What is a Poor Credit Score, How Bad is “Bad Credit”?

What is a Poor Credit Score, How Bad is “Bad Credit”?

Applying for a mortgage and purchasing a new home can be an extremely exciting time for any home buyer. However, when looking for a mortgage, a poor credit score could represent a major obstacle. Many people who we encounter are not aware of what constitutes a poor credit score or how bad their ‘bad credit’ is.

How Bad is “Bad Credit”?

Typically there are 3 main companies that mortgage applicants can use to get their credit score. These are Noddle, Equifax and Experian. The important thing to note is that they will all provide different results, which begs the question, do you need to check all 3?

If you’re checking out of curiosity, a quick check on Noddle is all that is required. Noddle can provide your credit report completely free of charge with no initial trial period or monthly subscription fees.

There are, however, situations when it is highly recommended that you check all of the above mentioned credit reference agency records

  • If you’ve been recently, and surprisingly, rejected for credit, you may have errors on your credit file that need correcting. Or your identity might have been stolen.
  • If you’re planning on making an important credit or mortgage application soon. Even if you are 99.9% sure your credit file is spotless, you should still check, in case of a troublesome error that you weren’t aware of.
  • You’re planning to clean up your credit records after insolvency.

When checking a credit report, be sure to check every detail, not just the headline “score” and the list of your debts.

“Bad Credit” Doesn’t Really Exist

When checking your credit score, anything in the 680-740 range is considered good by the credit reference agencies, with 700 being the target threshold. If your score is considerably lower than this, then it could be considered a bad or low credit score. However, the question arises as to the relative importance of the term bad credit. 

Essentially, your credit score means very little until a lender decides what they’re doing with it. Your credit score will go mostly unnoticed throughout your lifetime and often you will not know what it is. However, when it comes to arranging a mortgage, bad credit can have very real consequences.

Bad credit presents an obstacle to potential borrowers as most lenders will generally view those with bad credit as a higher risk on their part. Bad credit should be taken very seriously and being diligent with your credit score will prevent any nasty surprises when you look to purchase a property or remortgage. 

How to Check & Repair Your Credit Score

Many people are unaware of how to actually check their credit score. If you’re concerned about having bad or adverse credit, the simplest way to make sure we have an accurate analysis of your circumstances from the outset is to provide us with a copy of your up-to-date credit report. If you don’t have a copy of the report, you can speak to one of our recommended companies – Noddle, Equifax or Experian – for a copy of your credit report today. You can access all 3 here.

People with bad credit shouldn’t think that this cannot be fixed. Credit scores can be repaired, but this takes time. The actions that people should take include:

  • Always pay your bills on time
  • Check that the details on your credit report are all correct
  • Ensure that all of your financial commitments are under your most recent name and address
  • Close all unnecessary and unused lines of credit

For more details on improving your credit score, read our guide here.

It is also worth highlighting that although your credit score as indicated by the credit reference agency is indicative of your potential borrowing ability, it is ultimately the lenders decision based on your current overall circumstances at the time of your application. Therefore obtaining a copy of your report is highly recommended, not simply to check your score, but perhaps more importantly to enable your broker can see your history and establish your potential borrowing ability when considering lenders specific criteria.

If you would like to discuss your credit report with a skilled adviser from the Just Mortgage Brokers team, get in touch today. You can call us on 0800 114 3575 or use our contact form. Alternatively, you can email us at [email protected]