Poor credit scores deter 1 in 10 Brits from applying for a mortgage

One in 10 Britons have been deterred from applying for a mortgage due to poor credit scores, new research by The Mortgage Lender (TML) reveals.

The survey of 2,000 UK adults suggests a limited understanding of credit scores, with 62% saying they did not know their credit score. Some 50% of those who plan to buy a property in the next year are unsure about their score.

Of those who didn’t know their score, many were also unsure of how to improve it, nor did they have an interest in doing so. Nearly two-thirds (60%) of respondents said they had never taken steps to improve their credit rating, while a further 13% said they weren’t clear on what steps to take to improve their credit situation.

Peter Beaumont, chief executive officer at The Mortgage Lender, says the number of people who don’t know their credit score, despite wanting to make big purchases like buying a house, is a worrying trend.

“It shows there is a need for education among UK adults on what their credit score is, how it could impact major buying decisions such as home buying, and how to improve it,” he adds.

“With house prices rising rapidly, it’s already a challenge for many buyers to either get on or move up the property ladder and understanding your credit score early on will help you to plan ahead and access finance when you need.”

Beaumont continues: “With prices rising across the board, it can be tempting to take on too much debt but be wary of ‘too good to be true’ products and services. This will help to ensure you don’t take any unexpected hits to your credit score. Buy Now Pay Later products, for example, can cause problems later down the line should you miss a repayment or pay late.”

In addition to the negative financial impact many have experienced due to the pandemic, Beaumont says people across the UK will be feeling an additional pinch due to the rising cost of living.

“But a small blip on a credit score shouldn’t mean they are automatically excluded from a mortgage,” he says. “Specialist lenders can support, where often the high street cannot, by offering products suitable for those with less than perfect credit scores.”

“Talking to a mortgage broker will help to ensure you can find lenders that can help with your property ambitions.”

For those unsure about their credit score and how to improve it, Beaumont lists three small steps to take. These include:

• Registering on the electoral roll at your current address

• Making regular payments like bills on time

• Building your credit history by using – and then paying off on time – a credit card