Bad Credit Mortgages

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What is bad credit?

Bad Credit ratings can be the result of a number of common causes. Some examples include: such as missed payments, CCJs, and bankruptcies. Bad credit or no credit will affect your chances of having a mortgage deal accepted. It is important to check your credit score before applying for a mortgage and ensuring your finances are in order.

How do I know if I have bad credit or adverse credit?

You can check your credit record online through Credit Reference Agencies such as Experian, TransUnion or Equifax. 

If it is possible to do so, It is worth waiting for your credit to improve your score and gain access to the lower rates available. Every time that you apply for any type of credit and are rejected it will damage your credit score. You shouldn’t just keep applying for mortgages in the hope of being accepted, seek help from a mortgage expert instead.

Can I get a mortgage with bad credit?

You can still get mortgages if you have bad credit, but you may find you only have limited options and will more than likely have to approach a specialist lender. Any bad credit on your file doesn’t look good to lenders and suggests you are a high-risk borrower. Missing a credit card payment, however, poses a lower risk to a lender than missing mortgage payments. 

High street lenders such as banks and building societies are more likely to reject you if you have a bad credit report. Some can be flexible and specialist lenders will look more favorably on credit issues if they are due to illness, divorce, or other difficult circumstances.

These specialist lenders will be more understanding with their affordability checks but interest rates are likely to be higher or they may require a larger deposit for you to be approved for your credit application. For reference, the majority of borrowers with bad credit have to provide a 25% deposit to qualify and will be put onto fixed rate deals.

It can be worth waiting for your credit score to increase over time as you sort your finances out. Paying off any debts and ensuring that all of your accounts are up to date and correct will help to increase your score.

How do I improve my credit score?

Once you have established that you have bad credit you will want to know what you can do to improve it. There are things that you can do to ensure that you are improving your score over time.

A few things you can do to ensure you are improving your score:

  • Make credit payments on time, utility bills, mobile phone bills, etc.
  • Stay within your credit limit
  • Avoid withdrawing cash from credit card accounts
  • Avoid where possible spending on credit 
  • Pay more than the minimum payment on your credit card and ensure it is on time
  • Have separate cards for personal and business spending
  • Keep track of your old accounts
  • Untie links to other people’s credit history
  • Pay any outstanding CCJ or Defaults issued against you

You need to look after your finances and avoid taking out any loans, your credit will repair itself over time. Just ensure to take care when applying for any form of credit as being rejected will leave notes on your credit file.

You can make a debt management plan with charities such as Step Change or make a plan yourself to get up to date with your finances and pay off what you owe. Poor credit history will ensure a poor credit rating and will make you seem unreliable when it comes to making mortgage repayments. 

Being honest with a lender whilst making a mortgage application is key and you need to make sure your application is clear and correct. Any small mistakes alongside bad credit will look awful to a lender and as though you aren’t reliable enough for a mortgage.

How can a Mortgage Broker help?

Mortgage Brokers can help by advising you whether it is the right time to apply for a mortgage, they will ask about your finances and current situation and what you are looking for in a mortgage. If you are a First Time Buyer with bad credit it is definitely worth exploring ways in which you can get your score up before getting a mortgage.

Mortgage brokers can help gather all the documentation you need and ensure you have a strong and clear application before approaching a lender. We are Whole of Market Mortgage Advisers and have access to products not available on the high street and exclusive deals through our Network Quilter Financial Planning Ltd.

Brokers build relationships with lenders over time and if you have a reason for your bad credit then there can be options for you. A Mortgage Broker can help you plan and budget to make sure you can afford the repayments on your mortgage too.

Buy to Let mortgages are not regulated by the Financial Conduct Authority.

Your home may be repossessed if you do not keep up repayments on your mortgage.

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