The short answer is, no, getting rejected for a mortgage will not directly affect a credit score. However, the long answer to this question isn’t quite as black and white as that. Whilst rejection of a mortgage application itself won’t harm your credit score, the lender you have approached will have conducted a ‘hard search’ on your credit file as part of their assessment process. The record of this search may then have an impact on your score. If you have numerous hard searches on your credit file in a short period, then this can affect your credit score in a negative way.

So, what can you do to try to ensure that your credit score doesn’t get negatively affected when applying for a mortgage? In this article, we offer our top tips on keeping your credit score in check.

Common reasons for a mortgage rejection

Firstly, let’s talk about some of the reasons a mortgage application might get rejected. Whilst this is by no means an exhaustive list, it does contain a few of the more common reasons:

• A large number of credit applications in the past six months, resulting in multiple hard searches recorded on your credit report
• Poor credit history
• Recent missed or late credit payments
• A County Court Judgement (CCJ) or other adverse judgement on your record
• Large amounts of existing debt
• Not registered to vote on the electoral roll. This is important as it allows lenders to check some of your personal information and link that in with your credit history
• Failed the mortgage affordability assessment based on your current income and expenditure
• Self-employed or a contract worker with insufficient proof of consistent income
• Mistakes or inconsistencies on your application form and in supporting documentation, such as the incorrect address or spelling of names. Perhaps the payslips provided don’t match up with the claimed annual income
• Insufficient deposit available
• Failing to meet the income criteria for the size or type of mortgage applied for
• You’ve lived in the UK for less than three years
• They didn’t like the house that you were buying

If you do get rejected for a mortgage (or any other credit), it’s a good idea to try to find out the reason why. Mortgage lenders are not obliged to give any explanation for their decision, however, most will provide feedback if requested.

Find out more – ‘What happens if a mortgage application gets rejected?’

Why is my credit score so important when getting a mortgage?

When you apply for any type of credit, but particularly a mortgage, lenders will start by looking at your credit score to help them decide if you are creditworthy enough for them to lend to. This is because your credit score is a reflection of how you’ve managed credit facilities previously and is, therefore, an indication of how you are likely to manage your finances now and in the future.

A high credit score is generally an indication that you can be considered creditworthy and therefore lower risk to lend to. Applicants with a lower credit score will generally be considered a higher risk. They may find it harder to secure credit facilities. A low score is a warning to potential lenders that you may have a history of poor personal financial management. It may suggest a risk of future missed or late payments.

Although not all lenders will reject an application based simply on a poor credit score, they are likely to restrict any offer they make to mortgages with a less desirable interest rate. This is to compensate them for the increased perceived risk that they are taking in lending to you.

Find out more – ‘How does bad credit affect a mortgage?’

Why does a hard search affect a credit score?

A hard search on your report is evidence that you’ve applied for a credit facility of some sort. A lot of hard searches over a short period of time might suggest that you have a high reliance upon credit to fund your lifestyle or perhaps that you’ve had applications for credit rejected several times and are struggling to secure the mortgage you need.

This is generally taken as a warning sign and will negatively affect your credit score for at least the next six months. As we know, a poor credit score is likely to reduce your ability to get approved for credit in the future.

How to avoid mortgage rejection due to a poor credit score

Of course, no one wants to see their mortgage application get rejected. Especially because of a poor credit score. Luckily, there are some things that you can do to try and keep your credit score healthy and minimise the chance of your mortgage getting rejected.

Avoid applying for credit

Applications for credit usually stay on your file for a minimum of 12 months. However, they can stick around for a maximum of two years. With that in mind, it’s a good idea to avoid applying for too much credit in the months ahead of making a mortgage application in order to minimise the number of hard searches on your report.

If you do need to apply for credit, make sure that you only apply for credit you have been pre-approved for or that you are confident that you are eligible for. Some credit lenders will allow you to do a soft search before applying for credit to see if you are likely to be accepted. A soft search will generally not affect your credit score. Additionally, try not to make more than two or three applications for credit every few months. It’s a good idea to try to space them out as this may also help to protect your credit score.

Keep on top of your financial commitments

It may seem obvious – and we know that it’s easier said than done – but try and keep on top of your financial commitments at all times, but especially before applying for a mortgage. Make sure that all repayments on any loans, credit and utility bills are made on time and in full.

Ensure that credit card payments are also made on time. If possible, pay off outstanding balances each month. If you have any credit cards that aren’t in use, then it may be a good idea to close these down. Ironically, it can help your score to maintain and use at least one credit card. However, only if you keep well within the approved limit and clear the outstanding balance in full each month.

Ensure you are on the electoral roll

Lenders use information from the electoral roll to confirm details such as your full name, address and residential history. These details must match up to what you have put on your mortgage application. If they don’t match or you cannot be found on the electoral roll, then some lenders may choose to decline your application at this point.

If you are not on the electoral roll, try to get this rectified before applying for a mortgage. Check that all your details are recorded correctly, including spellings etc.

Check your credit file regularly

Obtain a copy of your personal credit file to make sure that the information recorded is accurate and up-to-date. Mistakes can and do occur. If you spot any errors then contact the lender concerned to get this corrected as soon as possible.

It is important to do this regularly to try and spot possible identity theft. This is where fraudsters use your personal details to fraudulently obtain credit. They then default on this credit, leaving you with adverse history on your credit file. This is becoming increasingly common. It can have a devastating impact and take a huge amount of time and effort to get corrected. You can obtain a free copy of your credit file from companies such as ClearScore.

Speak to a mortgage advisor

Lastly, speak to a mortgage advisor before you actually make any mortgage applications, particularly if you have concerns. No one will be better placed to help you than a professional.

A mortgage advisor, such as us here at Mortgage Light, will be able to help pinpoint any potential issues and put you on the path to success when applying for a mortgage. We’ll match you with the most suitable lenders for your situation and contact them on your behalf when we are confident that you are in a good position.

We’re here to give you the best possible chance. Need our help? We’re available to chat on 01908 597655 or you can contact us via our website.