For mortgage brokers in the UK, the ability to accurately read and interpret a credit report is more than just a skill, it’s a cornerstone of their professional practice. 

These detailed documents, compiled by Credit Reference Agencies (CRAs), offer a deep dive into an individual’s financial history, acting as a vital tool for assessing their suitability for a mortgage. Think of it as a financial blueprint, revealing past borrowing behaviour and the reliability of repayments. This blueprint is used to assess the future creditworthiness of the applicant.

In the UK, Experian, Equifax and TransUnion are the three main CRAs . Each agency gathers information from various sources like banks, building societies and even the courts. It’s important to remember that the information held by each agency can differ, so getting a comprehensive view often means checking reports from all three. Many lenders will consult multiple agencies: brokers who have a deep understanding of these reports are crucial for supporting clients effectively. 

At LendInvest, we don’t consider an applicant’s credit score at all, instead we determine our approvals by comparing their credit history to our tiered product profiles.

Understanding the ‘Anatomy’ of a Credit Report

A UK credit report is typically divided into several key sections, each providing valuable insights into an applicant’s financial standing.

Personal Information

This section confirms the applicant’s details, including their full name, date of birth, current and previous addresses (usually for the last six years), and whether they are registered on the electoral roll. Accuracy here is paramount. Any discrepancies should be investigated as they could indicate errors or even potential fraud. Importantly, being registered on the electoral roll at the current address is a key factor for lenders confirming identity and stability.

Credit Accounts

This is the heart of the report, detailing all active and closed credit agreements, such as credit cards, loans, mortgages, and even some utility and mobile phone contracts. Each account will list the lender’s name, account number, opening and closing dates, credit limit or loan amount, outstanding balance, and the repayment history. This history is often presented using status codes indicating the timeliness of payments over the past six years. Consistent on-time payments are a strong positive indicator, while missed or late payments, especially recent ones, can raise red flags and will ultimately impact the product tier the applicant will be eligible for.

Understanding the status codes is essential; for example, a ‘0’ typically means payments are up to date, while higher numbers indicate increasing levels of arrears, and codes like ‘8’ or a warning triangle often signify a default.

Public Record

This section contains information from court records and other official sources, which lenders often view with caution. It may include details of County Court Judgments (CCJs), bankruptcies, Individual Voluntary Arrangements (IVAs), and Debt Relief Orders (DROs). These records indicate serious financial difficulties and can significantly impact mortgage eligibility. It’s important to note the status of any CCJs, as a satisfied (paid) CCJ is viewed differently from an outstanding one. Generally, these records remain on the report for six years.

Credit Inquiries

Organisations that have accessed the credit report are listed in this section. It’s vital to distinguish between “hard” and “soft” searches. A “hard” search, typically triggered by a credit application (like a mortgage or loan), is visible to lenders and can temporarily affect the credit score, especially where there are multiple applications in a short period. “Soft” searches, such as when an individual checks their own report, do not impact the score and are usually only visible to the individual. 

A high frequency of hard searches could suggest to lenders that the applicant may be facing financial difficulties.

Beyond the Numbers: Assessing Creditworthiness

While the credit report provides a wealth of information, lenders also consider a credit score as a quick indicator of creditworthiness. However, it’s crucial to understand that in the UK, each of the three main CRAs has its own scoring system and range. For example, Experian’s scores range from 0-999, Equifax’s from 0-700 (or sometimes 0-1000), and TransUnion’s from 0-710. 

It’s important to remember that lenders often go beyond these scores and use their internal criteria to assess risk. They analyse the underlying data in the credit report to form their own opinion. Therefore, while a good credit score is helpful, it’s not the only factor determining mortgage eligibility. Factors like income stability, employment history, the size of the deposit, Loan-to-Value ratio (LTV) and the debt-to-income ratio are also critically important.

Specialist and alternative lenders like LendInvest tend to create their own credit tiering system. At LendInvest, more scrutiny is put into missed payments and arrears rather than credit scores.

Spotting the Red Flags

Mortgage brokers need to be adept at identifying potential red flags within a credit report that could concern lenders. These include:

• Frequent late or missed payments: This indicates a potential struggle with managing debt.

• Frequent change of address: Lenders prefer stable residential histories as frequent moves could suggest lack of permanence, financial instability or even attempts to evade creditors.

• High credit utilisation: Consistently using a large portion of available credit can suggest over-reliance on borrowing.

• Defaults on credit agreements: This is a serious negative indicator of past financial difficulties, especially when unsatisfied.

• Adverse public records: Unsatisfied or recent CCJs, bankruptcies, IVAs, and DROs are significant concerns for lenders.  

• Numerous recent credit applications: A high number of hard searches in a short period can suggest financial distress and credit hunger. 

• Financial associations with individuals with poor credit histories: This can sometimes negatively impact an application.

• Inconsistencies in personal information: Discrepancies between the credit report and the mortgage application can raise doubts about accuracy.

• Not on Electoral Register: This could suggest an unstable living situation, a lack of attention to administrative needs and even be considered as potential for fraud.

• Thin credit profiles: lack of credit means lack of history, but doesn’t necessarily pose an immediate risk. Applicants with thin credit histories are better suited to specialist and alternative lenders like LendInvest

Best Practices for Brokers

Brokers should be examining their clients’ credit reports. Doing so will enable brokers to have a clear understanding of their client’s profile and assist in which lender they can approach. To effectively utilise credit reports, UK mortgage brokers should:

• Check reports from all three main CRAs: Experian, Equifax, and TransUnion, to get a complete picture. Checkmyfile is a platform that compiles all CRAs into one report, simplifying the process and reducing costs.

• Utilise available resources: The CRAs themselves, along with websites like MoneyHelper and Citizens Advice, offer guides and explanations. 

• Stay compliant: A broker must understand and adhere to data protection regulations (like GDPR) and the FCA’s guidelines on responsible lending. Brokers should also get consent from their client before running credit checks.

A Broker’s Expertise Matters

In the complex world of mortgage applications, a broker’s ability to expertly read and interpret credit reports is invaluable. By understanding the nuances of each section, recognising potential red flags, and considering the broader financial picture, intermediaries can provide clients with the best possible advice and significantly increase their chances of a successful mortgage application.

The LendInvest Way

LendInvest acknowledges that every aspiring homeowner’s credit history is unique, and many do not fit into the “High Street” mould of lending.

That’s why we’ve taken a new approach to our credit criteria that doesn’t include credit scores. Instead, we have created four distinct categories, each designed for allowable adverse credit situations. 

Ready to help your client buy their next home or remortgage? Get started in our Mortgages Portal today or contact your dedicated BDM.

LendInvest plc is a public limited company registered in England and Wales (No. 8146929). Registered Office: 4-8 Maple Street, London, W1T 5HD.

LendInvest Mortgages and LI Mortgages are registered trading names of LendInvest Loans Limited. LendInvest Loans Limited is authorised and regulated by the Financial Conduct Authority (FRN:737073). LendInvest Loans Limited is a company registered in England & Wales (Company No. 09971600) and is a wholly owned subsidiary of LendInvest plc.

Regulated lending is provided via LendInvest Loans Limited (Company No. 09971600). Unregulated lending is provided by LendInvest BTL Limited (Company No. 10845703) and LendInvest Bridge Limited (Company No. 11651573), which are wholly owned subsidiaries of LendInvest plc.

Borrowing through LendInvest and its affiliates involves entering into a mortgage contract secured against property. Your property may be repossessed if you do not repay your mortgage in full.