Credit Score Basics > Does getting a buy-to-let mortgage depend on credit score?

Does getting a buy-to-let mortgage depend on credit score?

Wollit Team2 minute read · Updated 29th June 2024

Yes, your credit score plays a crucial role when applying for a buy-to-let mortgage in the UK. It can mean either a rejected application or a higher interest rate. Here’s how it works.

What is a buy-to-let mortgage?

A buy-to-let mortgage is a kind of mortgage specifically meant for people who want to buy a property with the intention of renting it out to tenants, rather than living in it themselves. It allows investors to generate rental income from the property while paying off the mortgage over time.

What is the minimum credit score for a buy-to-let mortgage?

The answer is “it depends”, but the higher the better. While credit score requirements can vary among lenders, most buy-to-let mortgage providers in the UK usually look for a credit score of 700 or higher on the Experian scale (which ranges from 0 to 999). A score in this range is generally considered "good" or "excellent" and shows that you pay your bills in full and on time.

However, some lenders may be willing to consider your application even if you have a slightly lower credit score, especially if you can put down a substantial deposit, earn a stable income, and have a low debt-to-income ratio.

Why does my credit score matter if I want to get a buy-to-let?

Lenders in the UK rely heavily on credit scores when assessing buy-to-let mortgage applications. Your credit score is a number that’s supposed to represent your creditworthiness, based on your credit history and how you handle debt. A higher credit score indicates a lower risk of defaulting on loan repayments, making you a more attractive borrower.

This means that, even though your property will in theory “pay for itself”, how you’ve dealt with debt in the past is still what lenders care about when deciding whether to approve your mortgage application.

Your credit score also matters because it’s one of the main things lenders look at when calculating what interest rate to charge you. Considering that a mortgage will be one of your largest loans and that it will be repaid over a long period of time, even a small jump in the mortgage rate percentage can make a huge difference.

Here’s an example. Consider a £500,000 property, 30-year mortgage, 20% deposit. With a good score, you'd pay a 4% rate, which would add up to £322,000 in interest. But a lower band could mean a 5% rate instead of 4%, totaling £412,000 interest – a £90,000 premium over someone with a good credit score. However, just because you’re paying more in interest doesn’t mean you can charge more rent – tenants don’t care about your credit score, only what the average rent price in your area is.

This is why it’s so important to work on your credit score. Not only can it turn you from a tenant into a landlord, but it can save you hundreds of thousands of pounds over the life of your mortgage.

The good news is that now there are many apps that can help you do this

One such app is Wollit. Wollit is an app available both on Android and iOS, and it works by reporting a fixed-fee monthly subscription as a loan repayment to all three credit reference agencies. This helps you build your credit history, the main thing that matters for your credit score.

On top of this, Wollit can also report your monthly rent payment to Experian. This can add another line in your credit report that shows lenders that you’re reliable and pay your bills on time, helping you make the most of your rent while you prepare to become a landlord yourself.