How fast can I improve my credit score for a mortgage?

Here are some questions I have seen recently about how long it takes to improve your credit score for a mortgage:

• I was foolish with credit cards for years but now I am determined to buy a house – how long will this take?
• My credit score is dreadful. My new partner has a good credit record and we want to get a mortgage.
• I have a poor credit rating but I have now inherited a deposit. How do I improve my credit score so I can buy a house?
• My credit score isn’t good as I have never borrowed anything – how can I get a mortgage offer?

Each mortgage lender has its own policy on what is acceptable. And some of these have changed in 2020 because of Covid-19.

But this article has general guidelines to help you work out what will improve your situation.

Does your credit rating really matter for a mortgage?

Some people say a credit score doesn’t matter for a mortgage. It’s true you can have a perfect credit score and be refused a mortgage. And it’s sometimes possible to get a mortgage at an OK interest rate with a much less than perfect credit score.

But credit records do matter, not the score itself but what your credit history shows.

The three fundamental issues for being offered a mortgage are:

1. Do you have a large enough deposit?
2. Is the mortgage affordable for you? The lender will do a stricter calculation than you might think;
3. How well have you handled credit in the past?

Your credit score is one of the ways lenders to assess the third question – how you have managed credit. So if you have a poor credit score, look at this in detail and think about how soon it will improve.

There is a big exception here. If you already have a mortgage and you want to get another fixed rate, your current lender will very often not bother to check your credit record at all, so the rest of this article may not matter – see After a fixed rate mortgage ends, fix again.

Get the facts

Start by getting all the facts about your debts, from all of the three big credit reference agencies. See The best free credit reports for how to do this.

If you only look at one, you may miss something bad on another one as not all lenders report to all of the CRAs.

It’s good to do this at least six months before a mortgage application so if you see any errors you have time to get them corrected.

When will your credit record be “clean”?

Check your three credit reports to find out:

• the dates of any defaulted debts. These disappear from your credit record after 6 years after the first default date on that debt. Don’t worry that defaults are still being added each month, these don’t matter;
• if any debts are marked as in arrears or in an arrangement to pay. These debts will drop off your credit record 6 years after the debt is settled;
• the dates of any CCJs. They will drop off after 6 years;
• the start dates of any insolvency – bankruptcy, IVAs or DROs. These disappear 6 years after the date (or when your IVA is completed if that is longer than 6 years);
• the dates of any payday loans. Most high street lenders will not consider you for a mortgage if you have had a payday loan in the last two years.

Knowing these dates gives you a timescale to a completely “clean” credit record.

Don’t panic if it seems ages away – your credit record doesn’t have to be completely clean, as the next section discusses. But this gives you the facts and shows what areas you have to tackle.

Can you speed this up by paying the debts?

Paying problem debts (defaulted debts, debts in debt management or with an arrangement to pay) doesn’t improve your credit score. But it is essential that you repay problem debts before applying for a mortgage.

Many lenders have a policy that they will offer a mortgage if your problems happened a while ago, they have all been resolved and you haven’t had any more problems.

The rough rule of thumb pre-pandemic is that you could get a mortgage at an OK interest rate from a high street lender:

• if all your defaults were more than three years ago
• and you had repaid all the defaults and any arrangement to pay debts more than a year ago.

But Covid-19 and then the cost of living crisis has made lenders more risk-averse. Many now want the defaults to have been settled for a couple of years – or even longer if you only have a 10% or 15% deposit.

Often better to repay debts first then save deposit

If you were going to repay your debts over the next three years and also save up the deposit during that time, you should think about a different plan.

It may be better to use all the money in the first year to pay off the debts the save the deposit in the next two years. That means when you apply for the mortgage, your debts will have been settled for longer. See How to juggle repaying debts and saving a deposit for details.

If a creditor makes you a settlement offer, you may be worried that this will later harm your chance of getting a mortgage.

In theory it can… but many lenders don’t care and for most people the key thing is to settle all their defaults as soon as possible.  See Will partial settlement make it hard to get a mortgage? for more details.

Debts that have fallen off your credit records

I said you have to repay them all – this even applies when debts have dropped off your credit record.

(The exception – this doesn’t apply if your old debt is “unenforceable” for some reason. This could be because it is Statute barred or because the creditor cannot produce the CCA agreement for the debt. Here the creditor can’t take you to court for a CCJ. If you aren’t sure about this, talk to National Debtline on 0808 808 4000 about it – they can help you understand if it applies to any of your old debts that aren’t on your credit record.)

