A new tool from credit agency Experian promises to take the guesswork out of applying for a mortgage.
The tool estimates your chances of getting accepted for a mortgage by specific lenders, without leaving a mark on your credit report.
Here, we look at how the tool works and what to do if your credit score doesn’t qualify you for a mortgage.
Experian mortgage eligibility tool: how does it work?
Experian launched its mortgage eligibility tool on comparison website CreditMatcher, initially offering it to 50% of the users who visit the site. It takes into account your income, deposit, personal circumstances and your credit score, drawing on Experian records.
The tool asks for personal information, including your identity, address, income and debts, the size of your deposit and how much you want to borrow. It then draws on your Experian credit record to estimate which lenders are likely to accept your application. It also suggests which mortgage products might be suited to your circumstances.
Depending on your profile, you may get a rating of ‘Excellent’ or ‘Good’, indicating that you’re likely to be approved. If you have special circumstances – for example, you’re self-employed or a freelancer – the tool might mark you as ‘Review likely’, which means the lender will need more information.
In cases where you meet lenders’ eligibility criteria, but can’t afford the amount you’d like to borrow, the tool will tell you how much deposit you’d need to qualify. Finally, if you don’t meet any lenders’ criteria, the tool will return no results.
While CreditMatcher shows products from a wide range of lenders, the eligibility tool only draws from a limited pool of six: Barclays, Aldermore, Family BS, West Bromwich BS, Leeds BS and Platform. This means there may be other lenders out there that will consider your application.
The tool also only takes into account credit information from Experian, not the other credit agencies Equifax or CallCredit. If those agencies have different information on you, that could change the lender’s decision.
Find out more: credit reports – everything you need to know
Does checking your mortgage chances affect your credit score?
Before applying for a mortgage, it’s advisable to check your credit score from all three agencies. This will give you a good indication of how strong your history is and whether you have any red flags in your file. Agencies are obliged to let you access your credit file for £2. You can usually also access your score for free online, though generally with some limits.
You can view your own credit file as often as you like without bringing down your credit score. However, once you apply for a loan, lenders will typically conduct a ‘hard search’ on your record – a thorough examination which will register on your score. Too many searches in a short timeframe, or a search which leads to you being turned down, may significantly lower your score.
Experian confirmed its mortgage eligibility tool would not register as a ‘hard search’ on a user’s file, and wouldn’t impact their credit score.
Find out more: improving your mortgage chances – tips to help you get accepted
What if my credit score isn’t strong enough?
Don’t panic if your credit score is not strong enough to be accepted for a mortgage. There are still steps you can take to become a homeowner.
1. Look at your options with specialist lenders
While many high street lenders won’t offer mortgages to customers with poor credit, some specialist lenders may consider your application. These lenders tend to look at your credit history in detail, and take into account any extenuating circumstances that may have affected your rating.
With a specialist lender, you could end up paying a higher interest rate or need to put down a larger deposit. Still, if you build a good track record of mortgage repayments, it may be possible to remortgage on a better rate after a few years.
Find out more: bad credit mortgages – see our list of specialist lenders
2. Talk to a mortgage broker
If you have complex circumstances – including poor credit – a mortgage broker could help you find the right mortgage product. Brokers can tell you which lenders will consider your application and how the deals compare, as well as how to submit the strongest possible application.
3. Work on improving your credit score
Most options for building up your credit score involve demonstrating a consistent track record of responsible spending. You could apply for a ‘credit builder’ card, designed for people unlikely to qualify for traditional credit cards. You should also work on paying down any outstanding debts and keeping your overall credit usage low.
4. If you’re a tenant, register for CreditLadder
Tenants have an opportunity to make rent payments count towards their credit history by registering with CreditLadder. The app will report consistent and on-time payments to Experian, which will incorporate it into your credit score. However, the scheme is fairly new, and not all lenders will take rent payments into account at this stage.
Parliament is also due to debate whether rent payments should affect credit scores, after a petition on the issue attracted 147,307 signatures.