No Credit vs Bad Credit – Which Is Worse For Getting A Mortgage?
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Credit allows you to borrow money or purchase goods and services with an agreement to pay later. So, if you’ve ever purchased products using finance, used a credit card, or have a mortgage, these are all common examples of credit.
Do I have credit or a credit score?
When it comes to credit and credit scores, you can’t have one without the other. When you use credit you automatically have a credit file with a credit score. Your score is free to access online at any time from three agencies in the UK: Experian, Equifax, and TransUnion.
If you’ve had one of the following then you will have a credit score:
- Pay later finance for a product or service
- Credit card
- Mortgage
- Loan (excluding student loans)
If you have never had any of the above then you will have no credit or credit score.
What is bad credit?
Your credit score is usually a 3-digit figure that looks at your credit history and is used as a key indicator of how healthy your finances are. It’s often used by mortgage lenders to determine whether you can afford repayments on your loan.
Your credit score will usually range from 300 – 850, and it’s best to aim for a score of more than 700 as anything less than that can be considered a ‘bad credit’ score.
To find out whether you have a bad credit rating today you can access your credit file through a credit reference agency website, or by requesting a written copy.
No credit vs bad credit – which is worse?
Now you know what no credit and bad credit is, we’re going to look at which is more likely to get you a mortgage.
For mortgages, a credit score is one of the key determining factors in whether or not a lender will consider you eligible for their mortgage product. If you have good credit you will be viewed more favourably. If you have bad credit you may need to make some financial or lifestyle adjustments to improve your credit and chances of getting a favourable mortgage plan.
If you don’t have credit then mortgage lenders will have no credit history about you and will be unable to calculate the level of risk or your level of financial responsibility. One of the quickest ways to remedy this problem is to apply for a credit card, but you can always speak to a mortgage broker to determine the best course of action for your circumstances.
While a bad credit score can be more difficult and take longer to overcome than having no credit, there are certainly plenty of remedies to get you back on track.
At Derngate Wealth Management we are an independent mortgage advisor Northampton who can help you remedy your credit file to increase your likelihood of getting a mortgage plan that works for you.
Contact us today to book a free initial consultation and get your credit score back on track.
Sources:
Experian:
https://www.experian.com/blogs/ask-experian/credit-education/faqs/what-is-credit/
https://www.experian.com/blogs/ask-experian/is-no-credit-better-than-bad-credit/
Money Saving Expert:
https://www.moneysavingexpert.com/students/student-loans-tuition-fees-changes/