How important is a good credit score when applying for a mortgage in the UK?

Thinking of obtaining a mortgage? If you are, then you may also have to consider how well your credit rating or credit score is doing. A good credit score could make all the difference between getting your mortgage application approved or rejected. This article explains the importance of having a good credit score when applying for a mortgage in London and the UK. Read on to discover how.

How credit score works in UK

A credit score acts like a mirror of your financial activity and capacity. This is useful information to any bank or lender. Especially when it comes to a mortgage where your financial history and creditworthiness has to be proven. A lender will take a close look at your credit score and assess your track record of financial dealings. This could be your monthly bill payments right up to your credit card payments.

Overdue credit payments, court judgements relating to financial discredit, inconsistency in settling credit card payments, exceeding your credit limit, all of these can be factors that bring on a negative image that ulitimately results in a low credit score. Having a good credit score would mean that the financial transactions you carry out are within the norms, which in turn interprets to a good report and works out to a positive credit score. Maintaining a good credit score in the UK definitely has its advantages. Getting a mortgage approved is among those advantages.

 How do I know what my credit score is?

To check your credit score in the UK, it is usually done through credit reference agencies, known as CRAs for short. In the UK there are 3 such agencies, and they are:

  • Experian
  • Equifax
  • Transunion

These agencies will have information on your credit history. By checking your report on credit rating, you will be able to ascertain how good your chances are when it comes to obtaining a mortgage or getting it approved. The history of your borrowings will not only provide insight into your credit score, but you will be able to understand what lenders and banks look for when they lend money to borrowers. If your credit score is not all that impressive, going by this report you will be able to improve your credit rating/score by changing some of your transactional habits and make it a more ‘lender friendly’ credit score.

The credit score report will typically provide the following information:

  • Your name, address and date of birth
  • Any money you may be owing to lenders
  • If your home has been repossessed
  • Existing joint loans, mortgages or overdrafts
  • Any missed payments (This applies to unpaid utility bills as well)
  • Court Judgements
  • If you have been declared bankrupt

Improving my credit score

The CRA report may differ slightly from agency to agency, but if your credit score is not looking good, you may have to come up with ways to improve it. Recovering from a bad credit score takes time. And you may need to make marked changes in the way you make transactions and handle your finances.

Settling outstanding debt is a good way to begin. This will reflect positively on your credit rating, which in turn will be updated in the agency’s records as well. Indicating a stable lifestyle is another way to improve your credit rating in the UK. Living at one address for a lengthy period of time is a good indicator to increase your credibility. Paying off your utility bills and credit card outstandings on time are a sure shot way of increasing your credit score. These payments will be ready reckoner to a bank or a lender of your capability to pay off pending payments. And of course, will reflect in the agency reports as well.

Conclusion

Improving and maintaining a good credit score is everything especially if you’re looking to obtain a mortgage and purchase a property. But to proceed to that stage, you need to be on top when it comes to your credit score. These pointers are great to keep in mind when you are ready to take on a mortgage. Remember a good credit score means a lot especially when it’s a mortgage you are eagerly seeking to utilise. For further information on how to manage your mortgage, speak to our expert team at BVS Mortgages and Financial Services, they will provide you with guidance and support so that you can access better deals. We wish you good luck and a healthy credit score! 

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

* Approved by the Openwork Partnership on 22 August 2023

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