Q Back in November 2020, my partner and I used a broker to apply for a mortgage. At the time, my partner’s credit score at Experian was 629 and mine was 964, and we got an agreement in principle (AIP) for a mortgage. We weren’t able to find a house to buy before our “in principle” mortgage offer expired in February 2021. So in March we applied for a new one. This is what we don’t understand. We got turned down because of our credit score. But our credit score is slightly higher than it was in November. We tried other lenders and we got turned down for it again, for the same reason.
At the same time, we tried to contact the original lender to give us information on what is the specific credit number they require us to have. No one knows. They don’t even spend time on the phone. Why do we use a credit score system if no one knows about it? And who is responsible for this system? I want someone to justify to me why there is not clear information online. Why don’t lenders set targets for credit scores? I need to know what number to aim for.
A What I don’t understand is why you were told that you were turned down for an agreement in principle (AIP) because of your credit scores. When lenders assess applications for AIPs, they usually want to know the exact details of your income, outgoings and existing credit agreements as well as all your addresses for the last three years. Lenders don’t run a full credit check but instead use one of the main credit reference agencies – Experian, Equifax and TransUnion – to confirm that the details you give about existing credit agreements match the details on your credit file. Credit scores don’t come into it. And according to Experian, even when lenders make a full credit check – when you have submitted a full mortgage application, for example – the credit reference agency’s score still doesn’t come into it.
According to Experian’s website, there is no such thing as a universal credit score system. “Each credit reference agency will give you a different score on a different scale. When you apply for credit, lenders don’t use this [credit reference agency] score. They use your credit report information, your application details and any recent history of previous accounts with them to calculate an overall score for you. It’s this [lender’s] final score that helps them decide whether to accept you or not.” And just as credit reference agencies each use a different way of working out your credit score, so lenders apply different criteria to their lending decisions, with a lot more weight given to the state of your income and outgoings than to your credit score.
As Equifax says: “A good Equifax credit score does not necessarily mean that you will always be successful when applying for a loan, credit card or mortgage but it does give an indication of how lenders might view your application.”