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What is Adverse Credit?

‘Adverse credit’ is an alternative term for ‘bad credit’, a widely-used phrase referring to events, actions or items on someone’s financial history or credit record. Generally indicating something that has had a negative impact on an individual’s credit score, it is used to define County Court Judgements (CCJs), bankruptcies, repossessions, default notices, late payments and other adverse credit events that may appear.

If you have any adverse credit events on your credit reports, then you are likely to find it more difficult to obtain loans or mortgages, and if you do, then it is likely to be at a higher interest rate than if you had applied with a healthy credit history. In this section, we’ll discuss what it will mean to you and how we can help to secure a mortgage with adverse credit.

Adverse Credit Mortgages

Adverse credit mortgages are home loans supplied by specialist lenders, designed to meet the needs of people who want to buy a home but are ineligible for a mortgage with the mainstream high street lenders due to a history of bad credit, or perhaps a single severe adverse credit event.

Your options when it comes to which lenders to deal with, and the rates they will charge you, will be determined by the level and type of adverse credit on your record, and the amount of money you want to borrow in proportion to the value of the property in question – also known as the loan-to-value (LTV) ratio.

As these products can be quite complex, and require a greater level of assessment and negotiation, borrowers will often get help from a specialist adverse credit mortgage broker. He or she will use their intricate knowledge of the UK mortgage lending market to quickly identify which lender and package will best suit the borrower’s situation, or, if a suitable deal isn’t possible at that point, will be able to help them with a plan of action to get them into a far stronger position with their credit score in the future.

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Can I get a Mortgage with Adverse Credit?

It can be a worry when looking into a mortgage to fund the purchase of your first home, or a new property as your family expands, to be doing so with adverse credit events showing on your records. While adverse credit can create issues with certain lenders, and therefore your options might be more limited than if you had a completely clean credit history, this certainly does not spell the end of the road for your quest to obtain a mortgage. We have helped many people with adverse credit to get a mortgage, and we could do the same for you, too. 

With all adverse credit issues, the kind of lenders you will be able to approach, the types of deal you will get offered and your application’s chances of success will depend on the specifics of the adverse event itself, as well as your current financial situation and more recent credit history. A lender’s reaction to adverse credit will depend on the exact nature of the issue, what it related to, how much money was involved, whether it was settled and how long ago the event occurred. The more time that has passed, the better, especially if you have kept a clean record since. 

Every lender has their own criteria for borrowing. While some high street providers may accept applicants with the mildest of adverse credit items, the majority tend to steer well clear of anyone with even the slightest black mark on their credit file, effectively shutting a large number of potential borrowers out of owning their own home. As someone with adverse credit, you are likely to find your solution lies with one of the number of specialist lenders in the UK mortgage market who cater specifically to the needs of people with adverse credit events on their reports. 

These specialist lenders are able to provide mortgages to people who have experienced a variety of adverse credit events, including but not limited to: 

  • CCJs (County Court Judgements)
  • Late or missed payments
  • Default notices
  • IVA’s (Individual Voluntary Arrangements)
  • DMP’s (Debt Management Plans)
  • Repossessions
  • Bankruptcy

If you have been affected by one or more of the above, and are having a difficult time finding a mortgage provider willing to help you, please get in touch with our team today to learn what alternative options are available to you. One of our expert advisers will be happy to help.

How Do I Get a Mortgage With Adverse Credit?

Because mainstream lenders tend to avoid offering mortgages to anyone who doesn’t fit their narrow criteria for their ideal client, in order to get a mortgage with adverse credit on your records, you will need to work with a more specialist lender who caters to the needs of people who have experienced financial problems in the past. However, specialist lenders do not generally deal directly with applicants, and so your first step to getting a mortgage with adverse credit is usually to enlist the services of a specialist mortgage adviser and broker. 

