Credit Score Basics > What are the first time homebuyer credit score requirements?

What are the first time homebuyer credit score requirements?

Wollit Team4 minute read · Updated 1st July 2024

If you’re a first time homebuyer, you might be wondering what the credit score requirements are. The good news is that in the UK there is no formal minimum credit score for getting a mortgage. The bad news is that having a good credit score still matters.

What's the minimum credit score for a first-time home buyer?

There is no specific first-time homebuyer credit score requirement. Equifax, TransUnion, and Experian have their own scoring systems, so no one credit score will automatically get your mortgage application accepted.

According to Finder.com, the average credit score in the UK last year was 644 on the Equifax scale (out of 1000).

Now, this is an average of the general British population, not just first-time buyers.

Still, a 644 out of 1000 would be in the “good” Equifax score band and close to being "very good" (“very good” is between 670 and 810).

We recommend you aim to get your score into the “very good” credit band. However, if your credit score is rated at least “good”, that should put you in a decent position when applying for a mortgage.

Bear in mind that you also need to prove you can actually afford to make the mortgage payments. This is especially true if you're a first-time home buyer, as you have no mortgage repayment history.

What's the best credit score for a first-time buyer?

Equifax, Experian, and TransUnion all have a top credit score band. If you want the best chance at getting a mortgage – especially with low interest and low deposit – then you should try to improve your credit score so it gets there.

Here's how high your credit score needs to be to be considered "great":

Equifax: A score of 811-1000 is considered excellent.
Experian: A score of 810-999 is considered excellent.
A score of 628-710 is considered excellent.

Now, these are just guidelines, and the actual impact of your credit score on your mortgage loan eligibility can vary based on the lender's criteria and the type of mortgage loan you're applying for.

How much deposit do you need if you're a first-time buyer?

The minimum down payment is around 5% of the property price.

But that's just the minimum. According to Uswitch, in 2022, the average house deposit for a first-time buyer in the UK was about £43,000.

Considering the average first-time mortgage increased to £294,000 in 2022, that works out to almost 15%.

In any case, the bigger the deposit you can afford to put down, the lower your mortgage interest rate and the smaller your monthly mortgage payments.

How long do you need to live in the UK to get a mortgage?

Most lenders will want to see that you have lived in the UK for at least three years before considering you for a mortgage.

You’ll also need at least three years of UK address history to verify your identity even with an app Credit Karma or ClearScore so you can check your credit report.

However, you can reach out to Experian and see if they can include your overseas address history, even if you’ve been in the UK for less than 3 years.

Can I get a mortgage if I have a bad credit score or no credit history?

The short answer is yes, but be careful.

You can search around and find specialist lenders who will consider your application regardless of your lack of credit history. Your employment record, income, salary, and any savings will all be considered with any mortgage application, so your credit history can be overlooked if the other elements are strong.

However, while getting a mortgage with no credit history is possible, be careful and check the conditions of the deal. Often, these types of mortgages are offered with very high interest rates or large deposit requirements. This is because mortgage providers want to offset the risk of lending you money when you don't have a good track record.

There are lots of reasons why you might have no credit: maybe you just turned 18, or recently moved to the UK and have no bank account in this country, or no employment history, or you’ve just not been named on any UK bills. But everybody has to start somewhere.

How does a good credit score help me get a mortgage?

Your credit score is basically a risk indicator.

A high one tells lenders that you have managed your credit well in the past, which reassures them that you are likely to repay your loan on time.

On the other hand, a low credit score can indicate that you have had difficulties managing credit in the past, which can make lenders wary.

Here's a closer look at how your credit score impacts the mortgage approval process:

Eligibility: Your credit score is one of the first things lenders look at when determining whether to approve your mortgage loan application.
Interest rates: Your credit score also affects how much interest you'll be asked to pay. If your credit score is low, you may be charged a higher interest rate to account for the higher risk.
Terms and conditions: In addition to affecting your eligibility and interest rate, your credit score can also influence the T&C of your mortgage. For example, if your credit score is high, you may qualify for a larger loan amount or a longer repayment term. If your credit score is low, however, you may be offered a smaller loan amount or a shorter repayment term.
Mortgage insurance: If you're applying for a mortgage and your down payment is less than 20% of the home's purchase price, you'll typically need to pay for private mortgage insurance (PMI). The higher your credit score, the lower the PMI premiums you need to pay.

How do I improve my chances of getting a mortgage?

You can do a few things to improve your chances of getting a mortgage.

The first, of course, is to save more for a deposit. The higher the amount you can put down upfront, the better the terms you can get. Your mortgage interest rate might also be lower.

The second is to improve your credit score. You can sign up for Experian Boost, connect your bank account with Experian, and make sure your Netflix bills, council tax payments, and even savings into ISAs count towards your credit score. Signing up for a credit building service like Wollit will give you another way to do this by reporting your monthly plan payments to credit agencies.

The third is to enrich your credit file – for example, Wollit will also report your rent payments to the credit agencies. While this doesn’t directly impact your credit score, it goes on your credit report – showing lenders that you’re financially responsible.