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How much does a mortgage application impact your credit score

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By Pete Mugleston   Mortgage Advisor

Last updated: 25th September 2018

There is no doubt that full-footprint credit searches against your name can impact your credit score, that said, when, to what degree, and is it likely to cause an issue for you or not, depends on various factors, as outlined below.

The following topics are covered below…

Numerous things impact your eligibility for a mortgage, and the state of your credit history is often a deciding factor. Some lenders use this to assess the risk they’d be taking on by granting you capital, and the checks they carry out can leave footprints on your file.

Here at Online Mortgage Advisor, customers often want to know how a mortgage application will affect their credit rating, and if this question is weighing heavily on your mind and keeping you up at night, you’ve come to the right place.

This article provides everything you need to know about the impact of mortgage applications on credit scores and the types of credit check lenders carry out, as well as words of wisdom for borrowers whose credit score has dropped after a mortgage application.

How mortgage applications impact on credit score

There are two types of credit check a lender might perform when deciding whether to offer you a mortgage - soft searches and hard searches - and the latter has a greater impact on the borrower’s credit score than the former, in some cases, causing it to drop.

What is a soft credit search?

A soft search is basically a preliminary check that a lender may perform as an enquiry, rather than an application. This allows them to get some basic details about your credit history, with your permission, of course, on which to base their lending decision.

The lender doesn’t always get full access to your entire credit history when carrying out this level of check, and most importantly, these searches are not visible to other prospective lenders who are granted access to your file. Only you can see them when you check your own credit history.

Many lenders will conduct a soft credit search for a mortgage application in the preliminary stages, typically to establish whether you’re eligible for an agreement in principle. This will leave what’s known as a “soft footprint” on your file, and these are nothing to worry about.

Soft footprints can remain on your account for up to 24 months, but you can have an unlimited number of them against your name without it impacting adversely on your score.

One thing to keep in mind, though, is that not all lenders carry out soft searches as part of their application process and some will leave a hard footprint (which we’ll get to in more detail shortly) if you give them permission to carry out a credit check.

If you’re unsure whether approaching a mortgage provider will have an adverse effect on your credit score, get in touch and the expert advisors we work with will offer their insight into your application before pairing you with the right lender.

What is a hard credit search?

Some lenders don’t conduct a soft-search, and instead go straight in with a full “hard” search. Other lenders will conduct a full search after an initial soft search, when you formally apply for a mortgage. It’s common practise for the lender to carry out a hard credit search at some point in the process.

A hard credit search is a full look at your credit report and score to give the provider a clear picture of how risky a customer you are.

The main difference you need to note between soft and hard searches, is that other prospective lenders can see a hard check on your file, and although no result for that application is recorded, will be able to guess at whether you were accepted for the credit you applied for (if a new account hasn’t been taken after the search).

In the case of a mortgage application, hard search information usually remains on your file for 12 months.

Why you should avoid unnecessary hard searches

Making multiple requests for credit in a short space of time may have a bigger impact on your credit score. In the eyes of prospective lenders, it looks like you’re either desperate for credit, or can potentially appear as too much of a risk for their competitors to loan to.

This could mean that you’re either turned down for a mortgage by some lenders or offered unfavourable rates of interest - and frustratingly, you might not realise this is the case until they’ve carried out hard checks of their own.

Thankfully, there are ways you can avoid unnecessary credit checks, and making an enquiry with us is one of them. The experts we work with will assess your application and pair you with the lender offering the best deals for someone in your situation.

Even if your credit file looks less than attractive to mainstream lenders due to the amount of recent credit checks on there, the advisors we work with have access to lenders who deal with customers under those very circumstances each day, and specialists who don’t take searches into account, who don’t credit score at all.

How much credit checking does a mortgage application involve?

As we’ve mentioned already, some mortgage providers will carry out a soft search to see whether you would qualify for a deal in principle. If you decide to press ahead and lodge a mortgage application based on this, expect the lender to carry out a full credit check and leave a hard footprint on your file.

Some lenders don’t carry out a soft search and will leave a full footprint when calculating your eligibility.

Mortgage checks track all addresses over 6 years

Lenders tend to want to review the full 6 years history when assessing your credit history and will do so against every address you have declared.

It is important then, to declare every address you have been known to on your credit reference and your mortgage application – those who don’t disclose an address may get a false reading of the situation, which may get picked up later down the line and cause declines. Non-disclosure of issues is often looked on unfavourably by lenders, who may have approved a deal they decline, had it been declared at the time.

Mortgage checks also include aliases

If you have been known by any other name, lenders will want to know this also, so they can reference you for any credit held in your previous name. If you have an account in another name it is likely the reference agency will be able to pick this up, so again it’s important to disclose everything from the start.

What to do if your credit score has dropped after a mortgage application?

First of all, don’t panic. Two things to remember:

  1. The good news is that this impact will be short term. In fact, it will soon return to normal, if not improve over the next few months, as long as you avoid taking on any other hefty debts and, above all, make sure you keep up to date with any repayments, such as mortgages, loans, credit cards, and phone contracts etc.
  2. There are lenders who don’t take any notice of “credit score” or searches – these specialists will just look at your account conduct and the dates of any missed payments, defaults, CCJs etc. These lenders tend to be the ones happy to consider people with credit issues or complex income, and so are flexible when it comes to what they will and won’t accept, considering even recent issues, often with small deposits.

If you have been turned down for a mortgage because of your credit score, get in touch and the advisors we work with will connect you with a broker who specialises in customers with low credit scores.

Speak to an expert on mortgage applications, without affecting your credit rating

If you like anything in this article or you’d like to know more, call Online Mortgage Advisor today on 0800 304 7880 or make an enquiry here.

Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances.  – We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

Updated: 25th September 2018
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FCA disclaimer

The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage.

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