Mortgage borrowing in the UK has decreased in recent years as a result of myriad factors. Banks and building societies are feeling the pinch of global economic uncertainty and as such they are seeking only the most creditworthy customers to do business with.
With plenty of people still wanting to borrow money to buy a home, the landscape for money lending has become very competitive. This leaves potential borrowers wondering exactly what credit score is needed to buy a house in the UK.
Although in the USA, most lenders use the FICO score to determine their creditworthiness, in the UK Equifax, Experian or the lesser-used CallCredit are your best bet to gather information on your financial history.
These companies will provide information from a variety of sources including the electoral roll and County Court Judgments and check how well you’ve repaid your debts. The resulting “score” will affect how much money you can get for a loan as well as the terms of that loan. The higher your score, the better interest rate you will receive. Ultimately the score predicts how likely you are to make your payments on time.
Credit scores are always three digit numbers ranging from 300-850. Most credit scores fall between 600-700 points. These credit scores are calculated using mathematical models which analyse your debt-to-income ratio and your repayments habits. Your payment history is compared with thousands of other consumers and then averaged.
Overall, about 58% of the UK population has a credit score in the 700-850 range. If your credit score is below this range it doesn’t necessarily mean that you can’t get a loan, but it will likely mean that you will be subjected to higher interest rates and credit approval with certain limitations.
Typically, people who score anywhere between 300-550 will not be approved at all, but it’s not entirely impossible, especially if you have a substantial amount of cash or some other type of collateral to trade.
While your credit score is not the only factor involved in assessing your creditworthiness, it is an important one. With a score of above 700 you will likely be considered a desirable candidate for a mortgage in the UK and be well on your way to owning your own home.