Can I Get A Mortgage With My Credit Rating?
Getting a mortgage is probably going to be the biggest investment that you ever make, therefore it makes perfect sense to get the best possible deal that you can. This is especially important if you’re not sure that you can successfully apply for one with the credit rating that you have. If it’s your first time getting a mortgage, this can be especially daunting as there are many factors to consider, so let’s break the mortgage application process down piece by piece to answer the question: Can I get a mortgage with my credit rating?
What Credit Score Do I Need To Get A Mortgage?
So, you may be wondering what credit score do I need to get a mortgage? That’s an easy question with a not-very-simple answer. This is because there is more than one credit rating system. Different lenders use different factors to decide whether you are an acceptable risk to loan money to. To complicate things further, there are a multitude of different mortgage deals and providers, which is why it’s crucial that you get proper mortgage advice before signing on the dotted line.
It goes without saying that the better your credit score is, the more mortgage packages and lenders will be available for you to choose from. It’s the same principle as applying for a credit card just on a bigger scale; the better your credit score is, the more favourable the credit card deals are and the amount of interest that is added overall is lower.
But what is classed as a good score if there are multiple credit rating systems?
There are three main credit rating systems used in the UK; Experian, Equifax and TransUnion and they all use their own credit scoring scale. So, while a credit score of 600 may be considered poor with one lender, it may be excellent for one of the others
Let’s look at the scoring systems used by the big three credit scoring providers.
961 - 999
881 - 960
721 - 880
561 - 720
0 - 560
Equifax Credit Scoring Scale (Uk Average Score – Fair (380 In The Old Score)
Equifax recently revamped their scoring system. They previously worked on a scale of 0 -700 and this has now changed to 0 -1,000, and all scores from the old system have been adjusted and transferred to the new one without any penalties. The new average UK score now sits in the ‘fair’ bracket, just as the old average score of 380 did.
467 – 700
420 – 466
367 – 419
279 – 366
0 - 278
811 – 1,000
671 – 810
531 – 670
439 – 530
0 – 438
Transunion Credit Scoring Scale (Uk Average Score – Fair)
Transunion was formerly known as Callcredit and they offer the UK’s only live credit scoring system. They are also the only credit score provider to assign a letter to each bracket of credit score.
781 – 850
720 – 780
658 – 719
601 – 657
300 - 600
How Do I Find Out My Credit Score?
Remember, there isn’t one universal credit reporting agency, there are three, so you should obtain a credit report from each one of them. You can do this by contacting them directly. By law, Equifax, Experian, and TransUnion have to provide you with a free copy of your credit report once every 12 months, but even if you have to pay for them, they only cost a few pounds. Those few pounds could potentially save you thousands and even get you a better mortgage deal.
Can I Get A Mortgage If I Have A Poor Credit Score?
Let’s dispel one myth straight away; there is no such thing as a credit ‘blacklist.’ This is because, as we’ve discovered above, there isn’t one universal credit scoring system and different lenders use different scales to base their decisions on. The trouble is you won’t know which credit scoring agency your chosen mortgage provider is using.
It is entirely possible to get a mortgage if you have a poor credit score – you just have to prepare yourself for the fact that the options presented to you will not be as favourable as the ones you would have with a stronger credit score. You may only be offered one or two options to choose from, and, unfortunately, chances are that the monthly repayment figures will be much higher, or the lender will require a larger deposit from you before they consider you for eligibility. But don’t let that discourage you; remember, what one creditor sees as risky, another will be perfectly fine with.
PBS Mortgage Solutions’ accredited financial experts will go through every possible avenue open to you and advise you on the best course of action to take, irrespective of your credit score.
How Can I Improve My Credit Score For A Mortgage?
There are a number of things that you can do to improve your credit score to ensure that you get the best possible mortgage offers:
1. Pay Your Bills On Time
This sounds obvious, but nothing will make you more attractive to lenders than being a reliable payer.
2. Register To Vote
This helps to confirm your identity and address.
3. Keep Your Amount Of Credit Low
Try to keep credit card usage below 25% and don’t apply for credit for approximately 6 months before you apply for a mortgage.
4. Check Your Credit Reports Thoroughly
You’d be amazed how this can put a rocket behind your credit score. Check for any entries that you don’t recognise (you may inadvertently have someone else’s bad credit attributed to your name) and for any entries that have expired and shouldn’t be on there anymore (CCJs and Bankruptcies). If you see anything like this, question them immediately and get them removed.
