FTB with low credit score

mjane93

Due to the new 5% deposit scheme and extension of stamp duty holiday my husband are finally in the position to potentially buy a house. The only thing that worries me is we don’t have a high credit score (checked on clear score) we are in our mid 20s so don’t have many years behind us building credit. Since 2016 we’ve been renting (currently paying 725 p/m) and we have never missed a rent or bill/utility payment. We don’t have any credit cards and aren’t in any debt or have any cars on finance. The only thing I am paying off are my monthly car insure payments, 70% of which has already been paid off (have less then 300£ to pay off)

We have about 14k saved and are looking to put down 10k for a deposit as we want to make sure we have money set aside for legal fees ect. 

We have a combined income of 41k a year and both have been in our current full time employment for over 2 years. 

Not sure if this is relevant but my husband is a British citizen however I am on a spouse visa (US citizen). I’ve been a uk resident since 2015 and we’ve been married since 2018. 

So my question are: 

1. Will having a low credit score put us at risk from getting a mortgage?
2. Are we at a disadvantage that both our parents have gifted us about half of our 14k savings to go towards a deposit? 
3. Am I right in thinking that since we are looking at buying under 200k we have until September to close on a house before stamp duty would then be reintroduced? 

MaryNB

1. Lenders don't see you credit score, only you and the credit rating agencies do. Your lender will look at your credit history and will do their own internal assessment. Check your credit file on Experian (use MSE credit club for free access) and Transunion (Credit Karma for free access) as well. A bank will look at any or even all three of them.

2. Not at the moment. Nationwide briefly brought in a rule that FTBs need to save up 75% of their own deposit for a 90LTV mortgage but that's no longer the case.

3. If you are FTBs you can avail of stamp duty relief beyond the stamp duty holiday. It's full relief up to £300k, and partial relief up to £500k.

Rental payments do not show up on credit reports (there may be schemes to get them reported but they are not common). Not all utilities show up on credit reports. I've only ever had my mobile phone bill (monthly payments included cost of phone) and one water company show up on my reports. Council tax won't show up. Have look at your credit report by all of the three agencies and see what appears.

It's good to have a credit card. It shows responsible use of credit. A lack of one could be contributing to your poor credit history. A bank wants to see that you can use credit responsibly. Use it every month, keep utilisation low (under say 30% of your limit), pay it off in full on receipt of the statement each month. Don't take out cash using a credit card.

Make sure your husband is on the electoral register. Unfortunately until you have citizenship you can't register. 

Other tips: avoid your overdraft, don't touch pay day loans, avoid too many hard searches (soft searches have no impact), avoid missed payments. 

K_S

mjane93 said:

Due to the new 5% deposit scheme and extension of stamp duty holiday my husband are finally in the position to potentially buy a house. The only thing that worries me is we don’t have a high credit score (checked on clear score) we are in our mid 20s so don’t have many years behind us building credit. Since 2016 we’ve been renting (currently paying 725 p/m) and we have never missed a rent or bill/utility payment. We don’t have any credit cards and aren’t in any debt or have any cars on finance. The only thing I am paying off are my monthly car insure payments, 70% of which has already been paid off (have less then 300£ to pay off)

We have about 14k saved and are looking to put down 10k for a deposit as we want to make sure we have money set aside for legal fees ect. 

We have a combined income of 41k a year and both have been in our current full time employment for over 2 years. 

Not sure if this is relevant but my husband is a British citizen however I am on a spouse visa (US citizen). I’ve been a uk resident since 2015 and we’ve been married since 2018. 

So my question are: 

1. Will having a low credit score put us at risk from getting a mortgage?
2. Are we at a disadvantage that both our parents have gifted us about half of our 14k savings to go towards a deposit? 
3. Am I right in thinking that since we are looking at buying under 200k we have until September to close on a house before stamp duty would then be reintroduced? 

@mjane93

1. You can safely ignore the Experian/Cleascore credit score number. Lenders will do their own individual "credit-scoring" which will take into account the details in your credit history that they look at.

2. Generally speaking, no. But it's not possible to say 100% what the criteria will be for 95% products until they start being released (not expected until mid-April)

3. If either of you are non-FTBs, then that's right. If you both are FTBs then you can safely ignore that deadline for SDLT purposes.

Based on the limited info in your post, the visa shouldn't have a material effect but again we'll need to wait and see what the criteria is for the 95% products coming out.

Assuming you've had a bank account since 2016 and are registered on the electoral roll, that's more than sufficient credit history. Taking out a new credit card or not will not make any material difference.

mjane93

Thank you both for the information! Yes we are both FTB and my husband is on the electoral roll however as I am not a British citizen I cannot register to vote. 

In terms of next steps, do we just wait until the 5% scheme has been implemented? I’ve read that there is no point in even looking until you’ve got a mortgage in principle which we can’t do just yet as we will only be putting down a 5% deposit. I want to make sure we are being as proactive as possible, however seems like all we can do until more information is released is wait and make sure all payments are made on time. 

