An individuals credit score is one of the factors that can influence a lenders decision on whether to approve a mortgage.
The higher your credit score the better chance of having your mortgage approved as lenders may view you as being lower risk however the decision is not solely based on this. Lenders use such methods as credit scoring as part of their decision making process to assess your likelihood of repaying and use information on your credit report such as your historic information to identify any potential past credit issues for example CCJ’s, IVA’s, Defaulted payments.
Whilst your credit score is important, another factor mortgage lenders take into consideration is an affordability assessment as they want to make sure that you are able to repay your monthly commitment. Many lenders use a method called Stress Testing to measure affordability to show them that you could afford the mortgage payments if you had a change in your circumstances such as a reduction in income or even if interest rates were to increase.
An affordability assessment will take into account your Income and Expenditure other credit commitments, fixed monthly costs and costs which can fluctuate such as utilities.
The greater deposit you have can also be viewed as lower risk as this means your are borrowing less against the property value. Mortgages with lower a Loan to Value ratio could mean access to lower interest rates.
Paying your credit commitments on time and making more than just the minimum monthly payment can help to improve your credit score. If you are heavy reliant on credit and are close to your credit limits this could potentially be harmful to your credit score.
Not all mortgage lenders use the same credit reference agency, Experian and Equifax are typically the most common.
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