Adverse Credit Mortgage
BAD CREDIT AFFECTING YOUR CHANCES?
ADVERSE CREDIT MORTGAGE SPECIALISTS
Can I get a Mortgage with Bad Credit?
Estimates show that one in five people have had a mortgage application turned down as a result of bad or adverse credit. Factors such as divorce, illness, redundancy have resulted in people having credit problems at no fault of their own. There are various reasons why people are not categorised as standard borrowers and do have a great credit rating. For example, they have no credit history, not being registered on the electoral roll, moving numerous times in a short space of time can affect your credit rating. But here at the Mortgage Advice Center, we are experts in helping people like you find a Adverse Credit Mortgage.
Some high street lenders will consider clients with minor credit problems such as a settled £100 county court judgment. We will always make sure we have considered the high street lenders before we look at adverse credit lenders. Mortgage lenders will charge higher interest rates and may be less flexible when lending to people who have bad credit because they are a bigger risk than a standard mortgage borrower.
CHECK YOUR CREDIT
When it comes to bad credit, the first place to start is your credit file to see how bad the score is – as the definition of “bad” is very wide. Having debt is quite common nowadays but it’s how debt is dealt with that matters.
We partner with and recommend CheckMyFile which combines data from Equifax, Experian and TransUnion. Different lenders use different credit reference systems to review and assess your profile so this gives us an incredibly good insight into what lenders may see when reviewing your mortgage application.
Here at the Mortgage Advice Center, we’ll help you understand how bad credit is affecting your chances of buying a home, and help you on your way to becoming a home owner.
What do Lenders Look at?
Lenders will look at all factors of your application from the type of property to your age and income. Debts usually stay on record for 6 years however you may be requested to disclose those earlier than 6 years, particularly if you have been bankrupt previously. It is our experience that lenders focus on the more present years i.e. 2-4 years of payment history for debt to ascertain your risk. Every lender has their own credit scoring system and not all lenders will credit score. Some will look at the case manually so it isn’t always a case of the computer says no.
Lenders will see your debt and credit and any credit agreements you hold. Late payments are taken into consideration and can be seen as a negative impact on your score. Your credit file will show late payments, CCJs, bankruptcy, IVA or debt management plans and how long they have been on there for.
YOUR CREDIT SCORE
You must check your credit files before you apply for a mortgage. If you are declined it could waste time with mortgage application fees but also a search could potentially show on your credit file. It also allows us to ensure that we have inputted any liabilities correctly. A lot of adverse credit lenders do not deal directly with the public, so an adviser will be able to apply on your behalf.
Most lenders will do a soft credit check first, however, some will do a hard credit search that would show on your credit file, and we would let you know if this was the case. Too many hard credit checks could ultimately affect your credit score. Ultimately it is beneficial for us to see what the lenders will see before we apply so that we can advise accordingly.
A client’s credit score could be low sometimes because they have no credit history. It is also affected by late payments, CCJs , defaults or bankruptcy. Multiple loan applications and multiple lines of credit can also affect your score.
Does Your Partner Have Bad Credit?
If you are a considering a single application but are currently living in a property with somebody else who has a bad credit history, this can sometimes effect your credit rating especially if it is your spouse.
The benefit of using us is that we can talk to the underwriters and get an insight into what is required beforehand. We will never put an application into a lender until we are satisfied that you stand a very good chance of obtaining a mortgage with that lender. Lenders for clients with bad credit are generally a niche market and can usually only be obtained through a mortgage broker. We take away the headache and use our experience to advise you in the best way.
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Deposits with Bad Credit
The size of your deposit can affect your eligibility for a mortgage amount. Clients with debt are occasionally asked for a higher deposit – in the region of 20%-25% due to making the loan to value ratio smaller.
How to improve your Credit Score
to increase your chances of getting a mortgage with Adverse Credit, it would be wise to try and improve your credit score. Most of these things are fairly straightforward and include the following:
Over 50 with Bad Credit?
Having bad credit and being over 50 impacts on the term of a mortgage.
Which might mean that you need a larger deposit.
We do have lenders that do lend into retirement but if a client has a personal pension or maturing investments, then this could be used in an affordability assessment. There may be an inheritance due in the older ages which could help with a deposit for a mortgage. The best thing to do is to contact us to talk through options.
SELF EMPLOYED & BAD CREDIT?
Typically finding a lender that takes self employed income is tricky. Add that on top of bad debt can make things a little more difficult. Again, here using a knowledgeable mortgage broker is important as we use our knowledge and experience of the market to benefit you. Lenders will look for the following if you are self-employed with bad credit:
- latest 2 years income figures for affordability purposes
- a mixed-income for dual self-employed/employed, or with a complicated mix of company income sources
- Getting a mortgage with both salary and dividends.
- Some lenders will use Net profit of ltd company businesses
- Getting a mortgage with one year’s company or sole trader trading figures
Already Have a Mortgage but fallen into Bad Debt?
If you’re ready to remortgage after falling into bad debt, don’t despair. We are used to clients re-mortgaging to consolidate debt as the benefit of having one monthly payment is advantageous. However it’s not always advisable, as the interest payable long term is far more than repaying the debt in the short term. We would help find lenders that accept debt consolidation as typically not all lenders are open to this. We will compare your current mortgage providers offering against the whole of the market. We can often also represent you to do a product switch with your current lender if this is the best solution. Typically people tend to have equity in the property by the time re-mortgaging comes around which can also provide different options such as capital raising or consolidating debt.
GOT A CCJ BUT NEED A MORTGAGE?
If you have a CCJ, getting a mortgage can be quite complicated. There are lenders that can fit these circumstances although not usually high street lenders and they tend to have a higher interest rate as they see clients with adverse credit as higher risk. Also what matters is how old your CCJ is. For example a CCJ over 3 years old may be acceptable but different lenders have different criteria. A higher deposit may help any application though but the amount of your CCJ can affect your mortgage ability as some lenders will ignore ccj’s under £500. There is no hard and fast rule here. That’s really where choosing a mortgage adviser is helpful as we can do all the sourcing for you through the whole of the market.
Having paid your CCJ certainly helps with being offered a mortgage. It’s worth remembering that a satisfied CCJ disappears from your credit file after 6 years.
IVA & BANKRUPTCY ORDERS
If you’ve been made bankrupt or had an IVA previously, you can still get a mortgage. It is wise to wait 6 years after the discharge so that it comes off your credit file. However some lenders require you to disclose whether you have EVER had any IVAs or bankruptcy orders. Again, we can search the whole of market for you and help you every step of the way.
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