Credit Score Basics > Does a mortgage in principle affect credit rating?

Does a mortgage in principle affect credit rating?

Wollit Team2 minute read · Updated 16th September 2024

If you're thinking about buying a home, you might hear the term "mortgage in principle." This is a document from a lender that shows how much money they are willing to lend you for a mortgage. Here’s how getting one works with your credit score.

What is a mortgage in principle?

A mortgage in principle (also called a decision in principle) is not a full mortgage approval. Instead, it gives you an idea of how much money a lender might be willing to lend you based on a quick look at your income and credit history. Getting a mortgage in principle can help you:

Know how much you can borrow;
Show sellers and estate agents that you are a serious buyer;
Speed up the mortgage process when you find a home.

However, remember that this is just an estimate. The lender will still need to do a full check before they give you a mortgage.

Can getting a mortgage in principle affect my credit score?

Most of the time, getting a mortgage in principle does not have a big impact on your credit score. This is because most lenders only use a “soft credit check” for a mortgage in principle. This type of check does not affect your credit score and is only visible to you.

However, you should still check to be sure. Some lenders might do a hard credit check. This type of check can affect your credit score and is visible to other lenders. Too many hard checks in a short time can lower your score.

To protect your credit score, you can do a couple of things:

Ask the lender if they do soft or hard checks for your mortgage in principle.
Limit the number of lenders you apply to, especially if they do hard checks.
Check your credit report to make sure everything is correct.

How can I get a mortgage in principle?

To get a mortgage in principle, simply go and apply directly to a lender – or use a mortgage broker. You’ll usually also need to provide a few basic details about yourself:

Your personal details (name, date of birth, address history);
How much you earn (salary, bonuses, benefits);
If you’re employed you might also be asked to show a payslip or P60. If you’re self-employed you might need an SA302 form.
How much debt you have (loans, credit cards), and how much you’re paying monthly towards that;
And information about any other monthly expenses (bills, living costs, supporting your family, and so on).

The application process is usually quick and can often be done online or over the phone. Many lenders will give you a decision in principle within a day.

How long is a mortgage in principle valid for?

A mortgage in principle usually lasts for about 60 to 90 days. If you don’t find a home within that time, you may need to apply for a new one. If you apply with the same lender, this usually won’t hurt your credit score, especially if it’s a soft check.

What happens if you're declined for a mortgage in principle?

If a lender says no to your mortgage in principle, it’s important to find out why. Here are some of the most common reasons that we’ve seen:

Your income is too low or not stable (for example, if you’re self-employed and just started trading);
You have too much existing debt;
The type of property you want doesn’t meet their rules;
Or your credit history is poor.

This last part is the easiest one to improve. While you can’t easily earn more or pay down debt quickly, you can take steps to improve your credit history today.

Luckily, there are many apps nowadays that can help you build and improve your credit history. One such app is Wollit.

Wollit works by reporting a fixed-fee monthly subscription as a loan repayment to all credit reference agencies. This helps you build a history of timely debt repayments, which is the main factor 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 you pay your bills on time and help you make the most of your rent while you prepare to become a homeowner.