More than 16,000 people failed to get on the property ladder last year because of their poor credit score, according to a study from Amigo. Most affected are those who embarked on higher education who are 10% more likely to be rejected for a mortgage because of poor credit scores than those with just A-levels
In 2015, there were around 310,000 successful first-time buyers – however 5% of all applicants were rejected for a mortgage because of their shabby credit rating.
Common reasons for being turned down include previous unauthorised overdrafts and blank credit histories, but the late payment of a bill dating back years is also enough to produce a rejection – even if the money owed is just a few pounds.
According to the research, a staggering three quarters (76%) of all first time buyer applicants admit they were turned down by at least one provider because of their poor score.
While most went on to be successful with other providers, the vast number of initial rejections highlights a major lapse in knowledge when it comes to the credit scoring system.
Each mortgage rejection can damage an applicant’s score, meaning those that apply to several lenders could be hampering their prospects of getting on the property ladder.
The lack of understanding around credit scores is most profound among 18-24-year-olds – with a third (33%) claiming they were unaware that having no credit history could affect their chances of getting a mortgage.
Interestingly, higher education seems to lessen your chances of being granted a mortgage. The research shows that Undergraduates, Masters and Doctorate graduates are 10% more likely to be rejected because of poor credit scores than those with just A-levels, possibly a result of the higher levels of debt associated with student life.
Broken down by family status, those with one child were 30% more likely to have suffered mortgage rejection because of a poor credit rating than those with no children.
Glen Crawford, CEO at Amigo Loans, which commissioned the study said: “Owning your own home is an aspiration many people have, but actually getting on the property ladder is becoming more and more unachievable. Ensuring people are aware of what can affect their chances has never been so important, as this is difference between having the key to your dream property and being declined for a mortgage. What many people don’t realise is that having no credit history can be just as damaging as having missed payments on your record, this is why it’s paramount that people begin using credit responsibly at the earliest possible stage.”
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