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Day: July 1, 2025

What Credit Score Do You Need for a Mortgage?

Considering purchasing a property? Need a mortgage before you can do it? Well, a little thing called a credit score could be the deciding factor in whether you get accepted. But what score do you need? Below is everything you need to know about credit scores and mortgages before you start applying. 

What is a Credit Score?

When you lend money to a friend or family member, how do you know you are going to get it back? Well, you never know for sure, and you just need to trust them most of the time. But, what if there was a number, for example, out of 100, that would alert you to the likelihood of them paying you back? Well, that’s basically what a credit score is.

Each person has a credit score that paints a picture of how reliable they are at borrowing money. Lenders will report the reliability to three main credit reference agencies, Experian, Equifax, and TransUnion, and they will determine the credit score. 

These agencies are all separate from each other, so you won’t see the same score on each platform. However, they will still provide you with the same idea of how good your credit score is to lenders. For example, Experian provides people with a score out of 999, Equifax is out of 700, and TransUnion is out of 710. 

Your credit score is affected by positive and negative actions. Positive actions will help your score go up and include things such as paying off loans on time and not spending recklessly using a credit card. Negative actions can include missing payments or going over your credit limit on a regular basis. 

It’s good to remember that scores are not universal. The best way to check how well your score is doing is by using checkmyfile. You not only get a credit score based on all three agencies, but a whole credit report that alerts you to ways you can improve it. 

It’s important to note that we receive a commission of £12 for each applicant who signs up using the link provided above. If you haven’t used the Checkmyfile credit report before, you’ll still receive a free 30-day trial, after which a subscription fee applies.

The Importance of Credit History

We’ve already delved into what a credit score is, but a credit history is slightly different. Instead of a number stating the probability of you paying back a lender, it is a record of how you’ve managed money you’ve borrowed over time. Some of the factors it may include are the number of credit cards, loans, and overdrafts you’ve had, how much you currently owe any lenders, what you have owed in the past, and whether you’ve paid on time, and why missed or late payments, defaults, or bankruptcies. 

So, why is a credit history important for getting a mortgage? The main answer is that when you apply for a mortgage, lenders want to know that you’re reliable and will pay them back. If you are, they will most likely accept you no problem. However, if you have a bad credit history, they may think you’re more of a risk and decline to give you a mortgage. 

A good credit history could:

  • Improve your chances of being approved for a mortgage
  • Give you access to better interest rates and terms

A poor credit history could:

  • Make it harder to get approved
  • Lead to higher interest rates or needing a bigger deposit

Basically, a credit history could be the make or break to you getting approved for a mortgage. That’s why it’s important to build up your score, stay on top of any loans, and ensure the likeliness of being accepted.

What Credit Score Is Typically Needed?

There’s no ‘set’ credit score that will get you approved for a mortgage. It’s a bit more complicated than that. Credit scores vary between credit reference agencies, and score requirements are different for every lender or broker. However, a general rule of thumb is that you should have as high a score as possible. It’s important to note that having a high credit score alone doesn’t guarantee mortgage approval, as there are other factors involved, like individual lender criteria.

If you are looking at your score on Experian, you most likely won’t get many mortgages with a score below 560. If it’s below 720, you may get accepted for a mortgage, but usually with high interest rates. Above 880, your chances of a mortgage with reasonable interest rates increase. As you hit 960, you could get most, but not all, mortgage deals. From there up to 999, you will get some great deals with low interest rates. Source

Equifax and TransUnion will have a similar ranking system with their credit scores as well, but they are slightly different from Experian. For Equifax, a score between 420-465 is deemed ‘Good’ and a score above 600 is ‘Good’ for TransUnion. Source

Lenders will often want you to have a ‘Good’ credit score or above. However, most of them don’t state an actual number required. Instead, most of them require you to have no County Court Judgments (CCJs). Other things they might look for (i.e., Barclays, Halifax, HSBC) could be free from Individual Voluntary Arrangements (IVAs), bankruptcy, or arrears. 

The credit score requirements may also vary depending on the type of mortgage you’re looking to get. For example, fixed-rate versus tracker mortgages might look for different levels of lending responsibility. The same applies to high loan-to-value and low loan-to-value mortgages. 

If you’ve just checked your credit score and see it is ‘Fair’ or even ‘Poor’, you don’t have to give up hope completely. There is a chance that these scores may qualify under certain conditions. However, you should expect to be offered a mortgage with a high interest rate. 

Understanding Internal Lender Scoring

If you have a bad credit score, you may also be happy to hear that it isn’t the only deciding factor when getting approved or declined for a mortgage. In reality, lenders have their own internal scoring systems. These are models they’ve built themselves to assess your risk using a much larger set of data, going beyond your credit score. They will look at these next to the score and make the final decision about whether they will offer you a mortgage and what the interest rate will be. 

