We often get people calling up/emailing us with their credit score and asking if we can help. One of the things we occasionally get asked is “what is the minimum credit score needed for a mortgage?” – The answer is probably zero, but lets expand on it and give some examples.
In 10 years as a broker this year, I think the lowest credit score I have seen is about 75, but I have a phrase – “Ignore the score” – Your credit score really is completely worthless. There are of course minimum scores needed with the high street lenders (more about that below), but it is not the credit score they are using.
There are 3 credit agencies:
All of these credit agencies give you a score, and each one of them uses their own calculation to come up with that score – I think that is quite an important thing to remember.
Your score may look poor on one, fair on another and good on the last – that could be due to the weighting they put on various things or it could be that a Default you have only shows on one report but not the others.
Typical Credit Scores for Mortgage applications
I go back to the whole “Ignore the score” comment. I never look at peoples credit scores, it plays no part in the research we do. What we do is to get a copy of the full credit report and to go through that, we are looking at the payment history, the balances, Default dates, any use of Pay Day loans etc.
What do Mortgage lenders do?
There are 2 types of mortgage lenders, those who credit score and those who credit check. There is a lot of information on that link, but there is a brief overview below.
Credit scoring lenders – These are typically the banks and larger building societies you seen on the high street. They get a lot of applications and one way to filter out some of those is to score the application. This is where the minimum credit scores do come in to play.
As mentioned earlier, they do not use your credit score for this. The easiest way to describe it is to say they take the information from your credit report, this will be things like your commitments, your payment history, the balances etc and combine it with the information on your application (but not on the credit report), your income for example. They then combine all of this to score your application.
Every lender will have their own algorithm for this calculation, so you can find you may be declined by one lender but accepted with another.
Some mortgage lenders may only use one credit agency to check you against, others will use 2 and some will use all 3, I think this also echos why credit scores are not used – your scores will inevitably differ from agency to agency, so then you would have to argue which score is used.
Non credit scoring lenders – These are typically the smaller building societies and the specialist lenders. When they do a credit check, they are ultimately checking you against a criteria table. Do you (and your credit report) fit criteria or not?
How do Mortgage Success work?
As mentioned above, we obtain a copy of your report and we work our way through it summarising any problems. We then compare that against lenders criteria and talk it through with our account managers before making a recommendation to you.
We find that the best report is one called CheckMyFile as this has all 3 credit reports on. Below is part of a credit report from checkmyfile – this shows the same commitment for the same customer on the 3 different credit agencies, you can see how it gets reported differently on all 3.
Minimum Credit Score summary
As you have probably guessed, we do not put much weight on your credit score.
The important part is your payment history. That is the information we need when we are researching your application. If by the end of this post you take nothing else from it, just remember there is minimum credit score needed and to “Ignore the score”.
If you would like to talk through your options, we are adverse specialists with plenty of Mortgage Success stories, please do feel free to get in touch.