How bad is having limited credit history before applying for a mortgage?

Blibble

Hi!

I've been around this forum for weeks / months now, reading up as a first time buyer on everything and anything I can surrounding mortgages and the process of property buying. My girlfriend and myself are looking towards contacting banks next month to discuss an agreement in principle, so I've tried to absorb as much information as possible (and I like to think I've done a good job).

One thing's bugging me, though. We're both 22, and have little credit history. By little, we've never owned a credit card between us as we've always wished to avoid debt wherever possible (my Dad always swore by the adage of "if you can't afford it, you can't have it"). Sure, bills have come out of my account by direct debit on time for the last 4 years, and I imagine this would count towards it. I've run our circumstances through Santander's affordability calculator for brokers (I would link, however MSE won't allow me to as a new user) which indicated provisionally that we would be good to go with the amount of money required, but I keep worrying that the fact we're first time buyers with little history will makes us seem a large risk to any potential mortgage provider.

Any reassurance would be grand - if you need clarification on our circumstances / calculations then I'm happy to oblige. Cheers.

enjoyyourshoes

Have you read the MSE articles on credit history?

Are you both registered with LA on electoral role at your most recent address.

Many current account allow you to get CC, could you not apply for one and use it like your switch card and account for the spending in same manner, then set up DD for paying off full amount each month.

Do research on best mortgage for you before you choose which company to go for.

Have you both got Help to buy isa? Government give you 25% value isa when used for deposit. Again MSE will guide you through.

amnblog

Your history is what is it and you wont know your options until you apply.

A lot will depend on your deposit situation. The smaller you deposit relative to the requested mortgage, the tighter the credit score.

You don't need an active credit card account on your history to obtain a mortgage.

Blibble

Hi,

Yep, both on electoral role & with HTB ISAs in place. We've scrimped and scraped and are just under 90% LTV now as of this month. I have considered the option of getting a CC with my bank, especially as there's cashback options etc., but do you think it'd make an improvement to our credit rating (bearing in mind it'd only be active on our file for 1 - 2 months max before seeking AIP).

Thanks for the reassurance amnblog - I guess this is partly what I was concerned about. I think I'm more getting nervy trying to prepare for our application haha!

Thrugelmir

Focus on saving for your deposit. Don't think you need to borrow money to improve lenders perceptions of you.

MortgageMamma

Having limited credit history isn't impossible where mortgages are concerned. I've just done one for a 19 year old who only has his bank account, no credit whatsoever. Not even a mobile contract bless.


The lender was a little more meticulous when going through the know your customer requirements. They insisted on 6 wage slips and 6 bank statements and extra proof of ID and address. All was fine once those details were provided.


I can't speak for every lender how they would deal with it since its rare we get someone with limited credit history. Other brokers may be able to shed light on it.

Blibble

MortgageMamma wrote: »

Having limited credit history isn't impossible where mortgages are concerned. I've just done one for a 19 year old who only has his bank account, no credit whatsoever. Not even a mobile contract bless.

Add 3 years on to that and I'm in the same position! I've never seen the appeal personally, but that's a grumble for another day.

Would you recommend a broker in such circumstances MortgageMamma? We were just thinking of sourcing our own mortgage and approaching directly as it would save another fee, however I imagine there would be a case for a broker in this instance?

HappyMJ

Blibble wrote: »

Hi!

I've been around this forum for weeks / months now, reading up as a first time buyer on everything and anything I can surrounding mortgages and the process of property buying. My girlfriend and myself are looking towards contacting banks next month to discuss an agreement in principle, so I've tried to absorb as much information as possible (and I like to think I've done a good job).

One thing's bugging me, though. We're both 22, and have little credit history. By little, we've never owned a credit card between us as we've always wished to avoid debt wherever possible (my Dad always swore by the adage of "if you can't afford it, you can't have it"). Sure, bills have come out of my account by direct debit on time for the last 4 years, and I imagine this would count towards it. I've run our circumstances through Santander's affordability calculator for brokers (I would link, however MSE won't allow me to as a new user) which indicated provisionally that we would be good to go with the amount of money required, but I keep worrying that the fact we're first time buyers with little history will makes us seem a large risk to any potential mortgage provider.

Any reassurance would be grand - if you need clarification on our circumstances / calculations then I'm happy to oblige. Cheers.

You don't need any history at all (as long as you've got a decent deposit).

Someone saving over 6 years may not have any requirement to use any credit at all. Why use credit when you've got thousands sitting in the bank waiting for it to accumulate to a figure large enough to put down as a deposit?

You also do not need to be on the electoral register.

You just need to be able to be identified as someone with the right to reside and work in the UK. A British/EU passport or a non-EU passport showing a valid visa would be ideal but there are other ways.

Blibble

Hi HappyMJ,

Whilst that sounds lovely in principle, the issue is the "decent deposit" bit! We're first time buyers, 12 months out of university, and have only just hit 90% LTV (I realise there is equity loan at £20% which goes towards it additionally).

MortgageMamma

Blibble wrote: »

Add 3 years on to that and I'm in the same position! I've never seen the appeal personally, but that's a grumble for another day.

Would you recommend a broker in such circumstances MortgageMamma? We were just thinking of sourcing our own mortgage and approaching directly as it would save another fee, however I imagine there would be a case for a broker in this instance?

Unfortunately we are not allowed to recommend other brokers in this forum its against the rules.


I think as first time buyers you would be wise to take professional advice. Getting the buying decision/process right first time can save a lot of headaches later on. It gives you a layer of reassurance, someone to handle the niggles/hurdles of the process and also puts you in a position where someone is comparing all mortgages in the market (assuming you select a whole of market broker), finding the most competitive and checking the lenders criteria thoroughly to ensure its a match before processing your application for you. That's just the tip of the iceberg of what a broker does. It is a service worth paying for, and many brokers can add their fee to the mortgage or you can pay on successful mortgage offer being made, so if you are short on cash don't let fees put you off. There are brokers who do not charge fees but they are few and far between and are usually forced to work on volume of cases so you could consider a fee free broker, but the service *may* be slightly rushed/basic.

Blibble

Hi MortgageMamma,

Thank you so much! I wasn't requesting a specific broker's details, more just a general nod as to whether it would be a good idea or not.

I'll certainly investigate local brokers over the coming days - we've budgeted £5000 or so for fees as recommended on this forum several times, and we're ex-chain so are hoping to come under that. I might shop around see if I can get an idea on prices.

Thanks again!