How does my credit score affect my mortgage rate?

As you know, your credit score is an indicator of how good or bad your credit history is and, by extension, how high a risk you are for lenders. While you credit score is never look at in isolation, it indicates how your credit file looks and how high or low your score is, so it will affect your ability to get all sorts of credit.

A mortgage is about the biggest form of credit you will ever take on and it is therefore a big risk to the bank who lends you the money. After all, you may be able to make payments now, but what about in 6 months, 5 years or 20 years time?

Affordability and risk factors

Generally banks will look at affordability factors and if you don’t have the income you won’t get a mortgage, even with good credit. But banks will want to see a good credit score too, so that they know that you will look after your money now in case one day you don’t have that income.

Applying for a mortgage

What this means is that regardless of your income, if you don’t have good credit you will be a bigger risk and banks will want a better return to offset that risk.

Generally, banks offer different products with different interest rates and you should expect the products with the best interest rates to have stricter credit scoring criteria. Of course some banks are more risk averse than others, so be realistic about which products you apply for and do your research to give yourself the best chance of getting the best deal.

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