Different loan types have different rules
Depending on the type of mortgage you are looking for, different rules will apply.
While all mortgages must fit an affordability assessment (checking your income against your outgoings), some buy to let mortgages will solely look at rental income to check you can afford the mortgages. On the other hand, a standard residential affordability check will be a lot more in depth and look at all your income and committed expenditure.
Similarly, deposit amounts will differ for different mortgage products and types. It is likely that you will need a considerably higher deposit for a buy to let mortgage, than you would for a residential mortgage.
Some lenders offer 100% mortgages. Again, in order to qualify for these, there will be specific rules in terms of security. It is common for the mortgage lender to require security from a family member, whether that is a charge against their residential property or through them depositing savings into an account with the lender.
If you have a poor credit history, there are certain lenders that will still consider you for a mortgage. In these circumstances, it is best to discuss your individual circumstances with an independent adviser who will be able to point you in the right direction. At the Tipton, while we will not lend if you have historic adverse credit, we do not use credit scoring systems. Therefore, we can look at your case on an individual basis. This means that if you simply lack credit history due to not having much credit in the past, the computer does not automatically say no.
What is the minimum credit score needed to get a mortgage?
The minimum credit score required to secure a mortgage is determined by individual lenders, so while there is no definitive credit score, the average tends to be around 620.
On the other hand, there are a range of lenders who will not use computer-based credit scoring to determine your eligibility for a Mortgage. At the Tipton, we will not credit score applicants, but instead we will assess each case on its individual merits. By looking at your credit and payment history, we can understand your credit risk in a more personalised way, replacing the need for an automated scoring system.
What are the main credit reference agencies used?
Mortgage lenders will use different credit reference agencies. However, the most common are Experian, TransUnion and Equifax. These agencies will keep records on you for a variety of things, including:
- Electoral Roll history;
- Any CCJs, bankruptcies, debt relief orders or IVAs;
- Existing accounts you have;
- Any historic repossessions;
- Any person you are financially associated with (e.g. via joint bank accounts); and
- Previous searches carried out on you over the last 12 months.
What credit score is considered good?
This will vary based on the credit reference agency. A good credit score with Experian is 880 out of 999, TransUnion is 781 out of 850 and with Equifax a score over 811 is considered excellent.
If you have a smaller deposit, this typically means that your interest rate is likely to be higher, and may also restrict which lenders have products available to you.