How your credit score can affect your chances of getting a mortgage

Essentially a credit score is an assessment of your credit worthiness and every lender bases their score on a different set of criteria.

How your credit score can affect your chances of getting a mortgage

Alastair Douglas (pictured) is chief executive of TotallyMoney

Picture the scenario.

You’ve spent months looking and finally found the home of your dreams.

You put in a bid and it’s accepted. And then you apply for a mortgage only to have your application turned down because your credit score isn’t good enough.

The general rule of thumb for any homebuyer looking to arrange a mortgage is the higher your credit score, the better your chances of being accepted; and the lower the interest rate available because you are considered to be at lower risk of missing repayments.

Lenders will use the data on your credit report, including your credit history, alongside other information on your application and proof of your income and outgoings, to give you a credit score.

Essentially a credit score is an assessment of your credit worthiness and every lender bases their score on a different set of criteria.

This will determine if they can offer you a mortgage or not, how much you can borrow and the interest rate you pay.

So what can you do to improve your credit score?

A good starting point before you even apply for a mortgage is to obtain a credit report to see if there are any inaccuracies that need to be corrected or updated. Use a service such as TotallyMoney's free credit report to check that your loans and credit card payment history and your current credit level are up to date.

You should also check that your name, address and date of birth are correct and that no closed accounts appear on your report as open as even the smallest details can affect your mortgage application.

According to research, one in four people who sign up for a credit report find at least one mistake in the report.

By checking your report, you can also see if any fraudulent applications have been made on your behalf and alert the relevant party to the matter, which may be detrimental both your credit score and your chances of getting a mortgage.

There are three main UK credit reference agencies: Experian, Equifax and CallCredit – it is Callcredit that provides the credit file information for TotallyMoney.

They gather information about your financial behaviour from banks, utilities, credit card providers and other companies that hold any financial information about you.

Lenders use these reports and ratings to verify your mortgage application and to determine your eligibility.

If anything is incorrect on your report contact the relevant agency or the company that provided that information immediately to get it changed as it may affect your credit score and hence your mortgage application.

Also, if you’ve had credit in the past and missed some payments because of illness or losing your job, you can add a 200-word statement or ‘notice of correction’ to your credit report to explain this.

Then make sure you are on the electoral roll by registering at as proof of your address.

It is particularly beneficial for your credit rating, and thus your chances of mortgage approval, if you have been living at the same address for a long period of time because it shows you are more stable.

Getting a landline also proves that you are rooted to one address and can help with any security checks.

Also, make sure that your name is on all of your household bills if it isn’t already to show that you can pay them off reliably and on time.

Another way to improve your credit rating is to always pay off your credit card bill in full and on time every month and, if necessary, set up a direct debit.

That applies to all other bills, including council tax and utilities like your mobile phone.

If you have savings, use them to pay off any outstanding debts, rein in any unnecessary spending, and cancel any cards or accounts you don’t use, including store cards and mobile phone contracts.

If you have a limited or no credit history this could also count against you when it comes to getting a credit score for your mortgage application, so consider using a credit builder card to build your credit rating.

Similarly, apply for a current account if you don’t already have one to build up your credit history and you could become eligible for a credit card or loan.

If you had a joint bank account or mortgage with a former partner, make sure they are removed so that their credit history doesn’t impact your credit score, and ultimately your mortgage application as well.

Also, if you have a credit history from a previous country, some lenders may be willing to take this into account when deciding whether to approve your mortgage.

This can be obtained through that particular country’s credit reference agency.

And, finally, if you’ve been turned down for credit before, ask for a quote to see what kind of offer you might get before making another application.

If you need to apply for credit again, leave a reasonable period of time from the initial application before applying.