Can I Get A Mortgage With Bad Credit

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Mark from Fancy a Mortgage joins the Mortgage and Protection podcast to explain how bad credit affects your chances of getting a mortgage.

What is bad credit?

It’s sometimes described as bad credit, adverse credit or a low credit score. The terminology can vary but it’s all the same thing. Bad credit is where someone has had debt problems in the past.

It could be that they’ve got County Court Judgements (CCJs) or defaults on their record. It may be that they have taken very little credit and therefore have a low credit score. Bad credit could just mean missed or late payments. A common area is mobile phone contracts – if you stop your monthly payments without telling your provider, you can end up with missed payments credit on your record.

Will anyone lend to me with bad credit?

There are certainly lenders out there who will accept less than perfect credit scores, but it depends on your specific situation. Even some of the high street lenders will allow a certain amount of bad credit. There are other non high street lenders that specialise in mortgages for people with bad credit.

It’s always best to approach a broker to help you determine the best lender to go to for your circumstances.

How can I find out if I’ve got bad credit?

The best way is to make contact with a credit reference agency to get a copy of your credit report. Some providers offer free service, some offer you a 28 day free trial.

It’s definitely worth checking your record to see what lenders will see about you. A broker can help you access your details and help you determine the best way forward.

Can I get a mortgage with bad credit?

Yes, and this is something that we deal with regularly. A lot of us have some form of poor credit. It may be the odd missed payment or a default from a long time ago. These blips will stay on your credit report for six years.

Getting a mortgage is often possible. It just depends on the type of bad credit you’ve got, the size of any debt and how recent it is.

Can you get a mortgage with a 500 credit score?

Credit scores are less important for a mortgage. They are mainly used to help financial providers decide whether customers are suitable for a credit card or a small unsecured loan.

With a mortgage, the lenders look more at the content of the credit report rather than your score. Each credit provider has a different scale – Eqifax might give you up to 300, TransUnion scores you out of 700, and Experian goes to 999. Because the systems are complex, lenders will often look at the details rather than the number.

Can I get a mortgage with a CCJ?

A CCJ stands for a County Court Judgement, where a debt ends up in court and you are found owing. The CCJ will be shown on your record as either paid or unpaid.

Whether you can get a mortgage depends on the size of the debt, how recent it is and whether or not you’ve paid it off. The same goes for an Individual Voluntary Arrangement, which is where you have got into trouble with a collection of debts. You can’t take out credit until you’ve paid this off.

Generally, lenders will not accept you until your debt is paid off. Some lenders won’t touch you until you’re six years past that date, while others might allow three years.

How can I improve my credit score?

The best approach is to always pay on time. If you’ve got credit cards, try to pay more than the minimum amount. Always overpay so that the balance is decreasing – that’s quite important in improving your credit score. The less debt you have, the better.

But sometimes even having no debt can give you a low credit score – you need to borrow to prove that you are responsible about paying money back. Lenders want to see that you’ve got a history of paying your debts on time and that you decrease your balance.

Is there any difference for First Time Buyers?

For First Time Buyers, lenders won’t have any mortgage history to look at. So they will look closely at your situation and previous debts. They’re going to be more cautious with you than with someone who they can see has paid previous mortgages on time, but the process is generally the same.

How does it work if you’ve got bad credit and you need to remortgage?

It’s generally the same, except with a remortgage you may have a decent amount of equity on the property and you will have a history of mortgage repayment. But, of course, bad credit could include missed mortgage payments.

What I generally find is that while many people have defaults, CCJs, missed payments or arrears, they do pay their mortgage on time. This goes a long way to showing the lender that, although you have some debts, you are responsible with the mortgage.

How can a mortgage broker like Fancy a Mortgage help?

A mortgage broker is here to help you find an appropriate lender and mortgage product by exploring the market on your behalf. We look at high street lenders and specialist lenders to find suitable options.

You are always better off seeking mortgage advice, as if you apply direct and are declined it could make your credit record worse. Some lenders, in fact, ask if you’ve been declined for a mortgage as part of the application process.

Even if you’re in a situation where we may not be able to get a mortgage today, a broker can give you helpful advice and direction for the future. It might be that in a few months time, you may be in a better position to apply for a mortgage. We don’t just look after clients today, we’re here for tomorrow and the future.

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

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