Every lender or broker has their own system to decide. However, these are the most common factors they will look at:

  • Employment status and history: When you’ve been working in a good job for a long time, a lender will view this more favourably than if you are unemployed or changing jobs monthly. 
  • Deposit amount and source: If you are willing to put down a larger deposit from your own savings, you are more likely to be seen in a better light by the lender. However, the source matters too. If it comes from family or friends, it may be viewed less favourably.
  • Debt-to-income ratio: Every person who applies for a mortgage will have a debt-to-income ratio. This is how much debt you have each month compared to your income. The lower the ratio, the better your chances of getting a mortgage. 
  • Property type: There are certain properties that are seen as higher risk, so a lender is less likely to give out a mortgage for them. One example is a flat above a commercial premises. 
  • Stability indicators: Some things that don’t involve money are taken into account too. This could include being on the electoral roll or having a stable address history. 

How Credit Scores Affect Mortgage Products and Rates

Having a good credit score is one of the ways to help you get approved for a mortgage- and on your terms. For example, if you’re looking at purchasing that beautiful two-bedroom semi-detached property down the road from you, it’s more likely to be to be a competitive interest rate. 

If you are known for late payments to credit card lenders, or you have a large amount of loans you’re paying off each month, it may mean you’ll be looking at lenders that have slightly higher interest rates or reduce your borrowing. The better your credit history, and the higher the score, the more likely you are to get the most favourable interest rates and loan conditions. 

As we’ve mentioned, a desirable score not only influences the likelihood of getting the mortgage, but it may impacts the terms and conditions attached to the mortgage repayments. These include:

  • Interest rates: The higher your credit score, the more likely you’ll receive an offer with lower interest rates. This makes your overall mortgage payment more affordable. 
  • Loan amounts: If you can prove you’re reliable at paying back loans with a desirable score, you might be able to approach lenders with higher income multiples. 
  • Negotiation power: You are in a better position to negotiate with lenders, if you have a good credit score.

How to Improve Your Credit Profile Before Applying

There are various strategies you can take to enhance your credit score and land the right mortgage for your situation. The first thing you need to do before you start looking at properties is to ensure you review your credit reports and score. There could always be a mistake that is lowering your score, and rectifying it could make all the difference. Again, your credit report is one factor in many that could determine your product and rate.

You may also consider performing a soft credit check before you apply for any new credit (or your mortgage). This helps you understand the likelihood of being accepted without impacting your score. This is because applying for loans and being rejected can lower your score, which is not what you need when you’re trying to improve it. 

These actions are fundamental to improving your score as quickly as possible and making you as attractive to lenders as possible. 

Final Thoughts

Applying for a mortgage can be an exciting yet stressful time in your life. However, you can make it as seamless as possible by ensuring you have your credit score in good standing before you apply. Even if you don’t have the best credit, it’s good to know that there is always the possibility of still being accepted for a mortgage, you just might have to agree to higher interest rates. 

Don’t let the fear of rejection stop you from purchasing your dream property. No single number defines your eligibility, and preparation is key. Follow the information in this guide, to help you moving forward in your property search.

Your home/property may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it. 

There may be a fee for mortgage advice. The precise amount will depend upon your circumstances and will be agreed with you before proceeding, but we estimate it will be £395.

Please be aware that by clicking on to the above links you are leaving Mortaged website. Please note that Mortgaged nor HL Partnership Limited are responsible for the accuracy of the information contained within the linked site(s) accessible from this page.

Why Stamp Duty Matters for First-Time Buyers

Becoming a first-time buyer is a huge milestone for many people. However, it can also be overwhelming as there are certain phrases you’ll encounter that you’ve never heard of before. One of these will most likely be Stamp Duty. 

But what is it, and how do you know if you qualify for it as a first-time buyer? Continue reading to find out more. 

What Is Stamp Duty?

Believe it or not, Stamp Duty has nothing to do with sending mail. Instead, its full name is Stamp Duty Land Tax in England and Northern Ireland, and it refers to the tax you pay when you purchase property or land. If you live in Scotland, it’s referred to as Land and Buildings Transaction Tax, and in Wales, just Land Transaction Tax. 

Simply put, Stamp Duty is what you’ll pay when you purchase residential property or land costing more than £125,001. It applies to freehold and leasehold properties, and whether you have a mortgage or not. The Stamp Duty £3,550 on an average-priced UK property. (£271,000) for non first time buyers. Source

Stamp Duty operates using a progressive system, so there may be different rates applied to different parts of your property or land. There are calculators available to determine exactly how much Stamp Duty you will pay, but it can range between 2% and 12% of your total property purchase price. The higher your property or land price, the higher the amount of Stamp Duty you will pay. 

However, Stamp Duty works differently for first-time buyers, which we will go into next.

