Anyone who considers buying a house is most likely to already come across the concept of credit score. It is one of the essential factors that loan and mortgage providers look into before signing their approvals. If you plan to secure a property and wonder what credit score you may need, this article is for you.
Understanding Credit Score
In the UK, banks, financial institutions, and lenders assign a credit score to individuals to assess their creditworthiness. The score also determines the type of interest charged on your loan and mortgage.
The credit rating is calculated based on your credit history and repayment history. The credit report contains your credit limits, current debt, credit accounts, and other information such as your loan balance and the credit report that you have filed.
Credit bureaus calculate your score based on your repayment history from the last twelve months.
How to Know Your Credit Score
Most banks and mortgage lenders require you to submit your credit report and score when applying for a mortgage or loan. However, to see your credit report, you must be over 18 years old, have a valid UK address, and be a citizen. If you fail to meet any of these requirements, you can still make an application. You can also apply directly to the credit bureaus.
There are several sources where you can request a credit report. The score is not the same across loan providers. It differs according to each credit reporting agency. Therefore, you should first check with your loan provider on what score they require.
What Is Considered a Good Credit Score in the UK?
The credit score varies according to the financial institutions, but the three main bureaus in the UK are Experian, Equifax, and TransUnion.
Here are their credit score ranges:
Fair Credit Score: 721 to 880
Good Credit Score: 881 to 960
Excellent Credit Score: 961 to 999
Fair Credit Score: 439 to 530
Good Credit Score: 531 to 670
Excellent Credit Score: 811 to 1,000
Fair Credit Score: 566 to 603
Good Credit Score: 604 to 627
Excellent Credit Score: 628 to 710
Benefits of Having a Good Credit Score in the UK
If you have fair, good, or excellent credit scores, you will likely experience these benefits:
- Your loan application and mortgage approval are easier.
- A good credit score can boost your chances of getting a loan at a lower interest rate.
- It can help you secure your home insurance policy at a lower premium rate.
- You will have easy access to better credit products, such as credit cards, personal loans, and car loans.
Disadvantages of Having Low Credit Score in the UK
- If you have a low credit score, you will not likely get a credit card and be subjected to a higher interest rate.
- If you want to apply for a loan, you must submit your credit report and score as one of the requirements.
- In the case of a property mortgage, you will need a higher deposit to secure your home loan.
The Best Way to Get a Good Credit Score
To have the best credit score in the UK, you have to make sure that you have a good credit history. You can do this by applying for a credit card and using it. Just make sure that you do not use it too much and pay on time to have a clean and clear credit report.
Conclusion
If you plan to apply for a mortgage soon, consider several factors when applying for a mortgage. Apart from your monthly income, it would be best if you have a good credit rating and you have to prepare a sizable down payment. These are the basic requirements to get you started on your journey of acquiring UK property.
If you want to apply for a mortgage, reach out to us for any concerns you may have. A Move Brokers offer a wide range of mortgage products and work hard to get the best deal to suit our clients’ needs. Contact us today.
This article is for information only and should not be seen as advice or a recommendation to act. As a mortgage is secured against your home or property, it may be repossessed if you do not keep up the mortgage repayments.