Your credit record isn’t the only way a lender can see what debts you have – debts you are repaying also show up on your bank statements. And you can’t stop paying a debt when it disappears from your credit record or you will get a CCJ which wrecks your chance of a mortgage for another 6 years.

So your credit record may now look great if you are in an old debt management plan, but you are very unlikely to get a mortgage until the DMP has finished.

Lenders are more concerned about CCJs and hate insolvencies

Most high street lenders will not give you a mortgage if you have a CCJ still on your credit record, even if it has been paid.

If you have just discovered a CCJ you knew nothing about on your credit record – perhaps a parking ticket? – act fast and talk to National Debtline to see if you can get the CCJ set aside.

No lender will give you a mortgage if you have insolvency still showing on your credit record.

I’m not talking here about a “bad credit” mortgage – those are very expensive and should be avoided. A bad credit broker may say you can just remortgage to a cheaper one in a couple of years… but you may not be able to do this.

Some ways to improve your credit score faster

For problem debts

Do any of your default dates look too late? If you can get them changed to be earlier, the debt will disappear sooner. Also think if any of the debts with Arrangement to Pay markers should really have had a default added, so they will drop off sooner. See What should the default date for a debt be? for more about this.

It isn’t usually possible to get a default removed, but see When can you get a default deleted? for some examples. NB you do not want to do this if it means the debt will have an arrangement to pay marker instead, as that means the problem will show on your records for longer.

Consider whether you could win an affordability complaint about a debt with credit record problems – often this will get you not just a balance reduction/refund but your credit record problems will be cleaned as well.

For insolvency, follow the rules on how to clean up your credit record after your type of insolvency: bankruptcy; IVA; or DRO.

For non-problem debts

Many mortgage lenders will also care about some other things which may surprise you. These are all good guidelines that will make it easier to pass the lender’s affordability checks as well as credit history checks:

• aim to pay down credit card and catalogue debts so that you are using less than 30% of the credit limit. Clearing the balance in full every month is best!
• it’s best to be paying more than the minimum amounts to credit cards and catalogues;
• no payday loans in the two years before you apply for a mortgage. Even if you repay them on time they are seen as showing you aren’t good with money;
• don’t go over your overdraft limit. Reducing the amount you use your overdraft is good – and it will also save you a lot of money;
• don’t use Klarna and other buy now pay later lenders. They may impact a lender’s affordability calculations. .

A “thin” credit file

It is incredibly frustrating to be turned down for a mortgage because you have never borrowed money in the past. If you have a great deposit and will very easily pass the affordability checks, talk to a good broker to see if any lenders will accept you. But if you don’t, what can you do?

The following suggestions may help a credit record with very little on it. They will not improve a credit record if there are a lot of problems.

• Get a “bad credit card”, use it each month for something small and repay it in full every month. This looks good to a lender and means you don’t pay the high-interest rate. This makes your credit rating worse for a few months but from 6-12 months you will see your credit score improving. Be careful – these cards can make your situation worse very fast if you don’t repay the balance in full every month.
• Look at LOQBOX  – it helps your credit score whilst you save. That too will take at least 6 months before your score starts improving.
• Experian’s Boost promises it will only increase your credit score, not harm it. But the amounts are small and there is little evidence that mortgage lenders are impressed by this.

Stop any new problems happening

If it’s going to take a while to sort out your old debts and/or save a deposit, don’t let any new problems land on your credit record.

Here are some tips:

• try to pay as much by direct debit as possible so you can’t miss a payment if you are busy/sick/on holiday;
• be careful when you cancel any direct debit or change address. Double-check that all your old bills are paid so you don’t get a default. Water bills after a move and mobile bills when you have switched are a common cause of problems!
• make sure DVLA always has your correct address. CCJs from a parking ticket you didn’t know about are a disaster.

Go through a mortgage broker

It is always good to go through a broker. Look for one that covers the whole market, not the one an estate agent happens to recommend.

Not only can a good broker find you deals you didn’t know about, but they will also know which lenders to avoid if you have had different sorts of problems. See MSE’s recommendations for a good broker.

Other articles about mortgages

• Getting a mortgage with debts This looks at the wider problem, eg the affordability calculations.
• 95% mortgages You may need a very good credit record to get one.
• very long mortgages. A 35 or 40-year mortgage will reduce your monthly payments but think about the problems they often bring.