If a bad credit history is holding you back from getting on the property ladder, it can feel as if you’re never going to get that new home you dream of. But the good news is, that many people with bad credit history are able to get a mortgage. It’s not impossible; it’s just harder than if you had perfect credit history.
Will I pay more for a bad credit mortgage?
Lenders will see you as more of a risk if you have bad credit history and so their terms for lending to you will be less favourable. Lenders work on Loan to Value (LTV) ratios when it comes to properties and usually, they would expect a deposit of 10% from a borrower to be put down for the price of the property, and they would then lend up to a 90% LTV of the rest of the cost of the property.
But when you have a bad credit history, or bad credit score, lenders have to balance the risk of lending to you so will usually expect a higher deposit from you and be prepared to lend you a less LTV. The higher the deposit you can raise, the better. And the less you ask to borrow, the better. For instance, you are much more likely to get a mortgage with bad credit history, if you are only asking for a 70% LTV.
Lenders interest rates are likely to be higher too for bad credit mortgages, so it’s very important you work with mortgage adviser who can help you get the most suitable deal and make sense of the terms and conditions that may affect you.
Where do I go for a bad credit mortgage?
A bad credit mortgage is harder to get on the high street. Many lenders are not prepared to lend to those without a perfect credit history, and high credit score, and if they do, are likely to charge you a lot more in higher interest rates, and offer a low LTV. It’s simply because they see you as a higher risk.
But do not despair. Bad credit mortgages, as we’ve said, are not impossible to get. There are many other lenders who are not on the high street, that can be approached through a specialist mortgage broker and will lend to those who have bad or poor credit history.
A specialist mortgage broker who is experienced in a range of mortgages, including bad credit mortgages, will be able to hunt for the most suitable deals for you. They will also conduct a ‘soft’ credit check, on your records so as not to harm your credit history even further.
Remember that every time you apply for credit it adversely affects your credit history, so make sure your application counts by having a professional mortgage adviser do it for you.
Who keeps my credit rating and comes up with my score?
There are three main credit reference agencies who record your credit rating. They are: Equifax, Experian and TransUnion. They gather all the information from lending companies and public records to come up with your credit score. The higher the score, the better chance you have of getting a mortgage with good terms.
From your mobile phone provider, credit card and bank, to any bankruptcies, missed payments and CCJs (County Court Judgments) are all recorded by these agencies.
Information from over six years ago is removed from your record and the further ago your bad history was, the less likely it is to affect your score.
What can I do to improve my credit score?
- Check the information - first of all, get a copy of your credit rating to make sure all the information is correct. If there are any errors, ask for them to be corrected.
- Register your name and address – ensure you are on the electoral role, and your correct name and address is with all agencies so lenders can be sure of your identity.
- Improve credit card usage – delete the accounts you don’t use and the ones you do use, ensure you make payments on time to show that you can be relied upon to manage your money.
- Don’t take out payday loans – they are a bad sign for credit as they indicate that you are not able to manage your money.
- Don’t take out further credit – if you already have poor credit history, don’t take out more credit.
What can I do to get a mortgage if I have bad credit?
Speak to an experienced, specialist mortgage adviser who can search thousands of products, not just those on the high street, to find a lender with the most suitable terms for you and your situation.
Where do you go from here?
You can make an appointment to talk to one of our friendly mortgage experts, either in person or on the phone, at a time to suit you.
You can contact us now on 0300 303 0913 and speak to one of our team right away.
You can fill out our quick enquiry form to request a callback.