Why your credit score matters when getting a mortgage
You wouldn’t believe how many people come to us for a mortgage without getting a copy of their credit report. It’s such a crucial document!
All applicants must see what a lender sees before applying. If you don’t know something’s broken, how can you fix it?
Don’t leave it until you’re rejected to act.
Our guide explains credit’s key role in the decision-making process, and how you can help rebuild poor credit.
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Here’s a sobering statistic: according to HSBC’s recent survey of 2,000 adults, 36% don’t know their credit score. That’s more than one in three people walking around blissfully unaware of something that could make or break their mortgage application.
And, based on our experience at Mortgage Quest, the reality’s even grimmer. Around 90% of customers who approach us haven’t checked their credit report before enquiring about a mortgage. That’s a lot of hopeful homeowners leaving themselves vulnerable to rejection and higher interest rates.
Here’s the thing. You don’t want lenders digging through your credit file only to discover problems you didn’t know existed. Even worse, the more rejections you collect, the harder it becomes to secure approval. So let’s change that.
In this article, we’ll walk you through:
- HSBC’s eye-opening findings,
- Explain why your credit score matters so much, and
- Give you straightforward steps to improve it before you apply for a mortgage.
The HSBC report: a wake-up call
The survey results paint a concerning picture of financial awareness across the UK. Some of these statistics should set off alarm bells, whether you’re a first-time buyer or looking to remortgage.
The numbers that matter
Here’s what HSBC discovered about UK adults and their credit awareness:
43% have been completely inactive in the last year, taking no steps to maintain or improve their score. Nearly half of the respondents are simply hoping for the best.
36% didn’t know what their credit score currently was. You can’t fix what you don’t know’s broke.
33% recognised that making payments on time helps improve their score. That means two-thirds either don’t know or haven’t connected the dots.
29% never check their credit score at all. Out of sight, out of mind – until they’re declined for a mortgage.
26% were unaware of how credit reference agencies calculate their score. Knowledge is power, and this gap leaves people powerless.
22% are completely in the dark about what makes up a good credit score. That’s more than one in five.
8% weren’t even sure if they had a credit score. Spoiler alert: if you’ve ever paid a bill or held a bank account, yes: you do!
The report did show us a glimmer of hope, though:
- 56% of respondents understood that missing a credit card payment would damage their score, and
- 48% knew their current score.
It’s a start. Whoop! But we can do much better.
The generation gap
The survey also revealed stark differences between age groups:
63% of people aged 55 and over haven’t taken any action to improve or maintain their score in the past year.
Perhaps they assume their established credit history speaks for itself. That’s such a dangerous attitude. Credit files aren’t ‘set and forget’. They need ongoing care.
60% of millennials are worried about their current credit score.
They’re right to be concerned, especially if they’re looking to get on the property ladder for the first time. First-time buyers have enough on their plate without having to battle a poor credit score, too.
If you’ve recognised yourself in any of these statistics, don’t panic. Your credit score isn’t set in stone. Based on our long experience, we’re about to show you exactly how to improve it.
What actually is a ‘good’ credit score?
The UK has three main CRAs. And, annoyingly, they each use different scoring systems:
Experian rates you on a scale from 0 to 999:
- Excellent: 961-999
- Good: 881-960
- Fair: 721-880
- Poor: 561-720
- Very Poor: 0-560
Equifax uses a scale from 0 to 1000:
- Excellent: 811-1000
- Very Good: 671-810
- Good: 531-670
- Fair: 439-530
- Poor: 0-438
TransUnion (formerly Callcredit) scores from 0 to 710:
- Excellent: 628-710
- Good: 604-627
- Fair: 566-603
- Poor: 551-565
- Very Poor: 0-550
Your tier determines both whether you’re approved for credit and what interest rate you’ll pay. A Good or Excellent score can save you thousands of pounds over the life of a mortgage. In many instances, we’re talking about five-figure sums.
Want to see what all three agencies have on file for you in one go?
Services like CheckMyFile consolidate reports from Experian, Equifax, and TransUnion into a single document. It’s free for the first month, then £14.99 monthly thereafter. It makes comparing and monitoring your credit health far simpler.
Why mortgage lenders care about your credit score
Let’s be frank: lenders want to know if you’re a safe bet. Your credit score is their crystal ball into your financial behaviour.
When you apply for a mortgage, lenders scrutinise your credit file to assess risk. They’re asking themselves: “Will this person reliably repay what they borrow?”
Your credit score helps them answer that question. A strong score tells lenders you’re financially responsible:
- You pay bills on time
- You don’t max out credit cards
- You manage debt sensibly
These signals translate into underwriter confidence. Their confidence in you opens doors to better mortgage offers with lower interest rates.
