Adulthood only seemed exciting during childhood but when one becomes an adult, they are met with plenty of new responsibilities. Of them is building credit history. From 18 to early 20s, little to no credit is completely normal. But further than that, it starts looking like a red flag so getting a mortgage with no credit history in the UK isn’t the easiest task.
Luckily, with the right help, you can find lenders who understand that we all have to start somewhere and give you loans for no credit history. Securing a mortgage or taking baby steps to build your credit, the right guidance makes all the difference.
Understanding Credit History and Mortgages in the UK
In the UK and many countries around the world, credit history is given a lot of importance. You can consider it to be a track record of all your financial decisions and how well you have managed obligations like loans and credit cards. Without this record, lenders do not understand how responsible you are and therefore are unable to trust you. A mortgage loan with no credit history is a tough journey.
While no credit history is frowned upon, there are many reasons why someone might not have it. If you are a young adult living with parents, bills and rent may not be in your name. Similarly, moving to the UK recently may not give you enough time to have a local credit history. Sadly, lenders don’t really consider overseas credit scores. Old history also gets tossed out so not using a credit product for over six years may seem like you are starting from scratch.
No matter the reason, there are things to understand when seeking a first-time buyer mortgage with no credit history. Knowing the root reason helps you to understand what it is that you need to do to get a healthy credit profile.
Can You Get a Mortgage with No Credit History?
Don’t let anyone tell you that you cannot because it is possible and people in the UK have done it. You are just taking a different path from those with established credits.
Mainstream lenders rely on credit scores but specialist lenders will take a look at your income stability, savings, and circumstances. No credit history certainly means complexity but you are not out of the race. There are challenges but also opportunities to improve your chances.
Challenges of Securing a Mortgage with No Credit History
- Lender Hesitation
The biggest challenge is to overcome the concerns a lender may have as they have no records to evaluate you as a borrower. Credit scores help lenders understand if you are responsible and reliable. Without it, the risks become tenfold for them. - Limited Mortgage Options
Most mainstream lenders, including high street banks, favour applicants with an established credit record. Without it, you could face rejection or be offered higher interest rates, which increase the cost of your loans for no credit history. Similarly, you might find it harder to get approved for mortgages with lower deposits. - Increased Deposit Requirements
To make up for no credit history, you may have to pay the price with a large deposit. This compensates for the risk to an extent. A mortgage with bad credit and no deposit is impossible, but a steady income and a significant deposit make lenders feel at ease.
- Strict Affordability Checks
In 2008, a financial crisis hit the UK and the world. The cause is said to be risky loans given in the states to people with poor credit. After this, affordability checks became much stricter. With no credit history, these checks become even more rigorous.
How to Improve Your Chances
- Build a Credit Profile
Taking out a credit card with no history may look like a bad decision but if you are responsible, it can be very beneficial. Start very small, use a low-limit card, and make sure you pay off your balance in full each month. Lenders would like to see that you can borrow and pay it back on time. - Consider Specialist Lenders
Chances with traditional lenders and high street banks are pretty low. Be open to specialist lenders because they are more flexible and lenient with your situation. Even though you might face higher interest rates, they will focus on your income and overall financial stability. - Find a Guarantor
A guarantor is someone who vouches for you, agreeing to step in and cover any missed payments if the need arises. This reassures lenders that someone has your back. If you are a young adult, ask your parents or a close family member to be your guarantor but make sure that all parties involved understand the risks. - Check Alternative Credit Data
So, there’s non-traditional credit data like regular payments to utilities or mobile phone contracts. You can offer them along with your mortgage application. A history of consistent payments on bills can act as evidence of financial reliability. There’s also manual underwriting where a professional evaluates your application and assesses the risk you present as a borrower.
Does the Role of Income Matter?
With a limited or non-existent credit history, your income can truly be the game changer. Employment history and income levels can decide your ability to make mortgage payments regularly.
Stable high salaries with evidence of saving can go a long way. It helps convince your lenders that you are a reliable borrower to give loans for no credit history.
First-Time Buyers
Even without the complication of a thin credit file, being a first-time buyer in the UK is a daunting challenge. But if you can manage to access mortgage brokers who specialise in handling your demographic, these experts can guide you towards the best plan for you out there.
Final Thoughts
Building a credit profile, saving a larger deposit, and seeking out specialist lenders can all help pave the way to homeownership. A mortgage broker or financial advisor can guide you through the tricky process. You can find the most suitable mortgage for your situation with UK Mortgage Finder.
If you are looking for invaluable expert guidance, contact UK Mortgage Finder to explore your options and find the best mortgage deal tailored to your needs. Take the next step towards securing a mortgage today.
