Bad Credit Mortgages

A bad credit mortgage is simply a term used to describe a mortgage arranged with a specialist lender for a borrower who has experienced financial difficulties in the past. Typically, a bad credit mortgage for someone who has had debt problems will be offered at a slightly higher rate than that found from your usual high street lenders and may also require a slightly bigger deposit or a larger amount of equity.

In our experience however, it is not necessarily the case for everyone that, just because they have experienced problems in the past with their credit, they will need to go down the route of getting a bad credit mortgage from a specialist lender. The market has evolved over the last few years and some mainstream lenders are now considering elements of adverse credit, and those eligible can still obtain standard interest rates. Our expert adviser are fully qualified and following an initial discussion and sight of your credit report should be able to ascertain which route you may have available.

While it can be more difficult to secure a mortgage with a bad credit history, it’s certainly not impossible for all. Also, there are things you can do that could improve your chances of being accepted for a bad credit mortgage.

How to improve your credit for a mortgage:

1. Consider doing these things now:

• If you aren’t on the electoral roll, get registered.
• Request copies of your credit report from the three main UK agencies.
• Close any accounts you don’t use e.g. store or credit cards.

2. Next, do this:

• When you get your credit reports, check that the information they contain is accurate. If anything is wrong, get in touch to get it corrected.
• Make a list of all your sources of income and outgoings, so you understand how money flows into and out of your household. Use this to work out a realistic budget, and stick to it.

3. Longer term actions:

• If you’re struggling with your budget, look at the figures again – maybe you haven’t allocated enough for groceries (for example) or you forgot about something.
• Open a savings account and put something into it every month – no matter how small a sum. When you have a little bit extra – such as your free council tax months – put that money into your savings account.

For further information on bad credit mortgages, contact our team of specialist brokers. They have a wealth of experience of securing mortgages for people with a history of bad credit and have access to exclusive deals you wouldn’t necessarily find on the high street.

The criteria for assessing a mortgage application will vary from lender to lender, and their approach to your application will differ according to the current level of perceived risk and the nature of your bad credit issue. Usually, you will need to approach a lender who specialises in mortgages for people with bad credit, but, with the mortgage market continually evolving, some mainstream lenders have been known to accept some elements of adverse credit and you may not need the services of a specialist lender.

As a general rule, the lesser the adverse credit event and the more time that has passed since it occurred, then the more favourable a mortgage lender will be. For example, an uncleared CCJ within the last 12 months will be a far greater issue than a few missed payments on a store card three years ago.

However, the main deciding factor will be that, whatever your previous money problems, if you are able to show you are now on a firmer financial footing in the long term and have taken steps to improve your credit score, then you will stand a far better chance of being accepted.

We know that no two cases are the same, and that many applicants will be able to find mortgages at standard interest rates, despite financial issues in the past. Once we’ve gone over your individual circumstances and analysed where you currently stand, we’ll be able to recommend the best path to take to successfully obtain a mortgage on reasonable terms.

You might think that bad credit is all about the scores obtained from credit agencies who collate information about your borrowing habits, but this is not the whole story. The definition of ‘poor credit’ and the approaches taken to potential borrowers is far more nuanced than you might imagine, and will vary from one mortgage lender to the next. Each of them will be likely to have their own methods of ‘scoring’ your credit history, and differing perspectives on what the score might mean.

Technically, there’s no such thing as a general ‘bad credit’ score. This is because credit scores are calculated in different ways by the UK’s credit reference agencies – the main ones being Experian, Equifax and TransUnion. You’ll find that each of them provides a report and a numerical ‘score’ based on their own system, which bears no relation to the others, so it’s not easy to make a broad comparison and it could be that one company is using information that is out-of-date or not considered by the rest. The view of any score will also vary according to which lender is looking at it, as some lenders will interpret scoring in different ways to others.

What’s important to note is that the numerical scores for your credit history are not what will impact a lender’s final decision; it is the collected information that makes up your credit file and the nature of the actual adverse credit events themselves that will make the difference. Sadly, some lenders will view the slightest fault on your credit history – such as a late payment on a utility bill, or a missed card instalment – as being indicative of poor money management, and will consider you a higher risk.

Other lenders are more flexible, understanding that unfortunate circumstances can happen to anyone, and that a borrower’s approach to finance and credit can change over time – even in cases of more severe bad credit events like bankruptcy or CCJs.

So, you could say that a borrower’s ‘bad credit’ status is caused by the attitude and approach of whoever is looking at their credit records. If you do have any issues, it’s a matter of finding a suitable lender who will view your case in the most positive light.

It’s entirely possible that you could be unaware of any bad credit events on your file, or that you have a potentially poor credit rating. It might be that any infringements have simply had no after-effects on your finances, or were so minor that they were not noticeable to you or those around you. You have been able to blissfully carry on with your life, without the experience of being chased by debt collectors or receiving letters from credit card companies, which would have been a clear sign that your credit history is not as strong as it should be.

For some people, the first real sign they have a bad credit rating is when their application for a mortgage is declined by a high street lender. This can be a surprise if you have not had a long credit history period (or no credit history at all), or have not considered any payment errors to be of any significance. For others, it may be less of a shock, simply because they may be aware of missed payments or court actions in the past, but have not seen any impact in their day-to-day lives.

The one sure way to find out if you have a bad credit history is to request a copy of your credit report from the three main UK credit agencies – Experian, Equifax and TransUnion. Each of them collects information and scores it in a different way, so it’s advisable to get a copy from all three to make sure they all have the correct information and spot anything that should be updated.

The process of obtaining your credit report used to take a while, require a written application and a small fee to pay, but thanks to new developments in recent years in managing our finances online, and new rules regarding access to personal information (GDPR), you can now check your credit score on your phone in a matter of minutes free of charge via one of many credit checking apps or websites.

If you have any concerns over what a particular score might mean for your chances of getting a mortgage, speak to one of our team of specialists today. They will be able to advise on your chances of getting a mortgage, who with and how much for, and give you options for the next steps going forward.

It’s not uncommon for people with bad credit to have problems obtaining a mortgage themselves directly from the well-known high street lenders. The mainstream providers tend to accept only those applicants with the cleanest of credit records who fit into a standard template, so they minimise their exposure to perceived risk and the process to application and lending is as simple as possible. Anyone outside of these narrow parameters is unfortunately likely to be declined, and so you will be best advised to approach a specialist mortgage broker to help you locate the mortgage to meet your needs.

In general terms, a bad credit mortgage broker is a title given to an advisor who specialises in this area of the market. These brokers specifically focus on bad credit lending to ensure they are knowledgeable in this sector – routinely handling applications on a daily basis from people who suffer from adverse credit, ensuring they are up-to-date on all developments in what can be a very fast-changing market, and keeping abreast of new products as they become available. They will also have the ability to recognise whether a bad credit mortgage is genuinely required, or where a standard lender could still be available and the best option to meet your circumstances.

At IMC Mortgage Brokerss, we receive many enquiries from would-be borrowers who find themselves in a position where they have been turned down for a mortgage due to some credit difficulties in their past. As specialist brokers, we completely understand the nature of their problems and immediately put them in contact with one of the many bad credit mortgage advisors on our team, who will have the right experience and training in this area of lending to ensure they are best-placed to give you the most appropriate advice, and will usually have great relationships with the lenders who cater to this sector of the market.

Determining which mortgage product and lender will be the right one for you takes insight and research – something our bad credit mortgage brokers are able to provide quickly and transparently so that you can understand your options.