Nope. There’s no credit check needed for a mortgage in principle.
Later on, when it’s time to actually apply for a mortgage, you might have to do a credit check. But you’ll need to give your express consent before that can happen, so it will never be a surprise.
Credit checks: the difference between an MIP and an AIP
Mortgage in principle – no credit check
You’ll have to give a few details about your income, savings, and deposit amount. Then your lender or broker will automatically calculate an estimate of the mortgage you could get. They might ask you about your credit commitments, but they don’t investigate your personal credit history at MIP stage.
Agreement in principle – credit check
When you apply to a lender for an agreement in principle, they’ll check your credit score to see how you’ve managed debt before – and decide how risky it would be for them to lend you money.
If they see you’ve been managing your money well, they’ll be more likely to offer you a mortgage in principle. But if they see lots of missed bills and unpaid debts in your record, that might put them off giving you a mortgage loan.
Credit scores: a quick refresher
A credit report is a record of how you’ve managed your money. It shows things like your debts, whether you’ve paid bills on time, your store cards, where you’ve applied for loans, when you paid those loans back… you get the picture.
It comes with a credit score: that’s all the information in your report, summarised in one number.
Before you apply for an agreement in principle, check your credit report yourself first. You can do this with Experian, Equifax and TransUnion (previously CallCredit) – the agencies who work out your credit score in the UK. They each calculate it a little differently, so it’s worth getting a report from all three.
Once you get it, work through this credit score checklist to make sure your score is as good as it can be before you apply to lenders.
Do credit searches affect my credit rating?
There are two types of credit searches:
- Soft search: a cursory check that won’t affect your credit score
- Hard search: a deeper dive into your credit history, that shows up on your report and might lower your score
For agreements in principle, it’s worth checking if your lender will use a hard or soft search in advance. If they use a hard search, it’ll show up on your record as a full mortgage application. One or two of these won’t affect your score too badly, but several over a short amount of time can really drag it down – as it’ll look like you’ve been rejected many times in a row. Not great.
When it comes to a full mortgage application, lenders need to dig deeper into your finances – that’s almost always a hard search, but one you can’t really avoid.
You can check your own score as often as you like. It won’t affect your credit rating.