So, you’ve given up countless weekends to the property search, the Rightmove tab is still open as you read this, you’ve appointed a mortgage advisor and now, you’re looking to get that all important mortgage deal. 

Which, whether you realise it or not, is where your credit score comes in. When you first apply for a mortgage, lenders will consider several factors, including your income, outgoings and credit score. Your credit score is often something of a silent partner in the house buying process – that is, unless your credit history throws up an obstacle. 

A good credit score is an indicator to lenders that you are responsible with your money, therefore it’s likely to get you a better mortgage deal. While a lower credit score indicates that you may be more of a risk in the eyes of lenders, which will impact the mortgage deals available to you – and may mean you’re not accepted for a mortgage at all. 

Here, we look in a little more detail at what credit score you need for a mortgage. 

What’s a good credit score for a mortgage?

The ‘good credit score’ vs. ‘bad credit score’ axis is defined slightly differently by each credit reference agency and lender. Usually, the score ranges from 300 at the lower end to 900+ at the excellent end of the scale.

Yes, mortgage lenders will be looking for a higher credit score. But, if yours is slightly lower, they’re also likely to consider your broader financial situation. Ultimately, they’re assessing what you can afford, so if you can show that you could make your monthly mortgage repayments, with flexibility if your situation changed or rates increased, this will also play into securing a good deal. 

At Keebo, we have our own points system, which we’ve designed to better reflect your financial picture, for a credit score that you (and your mortgage lender) can really learn from. 

What’s a low credit score for a mortgage?

As mentioned, we can’t put an exact number on a low credit score for a mortgage, as each lender has a slightly different take on this. What we can say is that, if yours does come out at the lower end of the scale, there are steps you can take to boost your credit score.

A low credit score will likely mean higher interest rates on your mortgage and you’ll need a larger deposit, too. So, it’s worth putting some time into improving your credit score before you apply for a mortgage. 

Why might you be refused a mortgage?

As you might expect, outstanding loans, bills, or failing to make credit repayments on time will negatively affect your credit score. The lesser known factor is that if you have little or no credit history, your credit score will also be low. This impacts your chances of getting a mortgage deal – not because you’re bad with money, but because there’s no proof that you’re good.

Traditional credit reference agencies are a closed book, so it can be tricky to find out what exactly is impacting your low credit score and therefore your ability to get a mortgage deal. It’s worth asking to see your credit report and running through it with your financial advisor if you are unsure what the blocker might be. 

At Keebo, we use open banking to consider your income, outgoings and savings – all factors that mortgage lenders will also be looking at – when calculating your credit score. The process is transparent, so you can more easily identify where and how you can improve your score to secure that mortgage deal.

Will a mortgage in principle affect your credit score?

A mortgage in principle – also known as an agreement in principle or a decision in principle (as if there wasn’t enough jargon in the house buying process already) – is an estimate from the lender of what you’re likely to be able to borrow. 

Usually, they run what’s called a ‘soft’ credit check for a mortgage in principle, which will not affect your credit score. A ‘hard’ credit check, on the other hand, will leave a footprint on your credit file that other lenders can see and could affect your credit score in the future. It’s perfectly fine to ask which type of credit check they are running when you apply for a mortgage in principle. 

What is it good for? A mortgage in principle proves to estate agents and sellers that you’re serious about buying and what you can afford. It’s also a great way to get an early indicator of whether your credit score is up to scratch for a mortgage. 

How does a mortgage affect your credit score?

When you first get a mortgage, there will be a slight dip in your credit score. The reason for this is it’s usually the largest amount of credit you’ll have ever secured and initially there’s no repayment history to show that you can manage the debt responsibly. 

(We realise that might not sound like a cause for celebration but, don’t worry, you can still go ahead and open the ‘we just bought a house’ champagne).

As with other credit you might have, the way you manage it makes all the difference. Once you start making the mortgage repayments, providing that you pay them on time and in full, your mortgage should actually help to boost your credit score. 

How to improve your credit score for a mortgage?

There are a number of ways you can boost your credit score, from paying your credit card in full each month, to managing your spending and saving habits. Here are a few we summarised earlier. [link]

One of our main aims at Keebo is helping you to build better credit. Sign up to the waitlist to get ahead of the game. And, good luck with the house buying!