Getting a Mortgage With a 500 Credit Score

If you have checked your credit score and it has come in around the 500 mark, you might be wondering if you can get a mortgage and what sort of deal you will qualify for.

Here you will learn whether a credit score in the 500 region is good from the perspective of mortgage providers, which lenders you could approach and how to get started.

Is 500 a good credit score for a mortgage?

A credit score of 500 would be considered low from the perspective of some mortgage lenders, but just how low depends on which credit reference agency they use.

Here’s a breakdown of what a 500 credit score means at the UK’s main credit agencies:

• Experian: Scores credit out of 999 and classes a 500 score as ‘poor’

• Equifax: Scores credit out of 1000 and classes a 500 score as ‘fair’

• TransUnion: Scores credit out of 710 and classes a 500 score as ‘poor’

In summary, your credit situation would be considered ‘poor’ by a mortgage provider that uses Experian or TransUnion for their credit scoring, while a lender that uses Equifax might view your application more favourable, as this agency ranks a 500 score as ‘fair’.

However, the most important thing to remember is that not all lenders use credit scoring to determine mortgage eligibility, so a ‘low’ score isn’t always a concern.

Can you get a mortgage with a credit score of 500?

Yes. Absolutely. Generally speaking, there is no set credit score you need to qualify for a mortgage as there are lenders who don’t use credit scoring to assess eligibility. These lenders take a holistic approach and consider the overall strength of applications.

With a credit score of 500, you might struggle to get a mortgage from a lender that does use credit scoring, particularly if the reference agency they use is Experian or TransUnion. But it may be possible to be approved by a lender that uses TransUnion or does not credit score.

Your chances of mortgage approval with a 500 credit score will improve if:

• There is a legitimate reason why your credit score is low

• Your application is strong in other areas, such as deposit amount

• You apply with a lender who does not use credit scoring

Even some of the mortgage providers who do use credit scoring might offer you a good deal if there’s a good reason your credit score is 500 or lower. For example, you may have limited credit history due to being a first-time buyer who has always lived with parents until now.

There are also ways you could strengthen your application, if you wish to broaden your options beyond the mortgage lenders who don’t use credit scoring. Read on to find out more.

How to strengthen your mortgage application

Credit scores and credit history aren’t the only factors mortgage providers take into account when assessing eligibility, but with a credit score of around 500, preparing a strong application could help you access a wider range of lenders, rates and deals.

Here are some steps you can take to boost your chances of mortgage approval:

Put down extra deposit

You will need a deposit covering at least 5% of the property’s value to get approved for a mortgage, but putting down more than this (if you’re in a position to do so) can reduce the risk posed by your low credit score and help you qualify for a more favourable deal.

Build credit where possible

There are quick ways to improve your credit position before applying for your mortgage. These fast fixes could increase your credit score beyond 500 and open up more options.

Ways to build and optimise your credit files include:

• Joining the electoral register

• Opening a UK bank account

• Ensuring all household bills are in your name

• Paying all bills and debts on time and in full

• Take out a credit builder card and use it responsibly

Check your credit files for errors

You can download your credit reports by accessing a free, cancel-anytime trial at Checkmyfile. This service gives you access to all three of the main UK credit reference agencies, and you should check your files with each of them for errors and inaccuracies.

If you spot anything that shouldn’t be there, including outdated information, be sure to flag it up with the relevant credit reference agency so they can remove it for you.

Speak to a mortgage broker

With a credit score of 500, there are some mortgage lenders you might want to avoid, specifically those who use Experian and TransUnion data to check your credit.

But there could well be options available for you with lenders who don’t use those credit reference agencies, and ones who don’t credit score at all. Our brokers have deep working relationships with these lenders and can introduce you to the best one for you.

Teito’s mortgage brokers have access to the entire market and can often arrange exclusive deals with lenders who don’t credit score. Get started with one of our advisers below:

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Which lenders offer mortgages to borrowers with a 500 credit score?

Some lenders who use credit scoring might offer you a mortgage with a 500 credit score if there’s a good reason for your score low, or you have a high deposit to offset the risk. But, often, borrowers with this credit score find more options at lenders who don’t credit score.

Mortgage lenders who don’t use credit scoring include:

• Pepper Money

• Bluestone

• Kensington Mortgages

• Scottish Building Society

• Furness Building Society

• Vida Homeloans

Bear in mind that while these lenders and others like them do not use credit scoring to determine eligibility, they will still perform credit checks to review your financial conduct.

The main thing that sets these lenders apart is that they are more interested in the overall strength of your application. If they spot any adverse credit on your files, they will review the age and severity of the issue, rather than base their lending decision on a numerical score.

What interest rate to expect with this credit score

If there is a legitimate reason your credit score is around the 500 mark and/or you have plenty of deposit to put down, there is a possibility the mortgage rate you qualify for will be no different than it would be for a borrower with a much higher credit score.

This is because there are lenders available who don’t use credit scoring to determine the rate you qualify for, but there is a possibility you could end up with a higher interest rate or have to put down a bigger deposit if adverse credit is the reason for your low credit score.

There are specialist mortgages for borrowers who have a low credit score because of issues such as missed payments, CCJs, IVAs and bankruptcies, but they usually come with higher rates. The exact rate you qualify for may depend on the age and severity of the issue.

Why choose Teito for your mortgage needs?

If your credit score is 500, it’s vital to speak to a broker before applying for a mortgage, and there are advisers on our team who specialise in clients with low credit scores.

Our brokers have expert knowledge and access to the entire market, which makes them ideally placed to pair you with the mortgage lender who’s the best fit for your credit profile.

Here are just some of the reasons our customers choose us for their mortgage needs:

• Our brokers specialise in borrowers with credit problems

• Your first consultation is free with no obligation to proceed

• We are 5-star rated on leading review websites

• You can apply for an agreement in principle through us in minutes

Ready to take advantage of a free, no-obligation chat with a whole-of-market mortgage broker and explore what options are available to you? Get started here.