Does a Mortgage in Principle affect your credit score?

Before we dive into whether a Mortgage in Principle affects your credit score, let’s clear up a key difference between a Mortgage in Principle and an Agreement in Principle.

What’s the difference between a Mortgage in Principle and an Agreement in Principle?

A Mortgage in Principle is often referred to as an Agreement in Principle, Decision in Principle or mortgage promise. Although these terms are often used interchangeably, they technically are used to refer to different things. 

A Mortgage in Principle gives you an idea of how much you can afford to borrow. It’s created using limited information about your finances, such as your income and your deposit amount, and there’s no hard credit check involved.

This is why you can get a Mortgage in Principle pretty quickly - we can generate a free, downloadable Mortgage in Principle for you in 10 minutes. Get started here.

When you’ve found the house you want to buy and you’d like to apply for a mortgage, you’ll need to get an Agreement in Principle (also known as a Decision in Principle). This is created using a more detailed view of your finances, and you’ll usually need to agree to a credit check to get one of these. 

Learn more: Should I buy a house in 2024?

Does a Mortgage in Principle affect your credit score?

Based on the above, a Mortgage in Principle does not normally require a hard credit check, so shouldn’t affect your credit score. But some lenders or brokers could run a credit check at the same time as issuing you a Mortgage in Principle, which could affect your score. Keep in mind that if you want to buy a home, at one point your credit score will be checked, even if it’s not checked when you get a Mortgage in Principle issued. 

Read our guide on credit for tips on how to improve your credit score. 

How to get a Mortgage in Principle

You can get a Mortgage in Principle by providing a mortgage broker or potential lender with information about your finances. All you need to do is answer a few questions about your income and savings and they’ll give you an indication of how much you can borrow. 

Create a Tembo plan today and we’ll send you a free Mortgage in Principle in minutes. 

What happens after you get a Mortgage in Principle?

Normally after you get a Mortgage in Principle you would start looking for a house by contacting estate agents and setting up viewings. Sellers tend to prefer buyers who have a Mortgage in Principle since it reduces the likelihood of the property sale falling through later on. Some estate agents won’t even let you book a viewing unless you have one. 

A Mortgage in Principle will help to make the house-hunting process so much easier by narrowing down your property search. You’ll know exactly where you stand and how much you can afford to borrow. The last thing you want is to fall in love with a particular property only to struggle to find a lender willing to give you the mortgage you need. 

You might like: What to look for when viewing a house: House viewing checklist

Once you’ve found a property that ticks most of your boxes, it’s time to put in an offer and start your mortgage application. As long as your circumstances haven’t changed since you got your Mortgage in Principle, you can be fairly confident that your application will be approved and you’ll be given a mortgage offer.

Does an Agreement in Principle affect your credit score?

An Agreement in Principle could affect your credit score, but it depends on how thorough the lender’s credit check is. Some lenders will only carry out a ‘soft’ search at this stage, leaving no trace of the credit check on your report and making no difference to your credit score. Other lenders will run a ‘hard’ search, which will leave a digital footprint on your credit record, potentially impacting your score. 

One or two hard credit checks are unlikely to make much difference to your credit rating, but too many credit searches could have an impact. To give yourself the best chance of getting an Agreement in Principle without affecting your credit score, speak to a mortgage broker. 

Here at Tembo, our technology shows you your borrowing potential as well as the best way for you to get on the ladder from over 100 lenders. We’ll also generate an instant Mortgage in Principle for all of your eligible schemes, without the need for any credit checks. 

When you’ve found a house you’d like to buy, we can do a more thorough search and get you an Agreement in Principle.

You might like our guide to adverse credit mortgages.

Can you be declined after a Mortgage in Principle?

Yes, it is possible to have your mortgage application declined even after getting a Mortgage in Principle. A Mortgage in Principle isn’t legally binding, so lenders are under no obligation to honour their original offer or even approve your application at all. 

Here are a few reasons you could be declined after a Mortgage in Principle:

• You’ve started a new job
• Your income or outgoings have changed
• Your income is unpredictable
• You’ve taken on a new form of credit such as a credit card, personal loan or car loan
• You’ve missed existing debt repayments
• You provided the lender with inaccurate information previously
• You don’t meet all the lender’s criteria
• Your circumstances and/or finances are more complicated than originally thought
• You’re financially linked to someone who has adverse credit through a joint mortgage or loan
• You’ve applied for a bigger mortgage than stated in your Mortgage in Principle

Lenders are unlikely to uncover the above issues when doing an initial assessment for a Mortgage in Principle, so it’s a good idea to speak to a broker if you think there’s anything at all that could affect your ability to get a mortgage.

Learn more: Agreement in Principle: What can go wrong?