5. Put A Bigger Deposit Down
Needless to say, the bigger the deposit you can put down, the smaller your mortgage will be, so try to save as much as possible before you take the plunge and start looking for a mortgage.
An interest-only mortgage is an attractive proposition for a first-time buyer as they keep the monthly repayments low. However, it’s important to understand that they are rarely a long-term solution. If, for example, you stay on an interest-only mortgage for the duration of your deal, the full value of the property would still be owed at the end.
Still the most popular form of mortgage. This is when you pay for the value of the property and the accrued interest at the same time. The amount owed gradually decreases during the term of your repayment mortgage, and the property is paid off in full at the end.
This is when funding for a mortgage comes from an alternate source to the usual channels (i.e a high street bank or building society). If a specialist mortgage is the only route available to you, you will find that the investor will have a much stricter set of requirements for you to meet before they are prepared to hand over any monies.
A re-mortgage is where you have an existing mortgage and wish to change it, and this could be for a variety of reasons. This may happen because the mortgage you currently have is reaching the end of its terms and conditions and you need to find a replacement, or it could be that market conditions have changed, and your payments have increased. Re-mortgaging can also happen when you have a change in personal circumstances. For example, you may have built up your credit score since taking out your initial mortgage and now wish to transfer it to a mortgage that gives you more favourable terms.
Also known as a business mortgage, a commercial mortgage is a way to let business owners borrow the money they need to purchase land or property for their business.
A tracker mortgage means that your payments will rise and fall with the Bank of England base rate, so if there is a sudden spike in this figure, your monthly repayments will shoot up accordingly. Before you take out a tracker mortgage, make sure that you will be able to afford the monthly payments if this were to happen, or you could be at risk of losing your home if you don’t keep up the repayments.
This will keep your mortgage payments at one set rate for up to 10 years. Once the fixed-rate period has ended, your mortgage will switch to a standard variable rate (SVR) with that supplier, so this is when most people choose to search for an alternate mortgage deal as the SVR will usually be much higher than the fixed rate you are used to paying
Discounted Variable-Rate Mortgages
Discounted variable-rate mortgages usually last between two and five years and are a fixed fee set just below your lenders SVR. However, if your lender's SVR increases, so will your mortgage payments.
Offset mortgages are linked to your savings account. The idea behind them is, that instead of earning interest on your savings, you pay less interest on your mortgage instead. It goes without saying that this mortgage option is usually only effective if you have substantial savings to offset in the first place.
First-Time Buyer Mortgages
There are numerous grants and schemes available to first-time buyers to help them get their first step on the property ladder. Some of these schemes include up to a 30% discount on the price of a new-build home, while some lenders will only require a 5% cash deposit as opposed to the usual 25% required when buying a property. You may also escape paying the stamp duty tax which is normally an additional cost that you pay before taking ownership of your new property. However, if you already own another property, then there are conditions that will make you ineligible for most of these schemes, so it’s best to check before applying for a first time buyer mortgage.
Buy-to-let mortgages are when you buy a property with the intention of renting it out. This may be a residential property or a commercial business unit, but the principle remains the same. Usually, with a buy-to-let mortgage, you will have to show evidence of having additional savings in case something goes wrong with the property. By law, you must keep your property to a habitable standard for your tenants, so buy-to-let mortgage lenders will want to see that you have the funds available to do this.
Equity Release Mortgages
An equity release mortgage is when you wish to withdraw some of the value in your property as a lump sum. For example, you may have bought your property for £250,000 and its current market value is now £320,000. This means that there is £70,000 worth of equity in your property. You may wish to use £20,000 of that equity to do home improvements, buy a car, put a deposit down on another property, or go on holiday. Your monthly mortgage payments will then increase in line with how much equity you have taken out.
Discuss Your Credit Rating With Pbs Mortgage Solutions
Just because your credit rating may not be the strongest, that doesn’t necessarily mean that you won’t pass for a mortgage. There are so many different mortgage solutions available from a variety of lenders that passing for a mortgage may be easier than you realise.
PBS Mortgage Solutions have the knowledge and expertise to advise and guide you toward a mortgage package solution that fits your finances and allows you to comfortably own your dream home. Get in touch for a more in-depth conversation.
To speak to a member of our team right away, give us a call on 0776 5738 796.