If you’re thinking about applying for a mortgage, you will likely have heard the term ‘credit score’ bounded around. You’ll likely have heard that you will need to have a ‘good’ credit score for lenders to consider your mortgage application. Your credit score can have a massive impact on how you live and the financial products that are available to you, but the reality is that not many people actually know what credit scores mean.
To help you decipher your credit score, the team here at Doctors Mortgages Online has put together this handy guide to credit scores, what they are, who decides them, and what influences them. Read on to find out everything you need to know.
What Is A Credit Score and Why Is It Important?
Essentially, your credit score is a three-digit number that indicates how reliable you are at borrowing and repaying money. Credit scores go from very poor to excellent. Your credit score is quite important because lenders will look at it before deciding to accept your application to borrow money. The better your credit score is, the more likely you will be accepted when applying for credit. If your credit score is poor, you might run into problems getting approved or only be offered products with a higher interest rate. Your credit score can change over time as your circumstances do.
Who Decides It?
Credit reference agencies determine your credit score. Each one collects information about you, which helps them determine your credit score. It’s important to note that your credit score could vary between agencies. This is because each one collects different information and has their own way of scoring.
These are the three main credit reference agencies in the UK:
- TransUnion
- Equifax
- Experian
Lenders will use specific credit reference agencies to determine your credit score. If your score is low with one agency, you might have a better chance of approval turning to a lender using another credit reference agency.
It’s also worth mentioning that when you apply for credit, lenders and service providers complete their own checks to determine your affordability for a loan so they can get a wider picture of your financial situation.
What Influences Credit Score?
There are lots of factors that go into determining your credit score. It’s a very careful balance. Credit reference agencies like to see that you can borrow money and pay it back on time. Equally, having a range of credit accounts can show that you can handle different types of credit effectively.
Other things that credit agencies look at when determining your credit score include, but are not limited to:
- The electoral roll
- Joint accounts
- How long you’ve lived at your address for
- Existing credit balances
- Overdrafts
- Gambling transactions
Making sure you pay your bills on time, managing your accounts well, limiting credit applications, and registering to vote can all help you boost your credit score.
Is Credit Score Important When Applying For A Mortgage?
There isn’t a specific credit score you need to get a mortgage, but generally, the higher your score, the more likely your application will be accepted. Sometimes, not having any credit history can affect a mortgage application as the lender can’t see proof that you have a good track record of borrowing and repayment.
Just because you don’t have a high credit score doesn’t mean you won’t be accepted for a mortgage. Lenders will also look at your affordability based on income and outgoings, debt-to-income ratio, personal details, and account details to determine if you’re eligible.
If you are worried that your credit score might hold you back from securing a mortgage, you don’t need to. Some lenders perform credit searches to determine eligibility. A credit search is where lenders manually score you based on a range of factors to get a broader picture of your financial situation. This might mean you could have more chance of being approved for a mortgage with a lender that uses credit searches instead of one that only uses credit scores.
Doctors Mortgages Online Is Here To Help
Your credit score is important, but securing a mortgage is still possible without an excellent one. As failed credit applications can have a detrimental effect on your credit score, it’s important that you get it right. This is where turning to Doctors Mortgages Online can help you. We have built up trusted relationships with lenders over the years and can help you (and them) understand your current circumstances to offer you the best mortgage product that will work for your unique needs. Get in touch with our friendly team today!
