Whose Credit Score is Used on a Joint Mortgage?

Applying for a mortgage can seem complicated when there’s just one person involved, let alone several. At least when applying solo you only have your own finances to worry about. But what happens when the credit health of others enters the mix? Could they impact your chances of getting accepted? Or could it be you that holds them back? When evaluating your mortgage application, lenders look at your credit report rather than your credit score. Your credit score is a number that gives you an indication of how favourably they may view what lies on your credit report. So, if you’re wondering whose credit score is used on a joint mortgage, it’s first important to note that creditors consider the credit report, not the score. But that doesn’t mean the score isn’t important – it’s a really valuable tool for helping you understand how your borrowing history will look to potential lenders. For a joint mortgage, lenders consider the credit history of everyone who signs on to it. This is because you’re all responsible for making the repayments. If you or someone you want to buy a home with has a credit score in need of a little TLC, it doesn’t necessarily mean you’ll be denied a joint mortgage. But your chances will be better if you both have high scores.

The relationship between credit scores and joint mortgages

According to UK law, you can buy a property with up to three others. As a result, many lenders will allow a maximum of four people to sign onto a mortgage. While this may mean you can pool your resources to buy a home, it also means you’ll pool your credit history. Basically, creditors will want to get a credit report from everyone who will sign on. Credit reports are essential for both lenders and borrowers when it comes to mortgages. Because a mortgage is a substantial loan, lenders need to gauge the likelihood of you meeting your payments – whether as an individual or as a group. Lenders evaluate joint mortgage applications in much the same way they would individual mortgage applications. Their goal is to see if you can all afford to keep up with payments. Lenders will look at how much of a risk each applicant is and what the joint application looks like as a whole. To do this, they will look at the complete picture of your collective finances, which could include: - Income and expenses, to see that you can afford the repayments. - The money you have at your disposal, to check if you are able to put down a deposit. - Your credit history, to judge the probability of you being able to pay back the loan. There is no minimum credit score for getting a mortgage, but a lower score could mean that the lender views you as more of a risk. Each lender will have their own specific criteria for evaluating mortgage applications. For example, some may have a maximum borrowing age, meaning they will not provide mortgages to those over a certain age as they deem this too risky. These restrictions could be in place whether you’re applying for a joint mortgage or one on your own.

Whose credit score is used on a joint mortgage? – FAQs

Can you get a joint mortgage if one applicant has a low credit score?

While it may be more difficult, it’s not impossible. In this case, the lender may request more information about their credit history. They may ask if previous debts have all been paid off or a repayment plan is in place. Other factors they may take into account include: - The deposit you can put down collectively. - Marital status. - Age of all applicants. - Employment status. - Homeowner status (is this the first home you’re looking to buy?) - Outstanding loans that you still have to pay off elsewhere. It’s also important to note that the term ‘bad credit’ is misleading. While some borrowing behaviours can negatively affect your credit score, the impacts don’t have to be permanent. You can improve your credit score by patiently and persistently working on behaviours such as making payments on time, checking that your details are correct with all of the credit reference agencies, and ensuring that you are signed up for the Electoral Roll.

What types of credit checks do lenders perform for a joint mortgage?

Mortgage lenders may run what is called a soft credit check early on in your application to see if you are eligible for credit. You and your buying partners may receive pre-approval for the mortgage from this process. Before granting your mortgage, they usually do a hard credit check for everyone involved. This assessment will give them an in-depth view of your credit history, showing how you’ve tackled repaying debts in the past. There are two ways your credit history may affect your mortgage application: - Whether your mortgage application gets approved or denied. - The interest rate (the amount the lenders will charge you to borrow money as a percentage of the total you owe). If one credit score is low, getting approved for a mortgage could be more challenging. Similarly, the lower any of your credit scores, the higher the interest rate could be.

Is the credit score of both applicants equally important in a joint mortgage?

Lenders tend to consider the credit reports of all applicants when evaluating mortgage applications. But again, that doesn’t mean you’ll be denied if one report has been negatively impacted by previous borrowing activities. Mortgage applications are judged on a case-to-case basis. If you’re applying for a joint mortgage, the mortgage provider looks at your ability to pay off the mortgage as a team, meaning they look at the whole picture. The gaps in one person’s credit history may be offset by the peaks in another’s. If you all have a credit history that lenders see as risky, your chances of them accepting your application are lowered. But even in that case, it’s still possible to get approved by certain lenders if the rest of your application checks the right boxes. Remember, they’ll also look at things like your employment status and the deposit you’re able to put down. If you think your credit history might impact your chances of being accepted, it could be worth seeking advice from a mortgage adviser. Can you get a joint mortgage for any kind of joint ownership?

A joint mortgage is possible for any kind of joint ownership. Regardless of the type, the credit history of all signers onto the mortgage will be taken into consideration. Types of joint ownership include: - Joint tenancy. Also known as beneficial joint tenancy, this type of ownership involves sharing the property equally. Neither of you owns a specific share. If you sell the property, it will be split equally among you. If either of you pass away, the property is immediately transferred to the other owner(s), which means your share of the property can’t be passed on in a will. One important factor of joint tenancy is that it can be very difficult to sell your property without the agreement of the other owners. - Tenancy in common. Here, you will own a specific share of the property – you decide together how the ownership of the property is divided. You will then need a solicitor to draw up the Deed of Trust, a legal document that outlines how much of the property you each own. Unlike joint tenancy, your share of the property is not immediately transferred to the other owner if you die, meaning you can leave it to others in your will. If you choose to buy a property with your parents, you may opt for a joint borrower sole proprietor mortgage. Even though you will own the property, you will all be responsible for the mortgage repayments. This solution can make the risk of buying property more manageable for first-time buyers. If it’s outlined in your agreement, you may be able to change this mortgage type to one where you are responsible only for repayments.

To recap:

While lenders have their own criteria for approving applications, the credit history of all applicants is typically taken into account on a joint mortgage, regardless of the joint mortgage type. But that doesn’t mean your application will be denied because of one person’s credit report. It’s just one piece of a complex puzzle. If you’re concerned, it may be a good idea to talk to a mortgage professional and get expert advice before putting off your desire for home ownership. Remember that credit reports are not the only factor in your application and that some lenders may be more flexible when it comes to finding you a deal that fits.