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Bad Credit Mortgages
A bad credit mortgage is a term used in the industry to refer to a home loan available from a specialist lender catering to borrowers who have encountered previous financial difficulties. You will usually find lenders offer bad credit mortgages at a slightly higher interest rate, and you may have to provide a larger deposit or a greater amount of equity.
Dealing with people just like you every day, we know that no two cases are the same, and that many of you could still find mortgages at standard interest rates, despite financial issues in the past. The mortgage market continues to evolve, and mainstream lenders now take elements of adverse credit into account, so you may not need the services of a specialist lender. Once we’ve seen your credit report and discussed your circumstances, we’ll be able to easily work out the best route open to you.
Bad Credit Mortgage Information
Bad Credit Mortgage Rates
Typically, interest rates for bad credit mortgages will be higher than those for conventional home loan arrangements, as lenders perceive a greater risk in lending to people with a less-than-perfect financial past. However, the industry has evolved, with more lenders entering the market and new products being created, thus providing greater choice for potential borrowers. As competition for customers has increased, many lenders continue to review their conditions and criteria, and interest rates have moved closer to standard rates accordingly.
The level of difficulty in your past credit history will have an effect on the interest rate a lender will offer, but they will also take into account other factors, such as your loan-to-value (often referred to as LTV, being calculated according to the deposit you can make or level of equity you hold).
Bad credit mortgages to do usually appear in ‘best buy’ tables due to all the factors that can contribute to calculating interest rates. However, our experienced advisers are familiar with lenders’ varying criteria, and will know where in the market to find the best product for your circumstances.
Bad Credit Mortgage Lenders
The financial crisis in 2008 caused mortgage lenders to tighten their conditions, shutting off mortgages to all borrowers but those with the cleanest financial histories and lowest loan-to-value scores. The resulting gap in the market meant that, since then, the role of the ‘specialist’ lender – someone catering specifically for those who have had financial difficulties, with products tailored to their needs – has steadily grown.
In contrast to a mainstream lender (who typically won’t have any set criteria for bad credit clients, if they accept applicants with a poor credit history at all), the specialist lenders will have set out the kinds of conditions they are willing to accept, some down to the details regarding the types of event, when they occurred and the amount concerned. Our specialist brokers will be aware of each lender’s criteria and will know exactly which will be best suited to your requirements.
Can you get a mortgage with Bad Credit?
Having a bad credit history does make it more difficult to get a mortgage, but it will still be possible in the majority of cases. To help your chances of getting accepted for a mortgage with bad credit, here are a few things you can do to improve your credit score.
How to improve your credit rating:
- Firstly, make sure you do these things:
- Get registered on the Electoral Roll, if you are not already.
- Close any credit accounts you don’t use – store cards, etc.
- Contact the 3 main UK credit agencies for copies of your credit report.
- The next stage:
- Check your credit reports to make sure they are accurate, and if any of them contain errors ask the issuers to correct them.
- Show you are completely on top of your financial situation by listing all your incomings and outgoings, and working out a realistic budget for your household.
- If you continue to struggle with your household budget, take another look at your figures and check if you allowed enough for bills, etc, or forgot to include some additional spending.
- Open a savings account and make a deposit (however small) into it every month. And every time you have something extra – like a ‘free’ council tax month or an unexpected rebate – put that in as well.
Our team of specialist brokers have a wealth of knowledge about the whole market, a huge amount of experience with obtaining mortgages for people with bad credit, and access to deals you won’t usually find on the high street. We’re happy to give you friendly, honest advice about your circumstances.
How much will a Bad Credit mortgage cost?
Specialist lenders price their products depending on the perceived levels of risk, so you will find their interest rates will always be slightly more than those on the high street. The amount you will be able to borrow may also be less, according to what they think you can afford.
What issues have an impact on cost?
Lenders will consider a number of things, including:
- The number and type of adverse credit events contained in your credit report, as some will carry more weight than others. Occasionally paying your mobile phone bill late might not be of too much concern, but defaulting on your mortgage is a more serious issue.
- When your adverse credit events occurred. These stay on your record for six years, but the older they are, the less they will impact how lenders perceive your risk.
- The settlement of historical debts.
- The loan-to-value (LTV). The lesser percentage of the value of a property they lend, the more likely the lender is to get their money back in the event of you being unable to keep up your payments.
In addition to the above, the lender will also look at your presence on the electoral register, your level of debt compared to your income, as well as how often you may have changed jobs or moved house. Lenders will look at your whole picture in order to understand the overall strength of your application and come to an informed decision.
What will it cost me to get a mortgage with bad credit?
