What credit score do you need to buy a house?

What is a credit score?

Since you require a good credit score to buy a house, you’ll want to know more about yours. Essentially, a credit score indicates how reliable you are when it comes to borrowing money. When a credit score is created, lenders can/will review your credit files before accepting the mortgage amount that you intend to use against your new home.

How do you get a credit score?

A credit reference agency will provide you with a credit score (which will be based on how you’ve managed repayments in the past). For example, if you previously took out a bank loan or a finance plan for a car, credit companies can assess if you’ve paid these bills on time. Your track record will then be taken into account  for your overall credit score when buying a house.

Your credit score will differ from one credit reference agency to the next, which is certainly something to bear in mind. But why is this so? Essentially because each individual agency will use its own scoring system. However, a credit file will always work in a similar way.

There are different scoring levels because:

-    Each lender will report to different agencies.

-    The date is more important than you think because the date you check affects your credit score.

-    Every lender has a different scoring system.

What credit score is needed to buy a house?

There isn't an exact credit score to abide by when buying a house becauseevery credit agency’s scoring system differs. But like with most things, the higher your credit score, the more trustworthy you’ll look to potential mortgage lenders.

So, what credit score is good to buy a house according to some credit agencies? We’ve listed the different ratings from three of the most popular credit companies for house buyers, ranging from very poor to excellent credit ratings.

Experian

-    Very poor = 0-560  

-    Poor = 561-720  

-    Fair  = 721-880  

-    Good = 881-960  

-    Excellent = 960-999.

Equifax

-    Poor = 0-438 

-    Fair = 439-530  

-    Good = 531-670

-    Very good = 671-810  

-    Excellent = 811-1,000.

TransUnion

-    Very poor = 0-550

-    Poor = 561-565

-    Fair = 566-603

-    Good = 604-627

-    Excellent = 628-710.

What can help your credit score?

If you’re reviewing your credit score when buying a house, it might be a little lower than you’d hoped. Don’t worry, though; there are several ways to improve your credit score, which we’ve listed below. 

Removing any credit report errors

Checking (and amending) any errors on your credit report will considerably improve your credit score. Because when you’ve entered information into your report, such as your home address, you might have misspelt it, or put in the wrong house number by accident. 

Of course, mistakes can happen, but the cleaner your credit report is, the more trusted you appear to lenders. So, it’s important to go back and review your credit report to tidy up any inaccuracies.

Try to avoid applying for new lines of credit

To keep everything ticking along nicely with your credit score, it’s best to reduce your spending with new credit companies. Generally speaking, it’s better to keep your credit utilisation rate as low as possible; preferably at (or under) 30%. You’ll need to think twice before applying for a shiny new car on finance so close to your mortgage application, for example. 

Keep old accounts in check

To increase your credit score when buying a house, ensure you don’t close any old accounts. Some people think closing old bank accounts, will improve their credit score. However, this is incorrect because closing accounts can more harmful than you’d expect. 

So even if you’re not using an old bank account, it’s better left untouched. Doing so will prevent new changes from hindering your credit score, keeping it nice and high, and even improving it.

There you have it, everything you need to know about what kind of credit score to buy a house with, alongside tips to follow to improve and sustain a good credit score for when you’re buying a house. 

To learn more about the process of buying a new build home,  browse our home-buying advice hub.