Skip main navigation

Do you need a credit check for a homeowner loan?

A credit check is needed when you apply for a homeowner loan. Lenders will carry out credit checks on all forms of credit - they do this to review your credit history and assess how risky it would be to lend you money from their perspective. You may, however, be able to get a quote for your homeowner loan without having a credit check performed.

5 min read
woman looking at documents

What is a credit check?

When you apply for credit (including a homeowner loan) the lender will contact one of the three main credit reference agencies in the UK (Experian, Equifax or TransUnion) to access your credit report. They will review your credit history as part of the application process. This is known as a credit check.

Credit checks normally fall into two categories: soft checks and hard checks.

Soft checks don’t impact your credit score or impact any future credit applications you might make. They are usually performed when you check your own credit report, or when you use an eligibility checker to see if you’ll likely be accepted for credit. You can make as many soft checks as you like, as they don’t leave a footprint that companies can see.

Hard checks, however, do leave footprints which companies can see and they will last on your credit report for up to 12 months. They are usually carried out by the lender when you make a formal credit application. A hard check will pull more information than a soft check. And this will help the lender to assess the risk involved in providing you with credit.

Multiple hard checks made within a short space of time can put some lenders off. It may give them the impression that you are struggling with money, and they want to feel confident that you’ll pay them back.

Why do lenders do credit checks?

Lenders perform credit checks when you make an application, to review your credit history and find out if you are a responsible borrower.

They use your previous financial behaviour to predict your future behaviour and calculate how risky it’d be to lend you money.

They also use the information on your credit report to make decisions about the terms of any agreement. This will include the duration of the loan, the interest rate and the amount you pay back per month.

If you have a good credit history, this should work in your favour, as you will most likely be seen as low risk. As a result, you may be able to access more competitive deals with lower interest rates.

What do lenders look at on my report?

Lenders will look at personal information on your credit report (such as your full name, date of birth and address) to confirm you are who you say you are. They may also check if you’re on the electoral register to verify your address history. 

Your payment history over the last six years will also show on your credit report. So lenders will be able to see markers like missed and late payments, defaults, CCJs, bankruptcy and IVAs. If you have a poor credit history, you may have a low credit score and this can affect your ability to get further credit. This is because lenders may see you as more of a risk. The impact of these markers should diminish over time if you maintain your payments going forward.

Lenders will also be able to see how many lines of credit you have open and how much of your available credit limit you are using, to check you’re not too reliant on credit.

In addition, lenders may check if you have any financial links to others. For example, if you have a joint account with someone else who has bad credit, it could negatively impact your loan application by association. You can remove any old ties by contacting the relevant credit reference agency, as long as the account is closed first.

Can I see my credit report?

Yes. It is possible to see your statutory online at any time, by directly contacting any one of the UK’s three main credit reference agencies, Equifax, Experian or Transunion. Although the report itself is free, you may be charged a £2 fee if you want a hard copy in the post.

There are several other services available, such as CredAbility, who also provide your credit score and further insight for free. You can use their app when you’re on the go and set yourself goals to help you improve your credit score.

Can I get a secured loan without a credit check?

No, a credit check is essential. Every lender will run a credit check before any agreement is reached. This is the case with all credit agreements, including unsecured loans, credit cards and overdrafts. Paying your mobile phone contract or car insurance monthly will also require a credit check, as these services are classed as forms of credit too.

Do you need good credit for a homeowner loan?

No, you don’t necessarily need a good credit score to get a homeowner loan. Some lenders specialise in lending to people with bad credit. And lenders have the added security of your property being secured against your home. This means they should be able to provide secured loans for larger sums of money and lower interest rates, compared to unsecured loans.

But you will have more options available to you if you do have a good credit history. And you may be able to access better deals with lower interest rates.

Remember, only borrow what you can afford to repay. If you don’t maintain the secured loan repayments on time, every time, then your home could be repossessed.

How to get a homeowner loan with bad credit?

  • Check which lenders specialise in providing finance for people with bad credit
  • Use eligibility checkers to help find the best deal, without impacting your credit score
  • Work on improving your credit score before applying, to get the best deal
  • Apply for the best deal and follow the lender’s application process