An experienced broker will get to know you, your financial situation and your aims in obtaining a mortgage. Most importantly, they will be able to make a thorough study of your credit reports to identify exactly where your problems lie, conduct an assessment of your income, outgoings and affordability before doing a search on which lenders will be likely to offer you the most favourable options for a mortgage in your circumstances. 

Inevitably, your options for a lender will be restricted according to the nature of the adverse credit and how much time has passed since it was registered. If it has been three or more years since your financial problems, then you may find more lenders are willing to consider your case, and that more competitive interest rates are open to you, especially if you have kept a clean credit history in the intervening period. 

If your credit records are still carrying items of bad credit or you have not had time to try to repair your credit score, there are a number of things you can do to improve your credit rating and increase the number options available to you. These steps are about proving that you have a healthy attitude to borrowing and can use credit in a responsible way, no matter what issues you had in the past. A few typical measures could be: 

  • Close all credit accounts that you no longer use – for example, catalogue accounts or credit cards you may still have available ‘just in case’. Keeping them open indicates to lenders that you are unsure about your finances and might not manage your money well.
  • Check your own credit records – contact the three main UK credit agencies – Equifax, Experian and TransUnion – to get a copy of your report from each. This is now all done online and is free of charge since GDPR regulations came in. If any contain errors either in your personal details or adverse credit issues that have since been settled, write to them immediately and ask that they be corrected, supplying any supporting documentation. 
  • Settle your outstanding debts – where possible, reduce your amount of borrowing and pay down any outstanding balances, or perhaps consolidate several smaller debts into a one more manageable loan.
  • Take out a credit card – in order to show you are a reliable borrower, you can create new borrowing to use sensibly. Use a credit card for day-to-day spending but it’s vital that you pay off the balance promptly, on time and in full, every month.
  • Open a savings account – this will show you want to save any spare cash to use wisely, and even if you invest just a small amount each month every little will help.
  • Register on the electoral roll – if you have not already done so. This will show you are an accountable member of society and will act as a storing confirmation of your identity. 

Another simple way to improve your chances of obtaining a mortgage with adverse credit is to supply a decent-sized deposit or show a reasonable amount of equity in your current property. We would recommend at least 25% of the value of the property you plan to purchase, although we realise that being subject to some types of adverse credit events can have limited your ability to save for a deposit. 

What Adverse Credit Is Acceptable to a Mortgage Lender

If you’ve already tried to apply for a mortgage from one of the numerous mainstream providers, either on the high street or online, then you may have found your application declined due to the presence of adverse credit on your financial history. While not all mainstream lenders are the same, and some may forgive one or two of the mildest bad credit items, the vast majority are highly risk-averse and will turn away anyone who can’t show the cleanest of credit records. So, you may be wondering: what adverse credit, if any, if acceptable to a lender? 

The fact is that, as with applicants, it’s rare to find two lenders the same, and there is a whole section of lenders who are not widely known to most people looking for a mortgage. There are a great number of specialist lenders who cater to the needs of potential borrowers who have experienced financial problems of differing degrees in the past. However, even with this sector, conditions can vary and you might find that what is acceptable to one lender is not to another, although it is possible to paint broad brushstrokes. 

Inevitably, the type of adverse credit on your file will make a difference to the lender’s assessment of your application. Obviously, a missed payment on a credit card will not be viewed as seriously as a previous bankruptcy, but if the missed payment turned into a string of defaults and a notice was served, then you may face more issues. It will depend on who you speak to. Each specialist mortgage lender will view your credit history in a slightly different way, with some lenders even specialising in lending to people who have suffered instances of the more severe types of adverse credit. So there is possibly still a mortgage deal out there for you, even if you have been previously declared bankrupt or had a property repossessed. 

Lenders will also take further aspects of your bad credit into account, and the conditions and context of any adverse credit event(s) can make a big difference to their approach. Time is a big factor  – if three or more years has passed then this will be in your favour, especially if you have kept up a history of responsible borrowing since. Of course, the more time that has passed, the longer you will have had to rebuild your credit score, and any bad credit items will naturally fall off your credit records after six years. Specialist lenders will also give more consideration to your current financial position, and will possibly allow for any mitigating circumstances around your adverse credit, such as a job loss, severe illness or unexpected emergency. 

