Getting a mortgage with bad credit can be difficult, but it doesn’t have to be. Watch this video to find out more.
Hi if we haven’t met before, my name is Dan, I am a CeMAP qualified mortgage & protection adviser. This video is purely for educational purposes only, and should not be seen as advice or a recommendation to act and I must stress your home may be repossessed if you do not keep up with the repayments on the mortgage.
With that out of the way, on with the video.
If you have defaults, county court judgments, individual voluntary arrangements, also known as an IVA or a bankruptcy in your credit history, you’ll find high street lenders are unlikely to consider your mortgage application.
This video will hopefully help you in the right direction on how to get a mortgage with bad credit, but the best thing you could do for yourself at this stage is to speak with a qualified mortgage adviser, such as myself about your circumstances.
Can I get a mortgage with bad credit?In short, yes. It’s often possible to get a mortgage with a bad credit history, although you are likely to have limited options.
Before approaching a mortgage adviser, carry out a credit search on yourself and be ready to provide this to them. I have created a video on how to get a credit report for free here.
Lenders at a later stage are going to carry out a credit search on you, so you may as well see what they’ll be able to see before you apply. If you forget to do this, I’m sure your mortgage adviser will ask for a credit report anyway.
Credit reports can be complex to read, so some friendly advice would be not to panic, because on occasions your situation may look worse than it actually is.
Some adverse marks on your credit history will carry more weight than others, depending on the level of the debt and when it occurred.
As I have already mentioned, if you have a bad credit history, some high-street lenders may refuse to give you a mortgage.
But that doesn’t necessarily have to be a bad thing, there are such things as specialist mortgage lenders, which cater specifically for people who have faced difficult life events that result in a poor credit history.
These lenders tend to be more flexible when assessing your mortgage application, but often charge higher-than-average interest rates and require larger deposits in return.
How to get a mortgage with bad creditIf you have a poor credit history, there are a number of steps you can take to improve your chances of getting a mortgage.
Give it time. It’s a cliche but time is a healer. Literally. The longer you put off applying for a mortgage, the older your bad credit becomes.
Repair your credit history Make consistent payments and be responsible with your credit usage
Present yourself as low risk Apply when you have a stable income and try to offer a higher deposit
You’ll always get caught out if you lie, always. Mortgage lenders will conduct thorough searches, and trying to hide adverse credit will look bad and could result in black marks against your name.
Have an explanation
Lenders will be interested in why you got into financial trouble and what has happened since then.
Should I buy a house with bad credit?It may well be possible for you to get a mortgage when you have a poor credit history, but you also have the option of trying to improve your credit score first.
In order to increase your chances of getting accepted for a lower rate in the mortgage market. I’ve listed some of the pros and cons of getting a bad credit mortgage:
Plenty of Choice – There are a sensible amount of mortgage deals available to customers with poor credit
Own a property quicker – You’ll become a homeowner sooner if you take out a bad credit mortgage instead of waiting for your credit history to repair.
Higher rates – You’ll often have to pay higher interest rates if your credit history is poor
Bigger deposit – You might have to buy with a higher deposit to secure a mortgage with bad credit
Remortgaging with bad creditIt is often possible to remortgage with bad credit, but it’s worth trying to improve your credit score if you have time.
Making your monthly mortgage repayments on time will help you build a stronger credit history but you need to also make sure all other debt is also paid back on time.
If your credit rating has gone up after a period of time with a specialist lender, it may be possible to remortgage with a high-street lender at a later stage.
Whether you’re able to secure a better rate will depend on your credit score, your income, your property’s current value, and the equity you hold in it.
The mortgage lender will also run affordability calculations to ensure you’ll be able to afford payments at the rate they’re offering.
Types of bad creditMissed or late payments, county court judgments, individual voluntary arrangements, and bankruptcies are all classed as bad credit.
When considering your mortgage application, lenders tend to look not just at your credit rating, but the details of your credit history.
The lender will want to know what happened, when, and the circumstances surrounding your bad credit.
For example, a missed payment on a utility bill will be judged differently from a County Court Judgement although some lenders ignore county court judgements if they have arisen from a utility bill.
Criteria will also vary from lender to lender, so it may come down to finding one suited to your circumstances. Which is why I recommend speaking to a qualified adviser, as it can make things a lot easier for you.
Checking your credit scoreThere are over 100 mortgage lenders in the UK, and each one of them is unique in what they see as an ideal client. So if you have adverse credit, such as missed payments, county judgments, defaults, or an IVA, there is often a lender available that will be willing to lend.
But it is important to know, what type of lenders you should be applying to, as not all lenders will be prepared to lend if you have bad credit.
This is where doing a credit search on yourself will help you and if you’re speaking to a mortgage adviser or lender, giving them an accurate description of your credit profile will save you, and them a lot of time.
You do not want to be making applications with multiple lenders, as this could really affect your chances of being approved for finance.
There are multiple credit reference agencies out there, the main ones are Equifax, Experian, TransUnion, and Crediva.
If you wanted to save some time, you could apply to Check My File, there is 1 sign up process as they cover all 4 of the credit search companies I mentioned earlier. They also have a 30-day free trial.
There are other websites that will be free for life, but they don’t often provide all the relevant information which is required to make a successful mortgage application.
If you sign up to CheckMyFile using the link in the description you will be able to check your credit score and history on Equifax, Experian, TransUnion, and Crediva all with the 1 login, this is important because not all lenders use the same credit report, so you need to check you can see everything they’ll be able to see before applying, as different lenders, accept different levels of credit scores and credit history.
It is free for 30 days but if you wish to keep viewing your credit report after the 30 days, so you can keep an eye on your credit score and history, there is a monthly subscription cost of £14.99. To avoid this, you could sign up to each of the credit reference agencies separately and utilise their 30 day free trials. If you did continue to use CheckMyFile after 30 days, I receive a £12 referral fee.
If you’d like my help obtaining a mortgage, please contact me, my details are below.
Also, not expected or necessary but sometimes I am contacted to ask how you can thank me for producing helpful videos, if you’d like to do this, you can buy me a coffee using the link below.
Check out this video for more information on how to improve your credit score.
Remember, your home may be repossessed if you do not keep up with the repayments on the mortgage.
See you next week.