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Improve credit rating for mortgage application

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Feb 8, 2023

Improve your credit rating for a mortgage application

A high credit rating is essential for getting a mortgage. If your credit score is high, you are considered low-risk and credit-worthy. Therefore, you will have a wider pool of potential lenders willing to give you a mortgage and a good credit score also enables you to negotiate for a lower interest rate and favourable mortgage payment terms.

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Credit score rating for a mortgage in the UK

There are three major credit reference agencies in the UK — Experian, Equifax, and TransUnion. Each collects your credit history and summarises it into a credit score which is known as your credit file. When you apply for a mortgage, the lender checks one or multiple credit reference agencies for your credit report and score. They then assess your rating to determine if you are credit-worthy.

Each credit reference agency that store your personal details has different scoring ranges for your credit file as follows:

  • Experian: 0-999
  • Equifax: 0-1000
  • TransUnion: 300-850

Due to the variance in the overall range, a high score for one agency may be medium range in a different credit bureau. Below is a breakdown of the score ratings by the various credit bureaus.

Experian credit scores

  • Very poor – 0-560
  • Poor – 561-720
  • Fair – 712-880
  • Good – 881-960
  • Excellent – 961-999

Equifax credit scores

  • Poor – Below 580
  • Fair – 580-669
  • Good – 670-739
  • Very good – 740-799
  • Excellent – 800-1000

TransUnion credit scores

  • Very poor – 300-600
  • Poor – 601-657
  • Fair – 658-719
  • Good – 720-780
  • Excellent – 781-850

TransUnion also ranks excellent, good, fair, poor and very poor credit score categories as A, B, C, D,

and E, respectively.

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How to improve your credit rating for a mortgage application

There is no golden credit score rating; however, the higher, the better. The score can fluctuate from time to time. As long as it is within an acceptable range, you will still be able to secure a mortgage.

You get the best credit card loans and mortgages at competitive interest rates with an excellent score. A good credit score should get you most loans and mortgages, but the interest rates may not be as good as an excellent score. With a fair score, the interest rates will be within the market range, but your mortgage amount will not be high.

If you have a poor or very poor score range, your options are bad credit and subprime mortgages. Even with those, you will have to prove your ability to afford the loan beyond a reasonable doubt.

Tips for improving your credit rating for a mortgage

  1. Review your credit report and score

The first step to improving your credit rating is understanding where your credit status stands. Start by downloading your credit report and checking your credit score on all three credit bureaus. Review each report carefully.

Check if there are any variances in the reports or inaccuracies. Slight variances in the credit reports are allowable as your mortgage lender may have reported specific issues with one bureau but not the rest. Also, the bureaus update your credit report and score on different schedules.

Identify any credit issues that lowered your score. Some, such as a few missed payments, may be easy to outweigh by keeping up with your payments for current loans. However, others, such as bankruptcy, repossession, and CCJs, stay on your record for six years.

Your credit report will show the following:

  • Identity Information, e.g., name, address, national insurance number, and date of birth. Ensure that they are entered correctly. Confirm that your name is spelt correctly and your national insurance number is correct. Also, confirm that your current employment information shows on the report.
  • Credit accounts. In this section, lenders report the accounts you have established with them, including the type of credit account, e.g., mortgage, auto loan, and credit card loans, your loan amount, credit limit, and payment history. In this section, the lenders indicate if you made payments on time and are in good standing. Look out for loans or credit accounts you did not sign up for. It is an indication of fraudulent activity on your account. Also, check that the account names, account balances, and payment history are accurately recorded. Contact the credit bureau to raise and resolve any disputes.
  • Credit enquiries. These are enquiries made by lenders on your credit report. Soft enquiries do not leave a footprint on your credit report, but hard enquiries do. The report will show the name of the lender that conducted the hard enquiry. Confirm that you have applied for credit with the lenders indicated on the report. Otherwise, there might have been an attempted incidence of fraud.
  • Public records and collections. The credit bureaus also collect information from county and state courts. Therefore, this section shows bankruptcies, repossessions, CCJS, etc.
  1. Be strategic about applying for a mortgage

You do not want too many lenders conducting hard enquiries on your credit status, which harms your report. Instead, work with a mortgage specialist to identify the most suitable mortgage lenders for you and the ones you can easily meet their eligibility criteria.

Then prepare your paperwork and submit your application around the same time. Credit bureaus have a 45-day window within which all the hard enquiries are recorded as one entry. The window period enables you to shop for a suitable mortgage without compromising your credit score.

