How does a credit score affect a mortgage application?
- DLi Mortgages
- Nov 18, 2024
- 3 min read
Your credit score is an important factor of your mortgage application, so it’s important to try and make sure it is as high as possible.
What is a credit score?
A credit score is a three-digit number, which indicates to mortgage lenders and other credit providers your likely credit behaviour. This allows them to determine the level of risk when lending to you, and consequently how much they are willing to lend and at what interest rate.
How is your credit score calculated?
There are three main credit reference agencies (CRAs) in the UK: Experian, Equifax and TransUnion. Although they all score slightly differently, they will consider:
Your payment history, noting any missed payments or other credit issues
Amount owed compared to the total level of credit available to you
The type and mix of credit you utilise, assessing factors like length of term and whether secured or unsecured
The number of recent credit applications you have made which have resulted in a ‘hard search’ on your credit file
The total length of your credit history
Lenders use different CRAs to perform credit checks, and whilst they are likely to be similar, it’s important to be aware of your score with each of them so you are not tripped up when applying for a mortgage.
What is a ‘good’ credit score?
There is no single number which is a ‘good’ credit score as mortgage lenders consider a range of factors. To make matters worse, each of the three main CRAs use a different scoring scale.
Experian scores are between 0 and 999, with Halifax suggesting a score of 721 or higher is ‘good’
Equifax scores are between 0 and 1,000, with Halifax suggesting a score of 531 or higher is ‘good’
TransUnion scores are between 0 and 710, with Halifax suggesting a score of 566 or higher is ‘OK’
Halifax was one of the UK’s largest mortgage lenders in 2023.
How can I improve my credit score?
There are several steps you can take to improve your credit score:
Register on the electoral roll at your current address
Build up a credit history if you don’t already have one, but don’t apply for too much credit in a short space of time
Keep your utilisation of available credit below 25% - for example if you have credit card with a £1,000 limit, don’t use more than £250
Pay your accounts in full and on time each month
Limit the number of credit applications you make - these will result in a ‘hard search’ on your file
Where can I check my credit score?
You can sign up with each of the three CRAs directly to view your score with them and what information they have recorded for you. As mortgage lenders use different providers, you can also sign up for service such a Check My File, which provides a report from all three providers.
To sign up for a free 30-day trial with Check My File, please click the link below. You can cancel within the free trial period, or choose to continue with the service for a fee of £14.99 per month.* **
Your home may be repossessed if you do not keep up repayments on your mortgage.
Approved by The Openwork Partnership on 18/11/2024.
*Monthly fee of £14.99 applies after your free 30-day trial. You can cancel at any time online, or contact us by phone or email to request this. The free 30-day trial applies only to new customers aged 18 years or over who are living in the UK. The 30-day free trial period starts when you register. If we are unable to verify your identity online when you register, we may ask you to provide information to us which may delay access to your credit report.
**The service promoted here is not part of The Openwork Partnership offering. The Openwork Partnership Limited accept no responsibility for this aspect of our business. We will receive commission should you proceed with the referral.
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