easiest ways to build up a good credit history over time. 

Close shared accounts you don’t need 

If you share an account with someone, you share their credit history, including any mistakes the other person has made with their repayments.

Pay off any debts you can

Easier said than done when you’re also saving for your deposit, but repaying what you owe will make a big difference to your report. If you can use this to get a better deal on your mortgage, you might well save money in the long run. 

Put your name on the electoral roll 

This gives you concrete proof of your current address, shows that you’re not moving around too much, and can act as a reassurance to your lender that you’ll be a reliable borrower. 

After taking these steps, improving your score (and so increasing the variety of mortgages you have to choose from) means behaving responsibly with your finances over several months and years. If you’d like to find out more about how to set yourself up for success, you can read more about improving your credit score here.

Can I still get a mortgage if I have a poor credit rating?

Usually, yes, although it might be hard to find one alone. Your chances of getting a mortgage with a poor credit score could improve if you use a mortgage broker like Habito. 

Whether you can get a mortgage ultimately depends on the nature of your debts and the reasons behind your poor credit history.

Missing a bill or two probably won’t have that big an impact on your credit score, and is unlikely to stop you getting a mortgage.

On the other hand, if your credit score is poor because of a CCJ, getting a mortgage might be a bit more of a struggle. A CCJ means that someone took you to court because they said you owed them money and you didn’t respond, meaning the court ordered you to repay. CCJs can stay on your record for years, and they can severely limit the mortgage options you have. 

If you’ve been declared bankrupt, you’ll have an even smaller choice of mortgages, and it’s unlikely that you’ll find one at all without going through a broker. 

If you have a poor credit rating, brace yourself that you may have to pay a much larger deposit (something around 35–40%) and a higher interest rate on your mortgage. Though if you continue to improve your credit history, the situation should hopefully improve as time goes by.

Find the right mortgage deal with Habito

Whatever your credit history, you don’t have to go it alone. At Habito we know the lenders that provide mortgages to borrowers with a poor credit history, so we can save you time by finding the deals that work for you. And the best bit? It’s totally free. Get started today or find out how much you can borrow with our mortgage calculator.