How Stamp Duty Works for First-Time Buyers

If you’re considering purchasing your first home or property, but the thought of Stamp Duty scares you, you might be able to breathe a sigh of relief. This is because the threshold to pay Stamp Duty is much higher. If you live in England or Northern Ireland, you only have to pay these taxes when you spend more than £300,000 on a property or plot of land.

Even when you go over the threshold, you aren’t hit with a high percentage of Stamp Duty. In fact, if you were to spend up to £500,000 on a property, you won’t need to pay tax on the first £300,000. However, it’s not all good news. If you end up spending over £500,000 on your first property, you no longer qualify for first-time buyers’ relief and will therefore have to pay the standard rates of Stamp Duty.

If you want to qualify for this relief, there are certain criteria you need to meet. You are seen as a first-time buyer if you are purchasing your only or main residence AND you have never owned a freehold or have a current leasehold interest in a residential property anywhere in the world. Unfortunately, if you have inherited a property, even if you didn’t purchase it, you will not qualify for this relief. 

If you are purchasing a property or land with someone else, you can still qualify for this relief. However, you both need to meet the first-time buyers’ criteria. 

Here’s the HMRC Calculator if you want additional details; Calculator

Important Deadlines to Know

On your way to purchasing a property or plot of land, and want to ensure you’re paying your Stamp Duty on time? Meeting the deadlines is crucial to ensuring everything goes smoothly. While there are different names for this type of tax across the UK, they tend to have the same rules when it comes to paying it.

To ensure you are meeting deadlines, all Stamp Duty must be paid within 14 days of the completion date of your property purchase. If you don’t pay it in time, you may face interest charges and penalties, meaning you end up paying even more in the end. However, typically, this is handled by your solicitor. 

Past Holiday Periods

There have been times in the past when temporary Stamp Duty holidays have helped stimulate the housing market. While none are predicted to occur in 2025, it’s good to know about them in case they happen again.

For example, from July 2020 to June 2021, the UK government raised the threshold from £125,000 to £500,000. This was helpful, especially after the emergence of COVID-19, meaning many buyers didn’t need to pay any Stamp Duty at all.

Implications for Buyers

As mentioned, there is a chance of financial penalties if you don’t pay your Stamp Duty in time. This is especially the case if you’re looking to buy a property towards the end of the financial year. This is because there are often changes to rates and thresholds around this time.

Common Misunderstandings About Stamp Duty

Unfortunately, even with all the information available out there, there are still a few common misunderstandings buyers have about Stamp Duty. 

All Buyers Pay The Same

Many people believe that everyone pays the same amount of Stamp Duty when purchasing a property or land, for example £1,000. However, this is not true as some buyers don’t need to pay any tax, and others pay different percentages depending on what they spend. 

First-Time Buyers Don’t Need To Pay Stamp Duty

Some people read the words ‘first-time buyer relief’ and immediately assume they don’t have to pay any Stamp Duty. While the threshold is higher than for people who own multiple properties, they still need to pay taxes when spending over £300,000.

Case Example: A First-Time Buyer Timeline

Emma, a first-time buyer in Manchester, agrees to purchase a £250,000 flat. Her offer is accepted on 1 March, and she instructs a solicitor immediately. Since she qualifies for first-time buyer relief, she will only pay stamp duty on the amount above £250,000, in this case, £0.

Her mortgage offer comes through on 15 March, and contracts are exchanged on 20 April. A completion date is set for 1 May.

Although Emma doesn’t owe stamp duty due to the relief, her solicitor is still required to submit a Stamp Duty return within 14 days of completion, by 15 May. 

On 1 May, the sale completes, and her solicitor immediately submits the Stamp Duty return on her behalf.

If Emma or her solicitor had missed the 15 May deadline, she could have faced penalties and interest, even though no tax was due. This highlights how critical the deadline is, not just for payment, but also for filing the return.

Conclusion: Staying Informed and Prepared

Buying a property for the first time can be an exciting part of someone’s life, but it is important to be prepared. By knowing about Stamp Duty, the different reliefs and thresholds, you can ensure you can budget properly and guarantee it is paid in time after purchasing a property. When the tax is paid promptly, you don’t have to worry about any potential fines or interest.

If you are thinking about purchasing a property or plot of land, but the idea of Stamp Duty appears overwhelming, then the experts at Mortgaged can help with guidance. However, we’d always recommend speaking to an accountant or solicitor regarding your stamp duty.

Your home/property may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.

There may be a fee for mortgage advice. The precise amount will depend upon your circumstances and will be agreed with you before proceeding, but we estimate it will be £395.

Please be aware that by clicking on to the above links you are leaving Mortgaged website. Please note that Mortgaged nor HL Partnership Limited are responsible for the accuracy of the information contained within the linked site(s) accessible from this page.