The only way to get a concrete answer to this question is to meet with one of our advisers, who will be able to look at all your circumstances and give you a proper idea of the costs according to how much you want to borrow. In the meantime, try out our Bad Credit Mortgage Calculator to get a rough idea of your chances for approval, and the amount you might be able to borrow.
What causes Bad Credit?
As the UK’s credit reference agencies all calculate their scores in different ways, there is no all-defining ‘bad credit score’. Lenders will base their decisions on all the information contained in your credit reports before offering a mortgage.
What are key contributors to a bad credit score?
- Not being on the electoral roll.
- Court records like CCJs, bankruptcies and IVAs.
- Any history of mortgage defaults or missed payments.
- Incorrect address on the credit report.
- Frequent applications for credit, especially those declined.
- Your level of current debt, and repayments.
- Use of payday loans.
You can do things to help your credit score, as outlined above, but not all lenders will view this in the same way. Each lender will handle your circumstances in a different way, so one of our advisers will be able to give you guidance as to which will best suit your credit history, and help you go through the steps to obtaining the right mortgage for your needs.
What black marks on my credit history should I worry about?
- County Court Judgements (CCJs)
- Individual Voluntary Arrangements (IVAs)
- Debt Management Plans
- Missed or late payments
If you have one or more of these, it is not the end of the world, especially if they are now behind you. Many of our clients had almost given up hope, but we have been able to help countless people with previous bad credit to secure a mortgage.
How do you know if you have Bad Credit?
Some people might get the unwelcome news that they have a poor credit history when their mortgage application first gets declined – a surprise to many who do not have a long credit history, or any history at all. Others may have reluctantly been aware that previous court actions or missed payments will have caused a black mark against them. Unless you have debt collectors on your heels or serious letters from credit card providers, it may not be obvious that you have a bad credit score.
How do I find out if I have a low credit score?
There are three main credit reference agencies in the UK – Experian, TransUnion and Equifax – each collecting data on people’s financial behaviour. When doing a credit check, lenders will contact one or all of them to see your information, and will then make their own assessment on your credit rating.
This creates a problem in that different lenders will interpret data in different ways, and the scores given from the three agencies do not give a good guide as to where you sit overall with regard to a credit rating.
As a broad guideline…
Experian creates a score from 0 – 999, and breaks down results as follows:
|0 – 560||Very Poor|
|561 – 720||Poor|
|721 – 880||Fair|
|881 – 960||Good|
|961 – 999||Excellent|
TransUnion scores people out of a possible 710, and uses this score to give a rating from 1 to 5:
Equifax generates a score out of 700, and breaks down results into five categories:
|0 – 279||Very Poor|
|280 – 379||Poor|
|380 – 419||Fair|
|420 – 465||Good|
|466 – 700||Excellent|
How do you get your credit report?
We strongly advise you to take a proactive approach with your credit score and log on or speak directly to one of the companies we recommend – either TransUnion, Equifax or Experian – to obtain a copy of your report.
If you think you may have trouble getting a mortgage, the information in the report could be vital. Fortunately, the process to obtain your credit report has never been easier, and we also provide a definitive guide for you to assess the contents.
Can I remortgage with Bad Credit?
It is absolutely possible to remortgage when you have a low credit score, but studying your own individual circumstances will be the only way to get clarity on what could be possible. If your low credit rating is due to easily-remedied factors, like unused credit cards left open causing high levels of available credit, then this can be fixed without a drama. More serious factors may take more work, depending on their severity and lapsed time.
Expert advice and a little planning can take a situation where you had been initially refused a remortgage, to finding a more suitable product for your needs, from a provider catering to your circumstances, and a much higher likelihood of acceptance.
Bad Credit Mortgage Calculator
You’ll find calculators everywhere these days to help you with decisions around all aspects of the house buying and mortgage process – giving you a guide on anything from how much stamp duty you might pay to how much you could be able to borrow.
Bad credit mortgage calculators will ask a short series of questions about your specific circumstances, so the result will be tailored to your actual situation, and will usually ask for your credit score, so it’s a good idea to have it before you start.
You’ll get a general indication of your chances of getting a mortgage, with your current credit rating, and how much you might potentially be able to borrow. The results are just a guide only, but can help you make an informed decision about how you will progress. A meeting with an adviser may be able to give more details on the possibilities, or raise opportunities that the calculator is not able to allow for.
Bad Credit Mortgage Advice
Nobody plans to be in a position where they are looking for bad credit mortgage advice, but if you do find yourself needing our services, take comfort from the fact you are not alone. A great number of people get in touch with us for guidance and advice, unable to get the insight they need from online searches or best buy tables, which cater mainly for customers in standard circumstances rather than those needing a specialist lender.
