What is the minimum credit score needed for a mortgage?
There is no minimum credit score requirement to win approval on the mortgage because the credit score is also not one. There are varied categories that denote the diverse levels and payment records, which give the hint of the repayment capacity of the applicant.
Varied factors, paired with various credit score levels, facilitate the final decision of the lender. Other factors matter a lot too. Employment status, income, debt-to-income ratio, etc. are also important. This fact tells that there can be no minimum credit score to obtain a mortgage.
Here is a description of what requirement arises with what credit score. To obtain a ‘yes’ from the lender, you need to gather all the necessary factors and present them to the mortgage company.
|Credit score||Necessary preconditions|
|Excellent credit score – 961-999||Income should be sufficient to prove repayment capacity. The guarantor is compulsory. Required debt-to-income ratio is 60:40|
|Good credit score – 881 – 960||Income part should be satisfactory. Debt-to-income ratio, 60:40 and guarantor required.|
|Fair credit score – 721 – 880||Income should be good. Debt-to-income ratio – preferred is 70:30, but 60:40 is also acceptable depending on the individual situations. Guarantor is necessary.|
|Poor credit score – 561-720||Income should be in big numbers. At least recent payment records should be flawless. Debt-to-income ratio 70:30 is a compulsory condition. Sometimes 60 income 40 expenses ratio is also considered. The guarantor is your saviour.|
Keep the credit score performance healthy
The best effort to make is to keep your credit rating good. If due to any possible reason your payment history has derailed, improve it as soon as possible. Usually advisable is to achieve a good credit rating at least 6 months before you apply.
Following are some of the ways to improve payment records –
Stay cautious about the identity theft threats
It is getting a big issue nowadays. You are not spending even a penny, but someone else is doing so using your identity, passwords, cloned credit card etc. can degrade the score.
To prevent identity theft –
- Regularly monitor your accounts online
- Enrol for credit monitoring service
- Keep your cheques safe, and stolen cheque gives information of your account number and routing
- Do not carry the social security card in your wallet
Do not pay the minimum due of credit card
You may think it is a safe way to play if you pay the minimum due balance on credit card. That least amount is equivalent to the interest rate of the related month, and the principal remains unpaid. It eventually hurts your credit score. Best is to pay the full instalment or at least more than minimum.
Check your credit report regularly
Do you know, sometimes wrong information gets mentioned on your credit report by mistake, and that can drastically spoil your financial records. Check your credit reports regularly. You may not realise the importance of this practice, but occasionally, the details of someone else can get into your fiscal history.
Due to similar names of address or same locality, etc., the bankruptcy of someone else may show in your report. You may even lose your job due to this then how is it possible to even think about a mortgage approval. There are free reports available online, check them every month.
- Quit from the joint financial commitments after divorce
A divorcee should never remain in any obligation with the X partner. Joint bank accounts, loan obligations, mutual funds, insurance products etc. can affect the credit rating very severely. If you are living separately, make sure you avoid this mistake.
Usually, such things happen due to ignorance, as people do not know that this factor affects them so severely. Finances are fragile; even the smallest thing can leave the biggest impression.
If other factors are in good condition the minimum credit score can be………
In case, all your other factors like a job, employment stability, debt-to-income ratio etc. are in perfect condition, there can be a minimum number. IDOL situation is that Good Credit Score is the minimum requirement to obtain approval on the mortgage.
The moment you get into the fair credit score, the danger zone starts spreading its wings to take you in its dominating effect. It is also an alarming situation when you should start working on preventive measures to improve credit rating. The mortgage is a significant loan obligation, and it demands the financial strength of the applicant on every aspect.
A little weakness or carelessness on the part of credit rating can make the lender reject your loan application. You need to be on your toes to remove the hurdles that come in your way.
Whatever is the concern for a mortgage on credit rating, the best thing you can do is, follow self-discipline in financial life. Pay the debts and bills on time, do not use a credit card for every purpose, and spend money wisely. Just small, simple rules and you may not need to ask ever that what is a good credit score for a mortgage in the UK. If you derail somewhere, the above information will help.
Description – There is no actual minimum requirement of credit score for a mortgage, as other factors too matter. If you keep them in satisfactory condition, you can say good credit rating is the minimum requirement.