Having bad credit is a worry for most people who decide to apply for a mortgage, and to some extent, their anxiety is justified. It is harder to find a good deal if you have bad credit – but it’s not impossible. High street banks tend to be the most strict, but depending on the details of your credit history, some will still consider your application. Building societies are often more flexible and then there are specialist bad credit mortgage lenders too, so you should have plenty of options. But not all bad credit is treated the same and your situation should be looked at by a professional advisor before you apply to make sure you don’t make matters worse. In this guide, we’ll explain what lenders will look at when considering your credit history and how you can increase your chances of getting a mortgage.
What Will Lenders Look at When Considering My Application?
All lenders carry out credit checks, and each have their own criteria as to what level of bad credit they can accept once other factors, such as deposit and affordability, have been taken into account. The lender won’t just look at your credit score, they’ll want to know the details of your credit history – such as defaults, County Court Judgements (CCJs), Debt Management Plans, Individual Voluntary Arrangements (IVAs), and bankruptcies. They’ll also want to know what happened, how long ago the incident(s) took place, and how much debt was involved. A missed utility bill 5 years ago will be judged differently to a CCJ a few months ago, for example. It’s important to be honest as lenders will do a thorough check themselves, and if they suspect you’re trying to hide details about your bed credit they’ll likely reject your application and being rejected can damage your credit score even further.
How Can I Increase My Chances of Getting a Mortgage With Bad Credit?
There are some things you can do to increase your chances of being accepted for a mortgage, and to improve the interest rates and borrowing limits you’re offered.
Stable Income
Having a stable income and showing good affordability when you apply will help to lower your risk profile and improve your chances of getting a good deal.
Larger Deposit
Raising a larger deposit will support your application. If you you’re unable to raise more funds, you may need to look at purchasing a cheaper property to decrease the Loan To Value.
Joint Mortgage
If your partner has a stable income and a good credit score, having them on your application will increase the number of providers willing to lend to you and improve the offers you receive.
Explanation
Having an explanation for how your credit score got damaged can help lenders to understand more about you and your situation, rather than judging your application purely on the facts.
Improve Credit Score
If you still have some time before you need to apply for your mortgage, it’s a good idea to try and repair your credit score by paying bills on time and using credit responsibly. Having good credit can increase your borrowing limit and decrease your interest rate.
Whole of Market Mortgage Broker
A whole of market broker has access to all mortgage products, including specialist bad credit lenders and exclusive deals, and they also understand the criteria of each lender. Getting rejected can damage your credit score further, leading to a vicious circle, so it’s important you only apply to lenders who are likely to accept your application.
The Bottom Line
If you have a poor credit history, your options may be more limited but you should still be able to get a mortgage. Whether or not you’ll be accepted, and what interest rate and borrowing limit you’ll be offered, will depend on the details of your adverse credit, your affordability, and other circumstances. Getting a deal that suits your needs will come down to finding the right lender and a mortgage broker can help you do that.
We’re whole of market mortgage advisors with over 30 years experience dealing with bad credit mortgages. Being rejected by a lender can damage your credit score further, so it’s important you seek the right advice before applying. We understand the criteria of each lender, so we can help you find a deal that suits your needs perfectly and we’ll liaise with your lender, estate agent and solicitor to make sure it goes smoothly.
Book in for your FREE consultation to get going quickly – this can be done remotely via phone or video call if you’d prefer. We look forward to helping you!
