Mortgage Credit Check UK

A credit check means the lender — whether that's a bank, a building society, or a different type of lender — will look at your financial history. The information they get is gathered from past years, so they'll be able to see lots of detailed information. When mortgage lenders do a credit check for mortgage application purposes, it will either be a soft or hard credit check. Both types of credit check work in the same way and are typically of a similar level of detail but have a different impact on your credit score.

This credit check is a critical step in the mortgage application process and helps lenders decide whether to approve your loan application, as well as what terms and interest rates to offer you based on the level of risk they perceive.  

Below you’ll find information about typically happens during a soft and hard UK mortgage credit check.

Soft Credit Check

A soft credit check is designed to give an overview of your credit history. It's where a lender assesses your credit profile but they don’t leave a footprint on it. Only you and the lender would be able to see a soft credit check on your profile. The benefit of not having a footprint left on your credit profile is that it won’t affect your score and other lenders will not be able to see that you’ve had a soft credit check. You wouldn’t be able to get a mortgage with just a soft credit check as all lenders require a hard credit check when you make a full mortgage application. You can usually be offered a mortgage in principle (also known as a Decision in Principle) after a soft credit check. A mortgage in principle shows how much you will be able to borrow and estimates what your mortgage will be like, based on the information you have provided the lender with so far.

Hard Credit Check

Some lenders will run a hard credit check at the Decision in Principle stage. All lenders will run a hard credit check at full mortgage application. The main difference between a hard credit check and soft credit check is that a hard credit check leaves a footprint on your credit profile which any other provider will be able to see and which will affect your credit score. You don’t want too many hard credit checks on your profile as it’s likely to negatively impact your credit score and lenders may wonder why you’ve had so many hard credit checks.

Mortgage lenders will do their own credit checks using credit reference agencies and their own private searches. Of course, what each lender looks for in the credit check will be different, as different lenders have varied lending criteria. This makes it hard to know what a mortgage lender will consider when they look at your credit history and whether you'll be accepted. This is why the soft credit check near the start of a mortgage application is so helpful, to both lenders and borrowers.

A mortgage application credit check is different from looking up your own credit score online, although lenders will use a lot of the same information. Nonetheless, this doesn't mean that looking up your own credit score is entirely worthless. It can still be very useful to see the basic information that is available, as this will help you judge what action you take can and your options. If you can see any obvious issues with your credit rating, try to remedy this before applying for a mortgage. 

Most lenders will perform different credit checks at different points of the application process. A lot of lenders will perform a soft credit check at the mortgage in principle stage, but some lenders will do a hard credit check. All lenders will do a hard credit check when you submit your full mortgage application before they send you an offer.

Here’s an overview of when you can expect a mortgage lender to conduct a credit check: 

1. Initial Inquiry or Pre-Qualification 

When you first inquire about a mortgage or seek pre-qualification, the lender might perform a soft credit check. This type of credit inquiry does not affect your credit score and is typically used to give you an idea of the mortgage amounts and terms you might qualify for based on your credit history. 

2. Pre-Approval Stage 

During the pre-approval process, which is more formal and serious than pre-qualification, the lender typically conducts a hard credit check. This hard inquiry provides a comprehensive view of your credit history and scores from the credit bureaus. The pre-approval involves a complete application, and this credit check will slightly impact your credit score. Pre-approval is a stronger indication of your ability to secure a mortgage and is often required when you're ready to make offers on homes. 

3. Final Approval and Underwriting 

Once you make an offer on a home and it's accepted, your mortgage application goes into underwriting. During this stage, the lender might perform another credit check to ensure that there have been no significant changes in your credit status since the initial approval. This is particularly important if there is a lengthy period between your initial pre-approval and the final loan closing. 

4. Before Closing 

Lenders often conduct a final credit check right before the closing of the loan. This check is to ensure that your financial situation has not changed significantly from the time of your loan approval. Significant changes, such as taking on new debt or missing payments, can lead to a reassessment of your financial status and could potentially derail the closing process. 

These credit checks are crucial for lenders to assess and manage the risk associated with lending large sums of money for home purchases. They want to ensure that borrowers remain creditworthy throughout the loan application process and are likely to be able to meet their mortgage obligations.

Mortgage brokers don’t generally do a credit check on your profile themselves, as this is typically done by the lender.  

Your mortgage broker also won’t necessarily need a copy of your credit report, but in some circumstances it can help – e.g. if you have a history of adverse credit and require a subprime lender. The reason for this is because a copy of your credit report can help the broker better match you with a lender.

It's possible to get a no credit score mortgage from a specialist lender. These lenders specialise in cases with borrowers who have adverse credit such as defaults and debts. Instead of using the information from credit references to give you a score, they manually underwrite your application to better understand your situation and how the bad credit occurred.

You’ll typically need a mortgage broker if you require an adverse credit lender.

If you're struggling to get a mortgage due to poor credit, consider delaying your plans to purchase a property until you've improved your credit score.

The more historic the bad credit event, the less likely it is to impact your application and the more likely you are to be approved for a mortgage.

If you’re concerned about your credit history or want more information about how lenders credit check you, speak to one of our advisers. At John Charcol, we’re experts in helping people with adverse credit find the right deals for their situations. Get in touch today to see how we can help.