Unlocking Your Experian Mortgage Score: A Guide

A good credit score is essential when it comes to getting approved for a mortgage and the rate you receive. While a higher credit score can make getting a mortgage easier and more affordable, the score requirements vary depending on the credit reference agency. Experian's scoring system ranges from 0 to 999, with a score of 710 considered 'Very Poor' and a score of 595 considered 'Poor'. To find out your Experian mortgage score, you can access your free credit report and FICO® Score on the Experian website. It's important to note that mortgage lenders consider other factors beyond your credit score, such as credit history, employment, income, and mortgage reserves.

Understanding the credit score requirements for mortgage loans

Your credit score is an important factor in getting approved for a mortgage and the interest rate you receive. Most lenders use FICO Scores for mortgage applications, and a higher credit score can help you qualify for a lower interest rate. The credit score requirement depends on the type of mortgage you're applying for. For example, government-backed mortgages have different minimum credit score requirements compared to conventional mortgages.

Lenders often request a tri-merge credit report, which combines information from all three credit bureaus and the associated FICO Scores. They might use the middle credit score, or if you're applying with a partner, the lower middle score of the two. If you're applying for a loan on your own, lenders get your credit score from each of the three major credit rating agencies and use the middle or median score to qualify you for a home loan.

The ideal target credit score for a conventional mortgage is 740 or higher, but some lenders will accept a minimum score of 620. You can get a mortgage with a lower score, but the interest rate and terms will likely be less favourable because you'll be seen as a higher-risk borrower. For example, a credit score below 580 is considered subprime lending and will result in higher interest rates.

To improve your credit score, focus on the underlying factors that affect your scores. Make at least the minimum payment on time, as even a single late payment can hurt your credit score. Keep your credit card balances low, as your credit utilization rate is an important scoring factor. Your credit history, employment and income, and mortgage reserves are also considered when applying for a mortgage.

How to improve your credit score

Improving your credit score is crucial for accessing favourable financial solutions like home loans, car loans, and personal loans. Here are some ways to improve your credit score:

Firstly, understand the factors that affect your credit score. The most important factor is your payment history, which accounts for 35% of your score. Even a single late payment can negatively affect your credit score, and it will stay on your report for up to seven years. Therefore, it is essential to make timely payments on all your credit accounts and loans. If you think you may miss a payment, contact your creditors as soon as possible to discuss your options.

The second most important factor is your credit utilisation rate, which makes up 30% of your score. This considers the amount of money you owe, your account balances, and how much of your available credit you are using. It is recommended to keep your credit utilisation rate low, ideally below 30%. People with excellent credit scores tend to have an overall utilisation rate in the single digits.

The length of your credit history also matters, contributing 15% to your score. The longer your credit history, the better. The average age of your credit accounts is considered, as well as the age of your oldest and newest accounts.

Additionally, consider your credit mix, which accounts for 10% of your score. Lenders look at whether you are managing both unsecured and secured loans, such as credit cards, car loans, personal loans, and mortgages. Finally, new credit applications or the opening of new accounts can also impact your score, also accounting for 10%. Each application triggers a hard inquiry on your report, which can temporarily lower your score.

Other ways to improve your credit score include regularly reviewing your credit report for errors and inaccuracies and disputing any mistakes. Keeping unused credit cards open can also increase your overall available credit and lower your utilisation rate. Finally, consider using a program like Experian Boost, which allows you to link your utility and phone bill payments to your credit report, potentially boosting your score if you have a history of on-time payments.

How credit scores vary across different credit agencies

Credit scores can vary across different credit agencies due to several factors, including the scoring model used, the timing of data updates, and the specific information considered. Here's an overview of how credit scores can differ between agencies:

