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Mortgage credit score

Credit score, mortgages, and credit reference agencies

In the UK, there are three major credit reference agencies supplying mortgage lenders with the information they require to make lending decisions on applicants.

These credit agencies gather data from financial services companies every time you take a loan, arrange a credit card, or apply for a financial services product. Data is normally held on file covering six years.

The information held includes addresses from which you made applications, how much you have borrowed, what the payments were, and whether you paid those payments on time.

Your record will contain details of anyone you are, or have been, financially associated with.

Credit reference agencies will give you access to your credit file if requested.

View our video – Mortgage Credit Score

Understanding your credit file

Your file may show a rating in the form of a number. Whilst many clients feel this rating number can guarantee them a mortgage, this is not the case.

The score on your credit file or even the condition of your credit file does not dictate whether a particular lender will advance you a mortgage.

It is important therefore to understand how lenders’ credit scoring differs from credit rating.

Understanding credit score

Most lenders, when considering you for a mortgage, put together a credit score where they will give you a certain number of points for each aspect of your application, for example, the higher your level of deposit, the more points you might get.

The higher your personal income is compared to the loan you want, the more points that may be available.

The better your financial history, again, the more points that may be available.

You could also get points for your age and your occupation, you will be point-rated on your financial liabilities, the size of your family, and whether or not your spouse is working. All these points go together to create a financial decision from the lender.

With many lenders, the credit score cannot be overridden and if you do not pass the credit score, they will simply not lend and there is no appeal to this.

How lenders generate scores and what points are gained for, each aspect of your profile is information that lenders keep confidential.

If you are applying for a mortgage, one factor that can work against you is if the lender sees a number of other credit references applied to your record over a short period of time, in other words, evidence that you are shopping around.

A client shopping around suggests to a lender that there may be issues in obtaining a mortgage and this could lead to a decline.

We always recommend that you only deal with one independent mortgage broker at a time, avoiding unnecessary credit scores on your record.

To keep your credit file clean, always ensure that any financial liabilities you have are paid regularly and within the terms and conditions of the arrangement.

Where possible, put payments on direct debit mandates and be particularly careful with mobile telephone accounts which are often missed and cause a problem.

It is sensible to make payments early in the month so that if something is missed, you still have the opportunity to make the payment before the end of the month.

The simplest and smoothest way to obtain a mortgage is to use the services of an independent mortgage broker.