K_S

mjane93 said:

Thank you both for the information! Yes we are both FTB and my husband is on the electoral roll however as I am not a British citizen I cannot register to vote. 

In terms of next steps, do we just wait until the 5% scheme has been implemented? I’ve read that there is no point in even looking until you’ve got a mortgage in principle which we can’t do just yet as we will only be putting down a 5% deposit. I want to make sure we are being as proactive as possible, however seems like all we can do until more information is released is wait and make sure all payments are made on time. 

@mjane93 I would definitely advise you to wait till there's information on the general criteria for the 95% products. Only a few weeks more Just keep an eye on the forum and the MSE page for 95% mortgages.

Lucywrix

K_S said:

mjane93 said:

Due to the new 5% deposit scheme and extension of stamp duty holiday my husband are finally in the position to potentially buy a house. The only thing that worries me is we don’t have a high credit score (checked on clear score) we are in our mid 20s so don’t have many years behind us building credit. Since 2016 we’ve been renting (currently paying 725 p/m) and we have never missed a rent or bill/utility payment. We don’t have any credit cards and aren’t in any debt or have any cars on finance. The only thing I am paying off are my monthly car insure payments, 70% of which has already been paid off (have less then 300£ to pay off)

We have about 14k saved and are looking to put down 10k for a deposit as we want to make sure we have money set aside for legal fees ect. 

We have a combined income of 41k a year and both have been in our current full time employment for over 2 years. 

Not sure if this is relevant but my husband is a British citizen however I am on a spouse visa (US citizen). I’ve been a uk resident since 2015 and we’ve been married since 2018. 

So my question are: 

1. Will having a low credit score put us at risk from getting a mortgage?
2. Are we at a disadvantage that both our parents have gifted us about half of our 14k savings to go towards a deposit? 
3. Am I right in thinking that since we are looking at buying under 200k we have until September to close on a house before stamp duty would then be reintroduced? 

@mjane93

1. You can safely ignore the Experian/Cleascore credit score number. Lenders will do their own individual "credit-scoring" which will take into account the details in your credit history that they look at.

2. Generally speaking, no. But it's not possible to say 100% what the criteria will be for 95% products until they start being released (not expected until mid-April)

3. If either of you are non-FTBs, then that's right. If you both are FTBs then you can safely ignore that deadline for SDLT purposes.

Based on the limited info in your post, the visa shouldn't have a material effect but again we'll need to wait and see what the criteria is for the 95% products coming out.

Assuming you've had a bank account since 2016 and are registered on the electoral roll, that's more than sufficient credit history. Taking out a new credit card or not will not make any material difference.

Hi, I am in the same position as the person who posted this. The 5% deposit is now available! We have completed an AIP and it was accepted, our case is now with underwriters and we’ve heard nothing since 4 days ago when it was submitted. Our MA doesn’t tell us anything so finding this really stressful! My boyfriend has a history of payday loans but these were about 2 years ago now. 

Do you know what our chances are of them accepting? They’ve asked for my P60 from 2020 and my bank Statements to prove wages.. 

K_S

@lucywrix From what you mentioned in the other post, it looks like a bit of a mix-up due to mis-characterising your job as working for your family business. Fingers crossed it'll come through. Santander isn't taking too long to turn around document reviews, so hopefully you'll hear back early in the week.

Lucywrix

K_S said:

@lucywrix From what you mentioned in the other post, it looks like a bit of a mix-up due to mis-characterising your job as working for your family business. Fingers crossed it'll come through. Santander isn't taking too long to turn around document reviews, so hopefully you'll hear back early in the week.

Have you heard of other people get accepted that are in the same situation? Or worse? 

mjane93

Hi, I am in the same position as the person who posted this. The 5% deposit is now available! We have completed an AIP and it was accepted, our case is now with underwriters and we’ve heard nothing since 4 days ago when it was submitted. Our MA doesn’t tell us anything so finding this really stressful! My boyfriend has a history of payday loans but these were about 2 years ago now. 

Do you know what our chances are of them accepting? They’ve asked for my P60 from 2020 and my bank Statements to prove wages.. 

I had no idea the scheme was now live. I haven’t been able to find any further information on it. 

K_S

mjane93 said:

Hi, I am in the same position as the person who posted this. The 5% deposit is now available! We have completed an AIP and it was accepted, our case is now with underwriters and we’ve heard nothing since 4 days ago when it was submitted. Our MA doesn’t tell us anything so finding this really stressful! My boyfriend has a history of payday loans but these were about 2 years ago now. 

Do you know what our chances are of them accepting? They’ve asked for my P60 from 2020 and my bank Statements to prove wages.. 

I had no idea the scheme was now live. I haven’t been able to find any further information on it. 

@mjane93 Afaik, it's not. The OP is referring to the 5% HTB equity-loan scheme which she's using for her mortgage application in progress.