An expert adviser in the bad credit mortgage sector will be able to use their in-depth knowledge of the varying criteria used by individual lenders in order to find the scheme most suited to your circumstances. You may be pleasantly surprised to find this is at a rate comparable to standard high street providers, or if this isn’t available, they will work on a plan with a specialist lender to put you in a more favourable position than you were previously with your mortgage.
Get in touch today for your free, impartial advice on getting a bad credit mortgage.
Bad Credit Mortgage Brokers
‘Bad credit mortgage broker’ is a title given to an adviser who specialises in helping those with a bad credit history to obtain a mortgage. They will have specific knowledge and skills relating to this area, and will be able to offer sound advice to potential borrowers who need a bad credit mortgage, or may even be able to spot when a standard mortgage could still be available.
We get many calls from people who have had trouble getting a mortgage due to a poor credit rating caused by unfortunate financial circumstances in the past. Out specialist advisers are trained to handle all kinds of enquiries in this area and will be able to guide you towards the outcome that will work best for you.
What else can I do to secure a mortgage?
The most important thing is to prove to lenders that you are less of a risk. Revealing existing debts is not a problem if you can show that you will be able to keep up with future ongoing payments.
Talking to one of our team will help to get an honest overview of your situation, perhaps put your mind at rest, and give you direction going forward, aware of your options. We know our business and care about our clients who may have endured previous financial difficulties – our close relationships with lenders will give us the edge when it comes to obtaining a mortgage with bad credit, and working out the best deal to suit your need.
Bad Credit FAQs
- Are you tied to high street lenders?
- Do overdrafts make credit scores worse?
- What do I need to get started?
- What does a bad credit score look like?
- How does bad credit affect you?
- Can I apply for a joint mortgage if my partner has bad credit?
- Can I refinance a mortgage with bad credit?
- Can a mortgage broker help with bad credit?
- Is it possible to remove bad credit from your record before six years?
- Does marrying someone with bad credit give you bad credit?
No, we’re unlimited mortgage brokers, which means we have access to the whole market, not just a panel of lenders or certain products. So, we really can do more to find you a mortgage to suit your circumstances.
If you’re careful with your overdraft and use it responsibly when you need to, then it shouldn’t have an impact. But if you are often on the limit of your overdraft, then that might have an impact on how a lender views your creditworthiness.
Not too much – you simply need to pick up the phone to our office, or send us a message through the contact form and someone will call you back. It’s not imperative, but if you already have a copy of your credit report before getting in touch, this can help speed up the discussion initially.
Lenders all view a credit report in slightly different ways, while the credit reference agencies will sometimes report events differently, or may even have differing information about you, so it’s difficult to say exactly. Decisions are made on the facts rather than figures, and if you do have adverse credit events on your file like missed payments, CCJs, IVAs or defaults, then you will need to speak to a specialist adviser about your options for a mortgage.
If you have any bad credit events on your financial records, then lenders will view you as a higher risk when you apply for a mortgage, loan or other credit facility. This means they might not accept your application, or, if they do, then you may have to pay a higher rate of interest. A poor credit record may also affect your job applications if you are working in the financial sector.
This is a very good question. If you are making a joint application for a mortgage, then lenders will take both of your credit histories into account. Whether your application is accepted may depend on the severity of your partner’s previous adverse credit event, how much time has passed and their borrowing behaviour since it occurred. Some lenders will accept people have a discharged bankruptcy, CCJs or are in an IVA, and specialists take more into account than the simple facts and figures, understanding that people and circumstances can change.
Yes, it could still be possible to refinance your mortgage even if you have bad credit history – lenders will take your overall financial situation into consideration. We recommend that you obtain a copy of your credit report, and talk things over with an experienced mortgage broker to get an accurate appraisal of your options.
A specialist mortgage broker who routinely assists applicants with bad credit histories will usually be able to help you find a lender and a product that will suit your situation. However, if it is not possible at that time (perhaps if the adverse credit events were too severe and recent), then they can give you solid advice on what steps to take to improve your credit history in advance of your next application.
It’s usually not possible to get a bad credit event removed from your records before six full years have elapsed, unless it was made in error. If you do spot anything incorrect on your credit reports, you should contact the creditor promptly to make sure they update their files, and also copy this message to the credit reference agencies to make sure they put things right too.
No, this will not impact your credit records in reference to any loans, credit cards or mortgages you have taken out yourself, as generally things are treated individually. However, if your credit accounts are taken out jointly, then your partner’s poor credit history could impact how you are viewed by lenders, who may decline an application, or accept it with a higher rate of interest.