• Scoring Models: Different credit agencies may use distinct scoring models, such as FICO or VantageScore. These models employ different methods and weightages for calculating credit scores. For instance, VantageScore may place more emphasis on certain types of credit accounts or behaviours than the FICO model. As a result, your VantageScore and FICO score may differ.
• Data Updates: Credit bureaus receive information from lenders, collection agencies, and court records at varying times. Consequently, one agency might possess more recent data than another, leading to discrepancies in credit scores. The passage of time itself can also contribute to score variations due to the dynamic nature of credit information.
• Information Sources: While the three major credit bureaus (Equifax, Experian, and TransUnion) collect similar information, there can be unique data points captured by one bureau that the others may not have. Additionally, the same data element might be stored or presented differently across bureaus, leading to variations in credit scores.
• Weightage of Factors: Even when agencies use the same scoring model, they might assign different weightages to various factors. For example, one agency might give more importance to payment history, while another might focus more on credit utilisation rate.
• Credit Report Errors: Inaccuracies or discrepancies in credit reports can also lead to variations in credit scores across agencies. It's important to regularly review your credit reports and dispute any errors or fraudulent information that could negatively impact your scores.

It's worth noting that while credit scores may vary, the underlying factors that affect your creditworthiness tend to be consistent across agencies. These factors include payment history, credit usage, length of credit history, types of accounts, and credit utilisation rate. By focusing on maintaining good financial habits, such as making timely payments and keeping credit card balances low, you can positively influence your credit scores across the board.

The factors lenders consider when reviewing your mortgage application

Lenders consider many factors when reviewing your mortgage application, and there's often a minimum credit score requirement. A higher credit score can make getting a mortgage easier and more cost-effective. The most commonly used credit scoring models top out at 850, but you don't need a perfect score to get the best loan offer. Mortgage lenders tend to offer the best rates and terms to everyone who has a score above a certain point, such as 740 or 780.

Mortgage lenders often require a FICO® Score of at least 620, but you'll have better chances with a score of 670 or higher. Lenders might also use the VantageScore, which falls in the range of 501 to 990. However, lenders don't commonly use these scores.

• Credit score and history: Lenders will look at your credit score and history to assess your financial track record and ability to manage obligations. They will consider your payment history, credit usage, length of credit history, and types of accounts. Even if you have a good credit score, lenders might deny your application if you have a history of bankruptcy or foreclosure.
• Income and employment: Lenders want to see that you have a consistent, predictable, and stable income. They will review your tax returns, pay stubs, and may contact your employer to verify this information. They will also consider your income sources, such as investments, and the longevity of your income.
• Assets and savings: Lenders will evaluate your assets, savings, and investments to determine your financial stability and ability to afford the loan. They will consider the value of your properties and other possessions that can be used as collateral for the loan.
• Down payment: Lenders will assess whether you have an adequate down payment for the loan.
• Loan type: The type of mortgage you are applying for can affect the down payment, maximum loan amount, eligible properties, and interest rate. Lenders will consider whether the loan is for a primary residence or a second home/investment property, as borrowing criteria differ due to the increased risk of multiple mortgages.

How to check your Experian credit score

To check your Experian credit score, you can use the Experian website or app. Experian offers a free credit report and FICO® Score, which you can access by signing up for an account on their website. You can also use the Experian app to get credit alerts and manage your money on the go.

It's important to note that your credit score can vary depending on the credit bureau or agency you're using. Experian, Equifax, and TransUnion are the three major credit bureaus, and each has its own scoring system. For example, Experian credit scores are out of 999, while Equifax scores are out of 700. So, a credit score of 700 would be considered "excellent" on Equifax but only "poor" on Experian.

Additionally, different types of mortgages may have varying minimum credit score requirements. Government-backed mortgages, for instance, have a minimum credit score requirement, but this tends to be lower than the scores required by lenders. For example, Veterans Affairs (VA) loans don't have a minimum credit score requirement, but many VA lenders require a credit score of at least 620.

There are several factors that can affect your credit score:

• Payment history: Making on-time payments on your credit accounts can help your score, while missing payments or having an account sent to collections can hurt your score.
• Credit usage: This includes the number of accounts with balances, the total amount you owe, and your credit utilization rate (the portion of your credit limit used). Keeping credit card balances low can help improve your score.
• Length of credit history: This considers the average age of your credit accounts and the age of your oldest and newest accounts.
• Types of accounts: Also known as "credit mix," this looks at whether you have a mix of installment accounts (such as loans) and revolving accounts (such as credit cards).

By understanding these factors and regularly checking your credit score, you can work towards improving your credit and increasing your chances of qualifying for a mortgage.

Frequently asked questions