Below are some of the important factors that should be considered when planning for your mortgage approval
Lenders will determine your level of reliability through your credit score, especially when you want to borrow money. But since lenders make decisions differently, there is no assurance that having a good or bad credit score will guarantee your mortgage approval. You may still get approval with a bad credit score. Below are tips should be aware of when seeking mortgage approval.
What is a credit score?
Lenders or agencies will be able to see whether you can be reliable whenever you borrow money. They can determine how you make repayments. For instance, a credit score will be given by credit reference companies. When positive financial activities are carried out, like regularly paying your loans or responsibly utilizing your credit card, this would improve your credit score. Alternatively, carrying out negative activities on your credit score like exceeding your credit limit or not making regular payments would adversely affect your credit score.
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Based on the credit reference company, you would have a varying credit score because each company has a unique scoring system. This implies that credit score differs according to individuals since each lender has its unique interpretation of the borrowing history of every individual, although most of these agencies and lenders have the same requirement in evaluating the reliability of your credit score, which some consider a warning sign might be overlooked by others.
How lenders decide
In general, lenders have different perspectives and make decisions based on different factors. However, there are some crucial factors that determine the decisions of lenders such as general factors used by all lenders. Some of them are:
Your credit report information, which includes your credit history and public report information such as CCUs and IVAs.
Your personal information such as your bank account history as well as the account information you have with the agency.
The policy of the lending agency, although these policies can vary based on the information you provide when applying for the loan.
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What is regarded as a good credit score?
As previously mentioned that the scoring system of every lender and credit agency differs, there is no generally known good credit score or that your credit score will guarantee mortgage approval. Although in most cases, a high credit score will increase your chances. Below is a brief estimate of what can be regarded as a good credit score by big CRAs.
Equifax between 420 and 465
TransUnion Between 604 and 627
Experian between 681 and 960
Fore premium mortgage rates, and major CRAs are usually after these credit scores that have an “excellent” section.
Experian between 961 and 999
Equifax: between 466 and 700
TransUnion: between 628 and 710.
Don’t forget that having a good credit score is not an assurance that your mortgage application will be approved. Also, this implies that bad credits do not mean that your application would be denied. Evaluations would be carried out by lenders based on their unique criteria that exceed your credit score.
How many years of credit do I require to achieve a good credit score?
The first six years of your credit history will be evaluated by lenders. Therefore, most lenders will think twice before lending you money if you have just a few years of credit history on your report. Even though there is no predetermined time limit, you can automatically increase your credit score. For example, an individual that is only 22 years old, but uses their credit card in a sensible manner (and ensures that payments are made on time and regularly) can have a higher credit score than a 55-year-old individual that has numerous debts.
The most important thing to remember about credit scores is that several years of credit would be required to increase credit scores which must be good credits. There is every tendency that you might have to wait for poor credit sectors like CCJs, IVAs, bankruptcy as well as other warning signs to be eliminated before your mortgage application would be approved.
Is there mortgage providers that do not use credit score?
Sure, there are a couple of mortgage providers that would approve your mortgage request, even with a poor credit score or bad credit history. Buckinghamshire is n example of a mortgage provider that can accept a poor credit history. They also approve individuals with CCJs (County Court Judgements) as long as it is above six months alongside an IVA (individual Voluntary Agreement) that has been repaid in the past five years or more.
A professional mortgage provider or broker that collaborates with clients having poor credit can offer you professional advice when you are looking for the best rates. They can evaluate your condition and provide the best advice that will suit your current financial condition which will boost the possibility of getting your mortgage request approved.
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