Does a Mortgage In Principle affect your credit score? Everything you need to know

A Mortgage in Principle (MIP) is a rough estimate from a mortgage lender of what you could afford to borrow.

It’s a good idea to get one before you start your property search, as it can give you a better idea of your budget and show you’re a serious buyer to sellers and estate agents.

But does a mortgage in principle affect your credit score? Can you get one without a credit check? And how reliable is it? We answer all those questions, and more, below.

But first, a little housekeeping.

Is a Mortgage in Principle the same as a decision in principle?

A Mortgage in Principle goes by many names, depending on who you ask. Some lenders call it a ‘Mortgage Agreement in Principle’ or a ‘Mortgage Promise’. Some call it a ‘Decision in Principle’ (DIP), while to others, it’s an ‘Agreement’ or ‘Approval in Principle’ (AIP).

These terms are often used interchangeably – but remember that they all refer to the same thing: an official, written estimate from a bank, building society, or mortgage broker showing how much you could, in theory, borrow.

No matter what your lender calls it, it’s a handy document as it proves to sellers that you’re serious about buying and not just there for a look around. Essentially, it shows you’ve taken the first step towards getting a mortgage – and you can, in principle, afford to borrow what you need to purchase a property.

Note: The ‘in principle’ bit refers to the fact that the lender’s decision is based on the information you’ve provided (more on that later). It’s not an official mortgage offer, as they haven’t done a deep dive into your finances yet, and it’s subject to change once they’ve had a closer look at your income, expenses, and credit history.

Does getting a Mortgage in Principle affect your credit score?

It could do – but it all depends on the lender and whether their credit check involves a hard or soft search.

• Soft credit checks (also called ‘soft searches’) happen when you check your own credit report or when you want to check if you’re eligible for a particular credit product, like a loan or credit card. Your full report is typically viewable; however, as no formal credit application is being made, a soft search won’t affect your credit score.

• Hard credit checks (also called ‘credit application searches’) reflect a formal application for credit. Each hard check is recorded on your credit report, and companies searching it will be able to see if you’ve recently applied for credit. A lot of hard checks close together could potentially lower your score and impact your ability to be accepted for credit.

The good news is that many of the UK’s mainstream mortgage lenders state that getting an Agreement in Principle with them won’t affect your credit score as it only involves a soft credit check.

Other lenders may carry out a hard search of your credit file before issuing you an MIP; however, one hard check in isolation is unlikely to impact your credit score significantly.

Can you get a Mortgage in Principle without a credit check?

Yes, it’s possible. Many mortgage brokers (a person or company that helps borrowers find the best available mortgage deal) offer an MIP as part of their service — and some state that there’s no credit check required when you get one with them. If you’re unsure, it’s always best to check before you submit your request.

Can you get a Mortgage in Principle with bad credit?

Getting an MIP with bad credit can be a little more challenging – but it’s not impossible. It all depends on what is bringing your credit score down, how severe it is, and how long ago it happened.

For example, suppose you have a couple of missed mobile phone payments from three years ago pulling your score down (but zero missed payments since then). In that case, some lenders might be willing to overlook this, so long as you meet the rest of their eligibility criteria – in other words, your income, expenses, employment status, deposit, and how much you want to borrow ticks the right boxes.

It's always a good idea to check your credit report before applying for a credit agreement – even if you’re only applying in principle. Remember, if you find any errors on your credit report, it’s important you get them fixed. This can help your score and boost your chances of getting an MIP.

For specific mortgage advice and guidance, we recommend speaking to a mortgage broker.

Read more: What credit score is needed to buy a house?

What do you need for a Mortgage in Principle?

You usually won’t need copies of bank statements, payslips, or other supporting documents when you apply for a Mortgage in Principle.

Instead, the lender or broker will simply ask you to confirm:

• Your personal details, including your full name, date of birth, and current address.

• Your address details for the past three years.

• Your income and monthly expenses.

• Information about any existing credit agreements.

• How much you have in savings.

• How much you have for a deposit.

• Roughly how much you’re looking to borrow.

The lender or broker will use your answers to determine how much they’d be willing to lend you (in principle). You’ll then receive a letter or certificate outlining this amount, which you can take to viewings to show sellers and estate agents that you mean business.

How long does a Mortgage in Principle last?

Once you have your Mortgage in Principle, it should be valid for 30 to 90 days, depending on the lender.

If you haven’t made an offer on a property before your MIP expires, you can ask to renew it or apply for another MIP with the same lender or a different one. You can even apply for multiple MIPs at the same time if you want to chase the best deal.

Just remember to check if the lender will carry out a soft or hard credit check, as too many hard searches close together could impact your credit score and your likelihood of being accepted for credit.

How reliable is a Mortgage in Principle?

A Mortgage in Principle is simply an indication of what you could potentially borrow, so long as you’ve been truthful and accurate with the information you’ve provided your lender or broker.

However, it’s not a guarantee that you’ll get a mortgage for that amount later. You can still be declined for a mortgage after getting a Mortgage in Principle.

When you apply for an MIP, the lender isn’t doing a deep dive into your financial situation, and it’s not tied to a particular property.

Once you’ve had an offer accepted on a house or flat, you’ll need to submit a full mortgage application, and that means the lender can review your payslips and bank statements to understand your monthly income and outgoings. They’ll also do a hard search on your credit report to see how you’ve managed borrowing in the past.

In addition to this, the lender will carry out a Mortgage Valuation to make sure the property is worth what you’re planning to pay for it.

With this level of detail in mind, it’s possible that your mortgage application could be rejected, even though the same lender gave you a Mortgage in Principle.

This could be for any number of reasons, such as:

• You’ve failed to meet the lender’s affordability criteria, meaning they don’t believe you can afford to pay back what you’re seeking to borrow, in addition to your current financial commitments.

• Your employment situation has changed since the MIP was issued. For example, if you’ve switched from a full-time to a part-time contract.

• The property has an issue, and the lender is unwilling to give you a mortgage. This might be because they believe it’s worth less than what you’re offering, or it’s been built with non-standard construction materials.

• You’ve missed payments on a credit agreement.

• You have a recent court order or judgement, e.g. a County Court Judgment (CCJ).

To recap:

A Mortgage in Principle is unlikely to affect your credit score.

That’s because many of the UK’s biggest mortgage lenders only do a soft credit search when you apply for an MIP, which has zero impact on your credit score. And some mortgage brokers even offer an MIP with no credit check whatsoever.

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