A poor score raises red flags. Perhaps you’ve missed payments, defaulted on credit agreements, or have CCJs against you.
Lenders see these as warning signs. They signify that you might struggle with mortgage repayments. The result? Higher interest rates, smaller loan amounts, or outright rejection.
Here’s what many people don’t realise: even if you have the deposit and income to afford a mortgage, a damaged credit file can still scupper your application. That’s why checking your credit report before you apply isn’t just optional, it’s essential!
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How to build a better credit score
The good news? Improving your credit score is entirely within your control. But it does take time and discipline.
Yes, we get that you might not want to hear if you’ve seen a home you want to buy. But these practical steps will point you in the right direction. And, the sooner you begin adopting them, the sooner your chances of buying a home will improve.
1. Download your credit report today
This is step one, and it’s non-negotiable. You cannot fix problems you don’t know exist.
Credit reference agencies aren’t infallible. Errors happen. They might hold outdated information on your file:
- Accounts you closed years ago that still show as open,
- Addresses you haven’t lived at for decades,
- Or even debts that aren’t yours if you’ve been a victim of identity fraud.
Check your report from all three agencies, independently, or all in one via CheckMyFile. Look for anything incorrect, out of date, or simply wrong.
If you spot errors, challenge them immediately using the agency’s dispute process. Resolving these issues can make an immediate positive impact on your score.
2. Verify your electoral roll registration
Being registered on the Electoral Roll confirms your identity and address to lenders. It’s one of the simplest ways to boost your credit score.
Check your credit report to ensure the address matches your Electoral Roll registration. If you’re still registered at a previous address, update it.
There’s more than one reason for getting your address right. Homeowners/tenants at a previous home you’ve lived at may have since incurred bad credit. Their misdemeanours could be dragging your score down through association, even if those debts aren’t yours.
You can register to vote online at gov.uk/register-to-vote. It only takes about five minutes, so no excuses.
3. Think twice before applying for new credit
If you’re planning to buy a home or remortgage, make postponing other new major purchases your new priority. Ask yourself: do you really need to finance that new smartphone, TV, or car right now?
Can you wait until after you’ve secured your mortgage?
Every credit application leaves a footprint on your file. Multiple applications in a short period can raise red flags. They suggest to lenders that you’re either financially stretched or desperate for credit. Neither impression helps your mortgage application.
4. Keep credit applications to a minimum
This builds on the previous point. If you’ve applied for a mortgage and been rejected, take a breather. Don’t immediately fire off applications to other lenders as a knee-jerk reaction.
You need to find out what went wrong:
- Was it your credit score?
- Your income, or its documentation thereof?
- Something else entirely?
Fix the issue(s) first, then reapply. Yes, that might mean delaying your application. But multiple rejections make you look increasingly risky to lenders. This creates a vicious cycle that’s hard to escape.
This is where working with a specialist mortgage broker like Mortgage Quest makes all the difference. We know which lenders will consider your circumstances and which won’t waste your time. One strategic application beats five desperate ones every time.
5. Pay every bill on time, every time
This sounds obvious, but it’s where many people trip up. Almost every bill you pay – from your mobile phone contract to your Council Tax – is now reported to credit agencies.
Missing or late payments damage your score. Lenders assume that if you can’t meet a £150 Council Tax bill on time, you won’t manage a £1,500 monthly mortgage payment, either.
Set up direct debits for everything you can. Use calendar reminders for bills that need manual payment. Whatever system works for you, make paying on time your default priority, not ‘optional’.
6. Build your credit history if you have none
Surprisingly, having no credit history at all can be as problematic as having bad credit. Lenders have nothing to assess, so they can’t confidently approve you.
This particularly affects first-time buyers who’ve always lived debt-free. Noble (or incidental) as that is, it doesn’t help your mortgage application.
Consider taking out a low-limit credit card or a small personal loan. Use the credit card for regular purchases like fuel or groceries. Then pay it off in full each month. This gradually builds a positive credit history, showing you can manage credit responsibly.
Just don’t go overboard. One or two well-managed credit accounts are plenty. You’re building a track record, not collecting cards.
7. Keep old accounts open (usually)
The length of your credit history matters. Older accounts demonstrate long-term financial stability.
If you have old credit cards you rarely use, consider keeping them open rather than closing them. That is, unless they charge annual fees, which defeats the object of saving for a deposit/to pay Stamp Duty.
Just make occasional small purchases. Then, pay them off immediately to keep the account active.
However, if you have unused accounts with high credit limits, it may be a concern for a mortgage lender. They’ll consider the possibility of you suddenly maxing them out after getting your mortgage.
