There is a misconception to presume that because you have bad credit or previously had bad credit, that you will not be able to obtain a mortgage. There are many factors that will be assessed when you apply for a bad credit mortgage and we will discuss these in detail below.
Can I get a mortgage with Bad credit?
When you look to get a mortgage or remortgage, the first thing you may try, is to apply for a high street mortgage with a well-known mortgage provider, however you may well be declined, as you have bad credit or a low credit score, this may be a result of county court judgements (CCJ) or default /s, registered against you, you may have some missed payments on utility bills or late payments on credit cards or loans, many people think that this will be ok, as you will make it up next month, or you make several late payments, you may even have been made bankrupt or set up an IVA, or entered into a Debt Management Plan, all these factors can go against you when applying for a mortgage or remortgage, it also depends on when this happened? And why did these missed payments take place?
It could be that you have no credit at all to speak of, so lenders are unable to assess your ability to manage credit, but there are lenders that will lend to you, due to these circumstances.
What is classed as bad credit?
- Missed Payments- On loans, Credit Cards and Mortgages.
- Defaults – These are registered when you have missed multiple payments.
- CCJ (County Court Judgements) – Where the lender has taken you to court to retrieve their money back.
- IVA – this is an agreement with your creditors to pay back a percentage of the debt owed, with an agreed amount, this will show on your credit report.
- Bankruptcy – this could be due to failed business or a personal debt.
- Debt Management Plan – A debt management plan is an agreement between a debtor and a creditor that addresses the terms of an outstanding debt.
How or will lenders assess your credit worthiness?
Lenders may use a credit score system to assess your suitability for a mortgage with them, not all lenders use this method, this is why you should obtain a copy of your credit report, you can then go through this with a mortgage advisor, who specialises in bad credit mortgages.
How do I obtain a copy of my credit Report
There are credit agencies who say that they are able to provide this service for free, but they do not provide all the information that you need to see.
The two main credit agencies are: Equifax and Experian, they do charge a fee for this service, but it is a very comprehensive way to see what is on your credit report you can then see what could be or is adversely affecting your possibility of obtaining a mortgage or remortgage, there may be information held that you feel is incorrect, either way, you will have the opportunity to get it rectified or there will be an explanation as to what happened, most specialist mortgage providers and your mortgage advisor will want to know this, to be able to present your application to them.
Can I apply for a bad credit mortgage directly?
Specialist mortgage brokers are able to access bad credit mortgage lenders and products, for your specific circumstances, they are able to discuss your application with the mortgage lenders, they will present your application, discuss your individual circumstances. Unfortunately these mortgage products are not accessible on the high street, and normally only available through a specialist mortgage broker.
Your chosen broker will guide you through the process, to try and obtain a mortgage/remortgage, specific for your needs.
When applying for a mortgage one thing you should avoid doing is make lots of applications with different brokers or lenders.
Every time you make an application you could be leaving a mark on your credit file that other lenders may see and could potentially reduce your chances of getting approval.
Will I have to pay a higher rate of interest?
Bad credit mortgages do exist and you may still qualify for a mortgage/re mortgage, despite a poor credit history. You may have to pay a slightly higher rate initially as they will assess your circumstances, on a case by case basis, yes primarily you may have to pay a higher rate of interest when compared to high street bank interest rate, but this can all be discussed with the mortgage broker.
You shouldn’t be dismayed because of your past history, every individual case is different, and mortgages/re mortgages are possible to obtain with the correct mortgage broker.
Mortgage Advisers at The Money Hub, have worked in the financial services industry for many years and their goal is to build long term relationships with our clients. If you are looking for a transparent broker that would give you good advice, The Moneyhub Ltd, offer a five star rated service.