The long and short of it is that, whatever your adverse credit issue, if you can show you are a reliable borrower there is likely to be a lender who can help you. As specialist mortgage brokers, we have helped a large number of people with adverse credit issues to find a mortgage that meets their requirements and purchase their home. As well as matching you with the right lender, we can help you frame your application to present your case in the best light. Call us today.

Adverse Credit Mortgage Rates

Mortgage interest rates available to applicants with adverse credit events on their financial records will vary quite a bit from case to case – there is no one standard best-rate that can appear on any tables or promotions.

This is because every case is considered individually. Your broker will canvass lenders who may be able to help you, but will first talk to you openly about your circumstances – looking at your past credit history as well as your current situation to get the whole picture on your borrowing, and how you manage your financial affairs right now. Every detail can make a difference, especially the reasons behind your adverse credit event, and what you might have done since to rebuild your credit score.

There are lenders who will consider applications with a range of adverse credit issues, but interest rates will typically be higher than those provided by mainstream lenders. Having a detailed consultation and review of your credit report with one of our experienced advisers will reveal where your problems really lie and what you can do to solve them, as well which lenders could be willing to lend to you, and at what rates.

Adverse Credit Mortgage Lenders

This is a general term that encompasses all ‘specialist’ mortgage lenders who help people with adverse credit events on their financial records to own their own home. Your credit report could include one or more adverse credit events for a variety of reasons – not all of them your own fault – but it does not necessarily mean you will not be able to get a mortgage.

Mainstream or high street lenders will usually not want or be able to help you if you have anything more than the mildest of bad credit events on your files, or if those events were many years ago. Adverse Credit Mortgage providers take a more pragmatic approach when it comes to assessing applicants, whatever their credit rating. They understand the technicalities of bad credit events, and that people can make changes, take steps to improve their borrowing record and move on.

You best option when trying to find a mortgage from a specialist lender, with the kind of acceptance criteria and deals that you won’t find on the high street, is to go over your situation with an experienced adverse credit mortgage broker. They will know exactly who to deal with, and the kind of conditions you will be able to get.

Adverse Credit Mortgage Advice

Applying for a mortgage with adverse credit items on your files need not be the dead-end that you might have believed it was. But in order to make a successful application and achieve the most suitable mortgage for your circumstances, you will need to get far more in-depth specialist advice than if you had been applying with a conventional credit record. This will mean talking your situation over with an experienced specialist mortgage adviser.

If you’ve applied for a mortgage yourself to a mainstream provider, then you’ll know that if you have bad credit then it’s very difficult to meet their criteria. You’ll need to approach one of the many specialist mortgage lenders in the market, whose processes and conditions are geared up for people with unconventional incomes or a history of adverse credit on their files. Only an expert unlimited mortgage broker will be able to give you impartial advice on which specialist lenders will be a good fit for your needs, and help you to present your application to give it the best chance of success. 

A key factor in being able to give adverse credit mortgage advice is the necessary overview of lenders from across the whole spectrum of the UK market, from the high street to the niche-market specialist sector. We are familiar with their individual criteria and assessment methods, know when new products are being launched, can track trends and changes in the market, and in many cases enjoy excellent relationships with key personnel. 

This means that once we have performed our own assessment of your circumstances and gained a thorough understanding of your adverse credit situation, we’ll know exactly which lender will offer you the most favourable deal and be the most suitable for your case, and how your credit issues will affect your mortgage application.Trying to do all this yourself can take hours, if not weeks, of hard work and frustration. Contact our team today to arrange a no-obligation, free-of-charge initial discussion, where one of our advisers will turn things around for you and present you with the most favourable options going forward.

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