Over the years we have become accustomed to people thinking their score should either mean they have the pick of the lenders or they will struggle to get a mortgage depending on their credit score. The aim of this post is to bust that myth.
Rule 1 of Mortgage club – Ignore the score!
What is a credit score?
I wont bore you with a big long explanation, a simple answer should be enough for this post.
A credit score is the score provided to you by the credit agency you are checking with – The credit agencies are Equifax, Experian and Transunion although some of these providers release their data to third party companies such as Credit Karma and Clear Score. All of these credit agencies score your application using their own algorithm. It has no bearing on your mortgage application in any way, shape or form.
Mortgage lenders do credit score I hear you say…
That is true. A lot of lenders do credit score, certainly the more mainstream lenders do. But they take the information from your credit report(s) – by information we mean things like your accounts, the balances, the limits, the payment history etc. We also mean things like the number of credit checks you have had carried out, any defaults or CCJs or any information provided from the insolvency service.
But unlike the credit agencies, they also take into account other factors not included on your credit report. This can be things like – income, expenditure, number of children, length of time in your job and even things as simple as whether or not you have a landline phone number!
Mortgage lenders combine all of this information and mix it together scoring your application based on their own scoring system. That algorithm may even change over time so that they can apply more or less weighting to certain aspects they deem more important or how much business they want to bring in it at a particular time.
Although we may say things like “your application has failed credit score”, it does not actually mean you credit score is not enough. It means your application as a whole did not pass the score needed for that particular lender.
I should ignore the score then?
I think the nicest way to view a credit score is an overall indication of your credit report. The not so nice way would be to say it is as useful as a glass hammer. We never look at the score when we ask for your report, we use it to see your payments history as that is the most important part of your credit report. =
It is not uncommon for people to see their credit score and think they can or can not get a mortgage because of it or that you will have the pick of the lenders because of a good score. Unfortunately it is not this simple. But you should not get too hung up on the score regardless of whether it is good or bad.
In short – Ignore the score! We certainly do. Look at your payment history, does it look good or messy? The messier it appears, the less likely you are to pass with a credit scoring lenders. In any event, we are used to looking at credit reports with low scores and plenty of red markers, it does not mean you can not get a mortgage. Come and give us a try and lets see if we can help you.