If you’ve never borrowed money or had a credit card, you might not have a credit history. While this can indicate financial discipline, it can also make lenders cautious when you apply for a mortgage. The good news is that getting a mortgage with no credit history isn’t impossible—it just takes a bit of extra preparation and the right approach.
In this guide, we’ll explore why credit history matters, the challenges of having no credit history, and practical steps to improve your chances of securing a mortgage.
Why Does Credit History Matter for Mortgages?
Your credit history gives lenders insight into how you manage money. It shows whether you’ve borrowed responsibly, made payments on time, and stayed within your means. When you apply for a mortgage, lenders use your credit report to assess your reliability as a borrower.
Without a credit history, lenders have no track record to evaluate, making it harder for them to assess the risk of lending to you. This doesn’t mean you’re automatically declined, but it does mean you might face more hurdles or need to take extra steps to prove your creditworthiness.
The Challenges of Having No Credit History
- Limited Lending Options: Lenders may be reluctant to offer you their most competitive deals without proof of your borrowing behaviour. This could mean higher interest rates or fewer mortgage products to choose from.
- Tougher Affordability Checks: Lenders will scrutinise other aspects of your financial situation, like your income, savings, and spending habits, more closely in the absence of a credit score.
- Stronger Deposit Requirements: A lack of credit history might require you to provide a larger deposit as a sign of commitment and to reduce the lender’s risk.
Can You Get a Mortgage Without Credit History?
Yes, you can! However, it may require additional effort, a solid financial position, and potentially working with a specialist lender or mortgage broker.
Steps to Get a Mortgage with No Credit History
- Work with a Mortgage Broker
A broker can connect you with lenders who consider applicants with no credit history. Some lenders specialise in cases like yours and take a more holistic view of your financial situation rather than relying solely on credit scores.
- Demonstrate Strong Financial Stability
Lenders may look at other indicators to gauge your ability to repay a mortgage:
- Savings: A healthy savings account shows financial discipline and a capacity to save for mortgage repayments.
- Employment History: A stable job and consistent income reassure lenders of your reliability.
- Rental Payments: If you’ve been renting, providing evidence of on-time rent payments can demonstrate your financial responsibility.
💡 Tip: Keep your bank statements tidy. Avoid unnecessary spending or unarranged overdrafts in the months leading up to your application.
- Save a Larger Deposit
A bigger deposit reduces the lender’s risk and increases your chances of approval. While most first-time buyers aim for a 5% to 10% deposit, offering 15% or more can make you a more attractive applicant.
- Provide a Guarantor
If you have no credit history, some lenders may approve your mortgage if you have a guarantor. A guarantor is usually a close family member who agrees to cover your repayments if you can’t. Having a guarantor gives lenders extra reassurance and can open up better deals.
- Consider a Credit Builder Loan
Before applying for a mortgage, you could take out a small loan or credit card specifically to build your credit history. Use it responsibly by making small purchases and paying off the balance in full each month. Over time, this will establish a positive credit record.
Common Misconceptions About Credit History
- No Credit History Is the Same as Bad Credit Not true. Having no credit history simply means there’s no record to evaluate. Bad credit, on the other hand, indicates financial issues like missed payments or defaults.
- You Can’t Get a Mortgage Without Credit Many lenders are willing to consider applicants with no credit history, especially if other financial aspects are strong.
- Checking Your Credit Report Hurts Your Score Checking your own credit report is considered a ‘soft search’ and doesn’t affect your credit score. In fact, it’s a good habit to stay informed about your financial standing.
How to Build Credit for the Future
Even if you can secure a mortgage with no credit history, building your credit will make future financial decisions easier. Here are some tips:
- Open a Credit Card: Use it sparingly and pay it off in full each month.
- Register to Vote: Being on the electoral roll boosts your creditworthiness.
- Pay Bills on Time: Ensure all utilities, phone contracts, and other payments are made on time.
- Avoid Payday Loans: These can negatively affect how lenders perceive you.
Final Thoughts
While having no credit history can make the mortgage process more challenging, it’s by no means a dead end. With careful planning, the right guidance, and a proactive approach, you can secure the mortgage you need to buy your dream home.
At HLC Mortgages, we understand that everyone’s financial journey is unique. If you’re concerned about your credit history (or lack of one), our team is here to help. We work with the whole market to find lenders who understand your circumstances and are willing to work with you.
Contact us today for expert advice and start your journey toward homeownership with confidence!