Your credit score is one of the primary ways lenders evaluate your “loan worthiness.” That being said, while lenders will look at your credit, it is still possible to get a mortgage with a bad credit score. There are plenty of ways you can improve your credit and we’ll cover that in this article. We’ll also discuss how your credit score impacts what lenders are willing to lend you and what it means to have a good credit score.

What is a credit score? 

A credit score, sometimes known as a credit rating, is a three-digit number that is a representation of your reliability when it comes to borrowing and repaying money from lenders. The higher the number, the better your score. This means that if you have a higher credit score, you are more likely to be approved for credit, be it a mortgage, loan, or credit card.

What affects your credit score?

In simple terms, your credit score is based on how you have handled your finances in the past. Your score is determined using your credit report, which is created using information such as how you manage your bank accounts, information from the electoral register, details of any bankruptcies, and a record of any credit (mortgages, loans, overdrafts, etc.) you’ve held over the past six years.

How your credit score impacts your mortgage application

The ideal credit score for a mortgage application can vary depending on the lender. A low credit score is not always the result of poor credit repayment - sometimes it’s low because you have no credit history at all. If you have never taken out a loan or paid off an overdraft, your score will appear low as you have no history of paying money back reliably.

If you think your credit isn’t good enough to find the mortgage deal that suits your circumstances, we’d recommend you work on building credit as soon as possible to give you the best chance at securing a mortgage that suits your circumstances. 

Getting a mortgage with a low credit score

Getting a mortgage with a low credit score can be done, you just need to take steps to ensure that you can show examples to a lender of how you can responsibly manage your money. Because of this, your application may take longer than a standard application compared to someone with a higher credit score.

You may have a higher chance of being accepted for a mortgage with bad credit if you follow some of these steps before you apply:

  • Pay off outstanding debt

  • Make sure you pay all bills (rent, phone, utility) on time

  • Cancel any unused lines of credit and bank accounts

  • Register on the electoral roll

  • Check your credit report for any discrepancies or errors

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How to improve your credit

If you have a low credit score, or no credit history at all, we recommend you start building your credit score before you apply for a mortgage.  There are several things you can do to improve your credit score:

  • Ensure you’re on the electoral register

  • Don’t use payday loans and ‘pay-in-3’ services as these can have a negative impact on your credit score

  • Consider creating joint accounts if you live with a partner

How an adviser can help

Whether you have a good credit score or not, there are options available for getting your foot onto the property ladder. 

We always recommend speaking to a mortgage broker, even if you’re just starting out in your mortgage journey. While they can’t offer financial advice, they can offer guidance on the types of mortgages you could secure with your credit score. Get in touch for more information about securing a mortgage today.

Important information

Your home may be repossessed if you do not keep up repayments on your mortgage.

There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.

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