Normally when it comes to buying a house, most of us will apply for a mortgage in order to borrow the amount needed to buy the house. And time and time again we’ll ask ‘Is my credit score good enough for a mortgage?’ or ‘What credit score is needed to buy a house?’ and the truth is, there’s no set answer, but there are a number of ways to check your credit score and improve it.
Your Credit Report
When you find a lender you want to apply for a mortgage with, they’ll ask you if it’s OK to carry out a credit check before they decide whether or not they will let you borrow the money. When you apply for credit, the lender will make sure you are who you say you are and live where you say you live. They’ll also check if you’re likely to be able to make the repayments set by checking your income, the amount you’re borrowing and your credit history by reviewing your credit report.
Your credit report basically shows the lender your name, address and how you’ve managed credit in the past and how you’re managing credit currently. It also records any negative information including if and when you’ve ever missed a repayment, court judgments, bankruptcy and ‘defaults’ – any agreements you broke on your credit contract.
So, what credit score is needed to buy a house and how can it be improved? Well, if your credit report shows you always make your repayments on time, this will improve your score and you’ll be likely to be able to apply for credit again and get a better deal with lower interest rates.
Your credit score is calculated by Experian, Equifax and Callcredit. You can check your credit score by visiting Experian’s free credit score checker.
What Credit Score Is Needed to Buy a House
There is no minimum credit score required to buy a house in the UK. Your credit score is determined by assessing how much money you’ve borrowed and when and if you’ve paid it back on time. The minimum credit score needed to buy a house is determined by the lender upon reviewing your report. Each lender will have their own guidelines and when they will accept an application for a mortgage, they may have very different minimum scores required, different risk tolerance levels and have their own criterias they require applicants to meet.
There are a number of different credit score models and you may have a different score on each model. However, if you have a good credit score on one model, you’re likely to have a good credit score on another.
How to Improve Your Credit Score
There are a number of factors you should focus on when it comes to improving your credit score. There are not external factors you can take that will improve your score, however to ensure you score improves over time, you will need to make sure that you:
- Make your repayments on time, every time
- Reduce your balances and do not continue to spend
- Try to pay off in full each time
Some credit companies will have a number of score factors and risk factors they base your credit score on. Late payments will have the biggest effect on your credit score and will reduce this significantly. Any late payments made will stay on your report for seven years and can have detrimental impacts on your future applications for borrowing money, whether it be for a car or a house.
Paying off all your credit cards in full and closing your credit cards is not the ideal way to improve your score. You will need a continuous history of credit, therefore you should continue to borrow and spend small amounts regularly ensuring you are always able to make your repayments. You need to be able to prove that you can borrow money responsibly. So next time you wonder what credit score is needed to buy a house, remember it isn’t as simple as a number! Speak to a mortgage broker to get a better idea of what mortgage you’re able to apply for.