In this brief guide, we are going to answer the question “what do mortgage lenders look for on credit reports”

When you make a mortgage application the mortgage lender will always ask to see your credit report. In the past, this used to be a physical credit report but as of now, mortgage lenders can carry out their credit checks using automated decision systems.

This doesn’t change the details that mortgage lenders will look for on your credit report and this guide goes into what mortgage lenders look for on your credit report.

What do mortgage lenders look for on credit reports?

Below we will highlight some of the key things which mortgage lenders look for on credit reports

  • If your name matches
  • If your address matches
  • If you are on the electoral roll
  • What your debt to income ratio is
  • What your credit score is
  • How many credit accounts you have open
  • If you have any overdrafts
  • If you have ever had any payday loans
  • If you have recently been searching for credit
  • How long you have lived at your current address
  • How long you have had your credit accounts open for
  • Your repayment history on your credit accounts.
  • What your credit utilization is
  • If you have any bad credit

If your name matches

The main thing most mortgage lenders will look to check for on your credit report is if the name you have on your credit report matches the name you have out don on your mortgage application.

If it doesn’t then you will need to change it to match your credit report and any identifying documents you have if not your mortgage application could be rejected for that reason.

If your address matches

Another thing mortgage lenders will look for on your credit report is to check if the address you have put on your mortgage application matches the address the mortgage lender can see on your credit report.  If your addresses don’t match then you may need further supporting documents to prove your address or you could see your mortgage application refused.

If you are on the electoral roll

Another important thing which mortgage lenders look for on your credit report is to see if you are on the electoral roll.  Most mortgage lenders will not lend to borrowers who are not on the electoral roll at their current address.

If you are not on the electoral roll at your current address then you can do this quickly by registering to vote at your current address.

What your debt to income ratio is

Another important thing which most lenders will look for on your credit report is your debt to income ratio.

Whilst your debt to income ratio is not presented in your credit report, a mortgage lender can work out what your debt to income ratio is by calculating your existing debts from your credit report and using the income information submitted on your mortgage application to work out your debt to income ratio.

What your credit score is

When a mortgage lender looks at your credit report they will look to see what your credit score is. Some mortgage lenders will have a minimum credit score they will lend to based on their mortgage eligibility criteria.

How many credit accounts you have open

Another important thing a mortgage lender will do when checking your credit report is to check how many credit accounts you currently have open.

This allows the mortgage lender to see how many different monthly repayments you may need to make each month.

If you have any overdrafts

Another thing mortgage lenders will want to see on your credit report is if you have any overdrafts and how much you have in overdrafts.

If you have ever had any payday loans

Mortgage lenders will also look to see if you have any payday loans on your credit report. Most mortgage lenders will not lend to borrowers who have taken out payday loans in the past.

If you have recently been searching for credit

When looking at your credit report, mortgage lenders will look to see how many recent hard credit searches you have had on your credit report.

If you have had any recent searches on your credit report then some mortgage lenders will automatically reject you via their automated decision-making systems.

This is due to the mortgage lenders eligibility criteria.

How long you have lived at your current address

When looking at your credit reports, the mortgage lender will look at how long you have levied at your current address. This information may not make too much difference to your mortgage affordability but it just allows mortgage lenders to understand your stability more.

How long you have had your credit accounts open for

Another vital information which mortgage lenders look for on your credit report is how long your credit accounts have been open.

If you have credit account which has been open and closed in a short time then this may indicate that you are doing something which could potentially be fraudulent.

Your repayment history on your credit accounts

When looking at your credit reports the mortgage lender will look at how often you repay your monthly credit obligations.

If you miss out on your credit obligations often then this could be a sign of negative credit behaviour and the mortgage lender may refuse to lend to you.

What your credit utilization is

Another important thing mortgage lenders may look for on your credit report is your credit utilization. 

Your credit utilization states how much credit you are using in comparison to your overall available credit. If your credit utilization is above 30% then the mortgage lender may think you are dependent on credit. 

If you have any bad credit

When a mortgage lender looks at your credit report, they will also be looking to see if you have any bad credit.

Bad credit could include:

  • County court judgements A CCJ
  • An Individual voluntary agreement (IVA)
  • A debt management plan (DMP)
  • A default
  • A bankruptcy
  • A home repossession

If you have bad credit then you may find it much harder to get a mortgage with a good mortgage rate and the minimum mortgage deposit required.

Tips for improving bad credit

  • Get a credit builder card to show good repayment behaviour
  • Get a secured credit card to show good repayment behaviour
  • Get a credit builder loan to show good repayment behaviour
  • Keep your financial accounts open as long as possible
  • Get on the electoral register
  • Avoid missed credit repayments
  • Avoid late credit repayments
  • Keep your credit utilization below 30%
  • Report your rental payments to the credit bureau
  • Avoid being rejected for credit
  • Avoid applying for too much credit in a short space of time

Need a mortgage? Use a mortgage broker

You may want to consider using an independent mortgage broker to get a mortgage.

Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases.

This could be over 11,000 mortgage products. This may have some advantages rather than going directly to a mortgage lender.

A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you based on your mortgage affordability.

After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle. 

This will allow you to shop for your home easier as more estate agents and sellers may take you seriously or it will give you confidence that your mortgage is indeed a possibility before you make a full mortgage application. 

Once you have found a home you want to buy and are satisfied with the mortgage offer for your mortgage then the mortgage broker will then look to get you a mortgage offer.

This will come with a key facts illustration document which details out the features of your mortgage including how much you will pay per month.

It will also contain information on if there are any limits such as early repayment fees, or annual overpayment limits.

If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer.

Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it.

They will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer and set a completion date with the seller or their conveyancer.

In this brief guide, we answered the question “what do mortgage lenders look for on credit reports”

If you have any questions or comments please let us know.

John Bate

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.