It might be worth closing some. It’s a balancing act. The ratio between the credit you’ve spent and what credit you still have free is important.
When in doubt, speak to a mortgage broker before making changes.
8. Use credit sensibly
As just implied, try to manage your credit utilisation: that’s how much of your available credit you’re using. Ideally, you’ll have spent up to 30% of your overall limits.
Using 90% of your credit limit suggests you’re financially stretched. Using 10% shows you have credit, but don’t depend on it.
For example, imagine you have a credit card with a £3,000 limit. Aim to keep the balance below £900 (30%).
Better yet, pay it off in full each month so you’re never carrying a balance. This is a sure sign of financial maturity, and that you have regular disposable income.
What about bad credit?
Let’s address the elephant in the room: what if your credit file isn’t just imperfect, but actively damaged?
Maybe you have defaults, CCJs, missed payments, or even a bankruptcy in your history. Does that mean homeownership is impossible?
Absolutely not. We’ve helped countless clients with less-than-perfect credit secure mortgages. It’s trickier, certainly. And you might not get the best rates available. But options exist. You just have to know where to look.
Specialist lenders understand that life happens. Redundancy, divorce, illness – these events can temporarily derail anyone’s finances. What matters is showing that you’ve moved past it and are now managing your money responsibly.
The key is being upfront about issues from the start. Trying to hide problems or hoping lenders won’t notice always backfires.
Work with a mortgage broker who specialises in adverse credit. They know which lenders will look past your credit history and focus on your current circumstances.
Common credit score myths (debunked)
Let’s clear up some misconceptions that could be holding you back:
Myth: “Checking my credit score will damage it.”
Reality: Checking your own score is a “soft search” that doesn’t affect it. Only applications for credit create “hard searches” that leave footprints.
Myth: “Closing credit cards improves my score.”
Reality: Sometimes it does, sometimes it doesn’t. Closing old accounts can reduce your credit history length (good), but increase your credit utilisation ratio (bad). It’s situation-dependent.
Myth: “I’m financially linked to everyone at my current address.”
Reality: You’re only financially linked to people you’ve held joint credit with:
- Joint bank accounts,
- Joint loans, and
- Joint mortgages.
Simply living with someone doesn’t link your credit files.
Myth: “Paying off debts removes them from my file.”
Reality: Settled debts stay on your file for six years from the default date. However, showing accounts as “settled” is infinitely better than leaving them as “defaulted.”
Myth: “Bad credit stays with me forever.”
Reality: Most negative information drops off your credit file after six years. Bankruptcies remain for six years from the date of discharge. You’re not branded for life.
How Long Does It Take to Improve Your Score?
This is the question everyone asks. And the answer is frustratingly vague: it depends.
If you’re fixing simple errors on your credit report, you could see improvements within weeks once the CRAs correct them.
If you’re building credit history from scratch, it will take longer. Expect to spend at least 3-6 months demonstrating responsible credit use before lenders take notice.
If you’re recovering from serious credit problems, such as defaults or CCJs, you’re looking at a longer timeline. Negative marks remain on your file for six years.
But the impact of credit blips diminishes over time. Especially if you’re demonstrating more responsible financial behaviour. Specialist lenders take this into consideration.
The key is to start now. Every month you demonstrate responsible financial behaviour, you move in the right direction. Waiting doesn’t help; taking action does.
Your next steps
Understanding your credit score is fundamental to securing a competitive mortgage. Building and maintaining good credit needn’t be complicated once you know what actions make a difference.
The factors we’ve outlined above give you a solid foundation. But everyone’s situation is unique, and mortgage lending is nuanced.
Every lender has its own criteria. Every lender has its own attitude to risk. What works for one person might not be the best approach for another.
That’s where expert advice makes all the difference. That’s when Mortgage Quest’s expert brokers and extensive network of lender contacts come in.
Leverage our long history with specialist lenders and underwriters
We’ve spent years navigating the UK mortgage market for clients with every conceivable credit profile. We know which lenders will look favourably on your circumstances and which ones will waste your time.
Before you start house hunting or consider remortgaging, let’s have a conversation about your credit position. We can help you understand what lenders will see when they look at your file. From there, we’ll identify any issues that need addressing, then create a clear action plan to get you mortgage-ready.
Your credit score isn’t a life sentence; it’s a starting point. With the right knowledge and support, you can improve it and secure the mortgage you need for your next move.
Ready to take control of your credit and your mortgage prospects? Start the conversation with Mortgage Quest’s friendly broking team today. We’re here to help you build a more secure future by laying secure foundations today.