  1. Pay your current debts timely 

Your payment history is a crucial factor in your credit rating. Late payments lower your credit score and damage your standing with your lenders. Therefore, you must pay your debts on time to boost your credit score.

  1. Pay your bills on time

Aside from credit, your bill payments also reflect in your credit report and impact your credit score. Therefore, pay them on time. If you tend to forget, find ways of automating their payment.

For example, you may set up a standing order for fixed monthly bills or automated electronic payments from your checking account. Or, set a reminder a few days before the payment date. Do whatever it takes to ensure no late bills or debt payments at least 12 months before your mortgage application. It helps prove your creditworthiness.

  1. Improve your financial status

If you find it challenging to make your bill and debt payments on time due to limited finances, find ways to improve your financial status. Begin by assessing your income versus expenditure.

Eliminate non-essential spending, e.g., eating out often, entertainment, multiple streaming services, and subscriptions you no longer use. You could also consider downgrading your lifestyle. For instance, move to a house with lower rent, use public transport instead of taxi apps, hold off on your annual vacation, etc.

Come up with a budget and adhere to it. If possible, get a second job or new income stream and channel that money towards debt management and paying your bills. Or, take up extra hours at work to earn overtime. Build on your savings, emergency reserves, and investments. They enable you to pass the affordability test when applying for a mortgage.

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  1. Avoid taking up new large credit 

A large credit account will significantly increase your overall credit balance on your credit report. Potential lenders may shy away from giving you a mortgage if you are already paying another big loan, as they doubt if you can keep up with both payments. It also increases your debt-to-income ratio.

  1. Register on the electoral roll

Registering on the electoral roll can positively impact your credit score. It makes it easy for lenders to confirm your identity. Identity verification is a crucial part of the mortgage approval process to prevent issues of fraud and identity theft. Therefore, the more reliable your identity verification information is, the more confidence lenders will have to give you money.

  1. Review your financial links

Most people do not realise that if they have financial links with other people, the other person’s credit score and history influence theirs. For instance, if you have a joint account with a spouse or are a guarantor for a loved one’s loan, their credit score will affect yours. Therefore, request to see their credit report and score to establish whether it is compromising yours. If possible, cut down the financial link by closing the joint account.

  1. Apply for smaller, manageable loans

If you do not have a pre-existing credit history or your credit score is very poor, consider taking up smaller loans that you can easily manage and pay on time to boost your credit score.

For example, you can take a secured credit card loan. These types of loans work such that you put aside a specific amount of money in a specific account. The money serves as collateral, and you get a credit limit based on the security deposit. If you miss your payments, the lender takes the deposit amount to cover your credit balance. However, if you keep up with payments and pay off the loan as agreed, the lender will refund the deposit amount and report to the credit bureau that you are in good standing.

You can also consider a credit builder loan. These loans sound counterintuitive as you do not access the loan amount until you have paid it off. However, they are an excellent opportunity to build a credit history or improve your credit score if it is very poor. They can also be used as a savings scheme for your mortgage deposit.

  1.  Consolidate your credit card debt

If you have multiple credit cards, consolidating the debt lowers your interest rate and also reduces the number of credit accounts on your credit report. Take a personal loan to pay off all the credit cards so that you are left to pay the personal loan only. You will now have one monthly payment to make, which is more manageable.

  1. Avoid closing all your credit accounts

While you want to minimise your overall credit balance and credit account, having no credit account can hurt your credit score. Lenders want to see a long history of well-managed debt. The longer a credit account has been in your credit report, the better, as long as you have been paying your debt on time. It shows potential lenders that you are consistent and reliable.

  1. Save for the deposit

Having the right amount for the deposit does not influence your credit score, but it affects your creditworthiness. It also influences your mortgage amount limit. Therefore, as you take measures to build your credit score, open a savings account and put money aside towards your mortgage deposit.

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Consult with a mortgage specialist to improve your credit score

Improving your credit score can take time. However, with the right strategy, you can build it faster and set yourself up to qualify for a mortgage. If you are unsure of the best strategy for you to build your credit score, consult with a mortgage specialist. They will help you to identify the right type of mortgage for you. They also understand the eligibility criteria of different mortgage lenders and will guide you to meet them.


What is meant by credit rating?

Credit rating refers to a person’s creditworthiness depending on their credit history and income. It determines a person’s ability to pay for a loan.

What is a good credit rating?

There is no golden number for credit rating. However, different credit bureaus provide credit score ranges, including excellent, good, fair, poor, and very poor. The range within which your credit score falls determines your eligibility for loans, credit limit, and interest rate. Ultimately, the higher your credit score, the better your chances of getting a mortgage and the lower your interest rate.

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