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Remortgage with Bad Credit

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Can I Remortgage with Bad Credit?

Remortgaging can be an excellent way to raise cash for a large one-off expenditure, perhaps tapping into the increased value of your property to facilitate a new car, business investment, house renovations or a special holiday. In the process, you could also end up with a better mortgage deal, making it a win-win for all concerned.

A bad credit history could impact your ability to find a lender willing to offer you a new mortgage, but it is not the end of the world. As experts in this field, we know that there are many options available to you, and have successfully helped many applicants with a poor credit history to obtain a mortgage.

Remortgage with Poor Credit

Remortgaging might sound simple, as you are staying in the same place, but if you have suffered credit problems since you applied for your initial mortgage and your financial situation has changed, then your current lender (like many other mainstream lenders) may not be willing to agree a remortgage deal. And if they did, then it might be on less favourable terms than you have at the moment.

Have a bad credit rating and blemishes in your borrowing history can throw up difficulties in securing a remortgage package. However, there are many more lenders than those on the high street, meaning there will be more options available than you think, and a bad credit history need not be an obstacle to getting a remortgage deal to suit your needs.

It will help to understand why lenders may not be willing to offer you a remortgage, so let’s go through the circumstances you and they will be working around.

Remortgaging with Bad Credit Information

Bad Credit Remortgage Lenders

Aside from freeing up funds for larger items or projects, clients have also remortgaged to get a better deal or interest rate on their mortgage, as terms available on the market have shifted over time, or to have someone’s name added or removed from the loan. In the eyes of a lender, a history of bad credit and instances where you may have not met the conditions of a financial agreement, leading to a bad credit rating, demonstrates poor money management skills, making you a high lending risk. Most high street lenders will view remortgaging options with bad credit as they would any new mortgage application, and turn you down.

Fortunately, the growth in the mortgage market to meet the need for financial products for those with a chequered credit record means that there are many more lenders who will now consider applications from people with a poor credit history, giving you a greater degree of choice. These specialist lenders will take into account your entire situation, rather than just the scores on a report, when assessing your application, and it’s worth going over your circumstances and personal story with an experienced bad credit mortgage adviser before applying for a remortgage deal.

We have helped hundreds of homeowners secure a remortgage deal with bad credit events on their records like:

  • Missed or late payments
  • Debt management plans
  • Default notes
  • County Court Judgements (CCJs)
  • Individual Voluntary Arrangements (IVAs)
  • Discharged bankruptcies

While we can never absolutely guarantee that a remortgage with bad credit will be possible, we can say that the lenders we deal with consider every mortgage application on its own individual merits. Black marks on your credit history will affect your credit score, but should not be viewed as insurmountable obstacles to getting a reasonable remortgage arrangement.

What is a Credit Score?

Your credit score is generated as a result of information gathered by the three main credit reference agencies in the UK: TransUnion, Equifax and Experian. Each obtains data on your credit habits from other credit agencies who have agreed to share information on customer borrowing and spending, and public records available from local authorities.

The kind of information that credit companies share includes how much a customer has borrowed and owes, whether they keep up with instalments, pay in full and/or pay on time, and if their lines of credit are at maximum.

The information available through public records will be relating to legal arrangements like County Court Judgements (CCJs), Individual Voluntary Arrangements (IVAs) and bankruptcies, as well as details on the electoral register.

Each of the credit reference agencies report in slightly different ways, and lenders will also create a score based on what they find according to their own criteria. The decision to offer you a remortgage, and if so on what terms, will be based on this assessment. If the information does not give them a clear-cut choice, they may well still offer a remortgage deal, but with a larger deposit and possibly a higher interest rate. This is reflects their perception of increased risk, and wanting to make sure they get their money back, but also market forces – they can charge more because people with bad credit records have less options.

How do I improve my Credit Score?

On one hand, your credit score will improve naturally with time (if there are no more financial issues added to your records). Adverse credit events stay on your records for six years, disappearing after that time and, while they show on there, any bad credit issues carry less weight with a lender’s decision the more time has passed since they occurred. But remember, even if they no longer appear on your records, if you are asked about any previous serious events like a bankruptcy or repossession, then you must answer honestly. If not, your mortgage will be sure to be refused when they find out.

In the meantime, there are a number of ways you can rebuild your credit score while waiting for time to pass and keeping up with all your current financial commitments. This is a continuous process that will encourage lenders to see your application in a favourable light, as well as improve your circumstances in general. It’ll take a little time, but if you persevere, you will see results.

Creating a healthy credit rating will make a big difference to all your financial dealings in future. While we would recommend getting professional financial advice about your own particular circumstances, there are a few steps you can start taking immediately to help get your credit score back on track:

  • Contact the three main UK credit reference agencies (Experian, Equifax and TransUnion) for copies of your credit reports, and check that everything they contain is correct and up-to-date. They may hold different information, so it’s important to get one from each.
  • Keep your personal details on the credit report updated regularly.
  • If you are not already registered, make sure your name is on the electoral roll. This is easily done via local authority websites.
  • Closely manage the balances on your credit cards. Try to pay a little more than the minimum each month, so that the debt goes down, and make sure you do not go over the agreed limit.
  • Use your calendar to set reminders for paying your bills, so you are never late. Better still, set up direct debits, so you no longer need to remember and payments are made automatically.
  • Close down and cancel any unused cards or lines of credit that you may have been keeping ‘just in case’.
  • Build up a positive credit history by using a credit card for your household spending and making sure you pay off the balance promptly every month.
  • Never take out any payday loans – they may seem like another way to prove you can pay back on borrowing, but these loans are viewed as a sign that you cannot manage your finances effectively.
  • Make sure all responsible borrowing and repayments show on your record.

We have a few more suggestions on how to repair your credit rating on our tips page.

Improving my Credit Rating

The simple figures on a credit report do not always tell the whole story. There may have been mitigating factors beyond your control behind any previous financial difficulties – such as your employer going bust, or you were a victim of fraud.

In these cases, you should contact each of the credit agencies, explain what happened and ask for a note to be made on the records so that any companies making future credit searches will be able to take it into account. You will need any supporting evidence, and it might not be possible in all cases, but it is worth asking.

Another obvious way to boost your finances is to find extra income, maybe through freelancing or a part-time job, or making savings on existing outgoings. For example, you could cancel a gym membership you don’t use, make sure you are on the best mobile and energy tariffs, save money on travel by getting work closer to home, or use a bike rather than a car, etc. While this does not improve your credit score in itself, you could use the money to pay off your debts more quickly, and simply having more money left after paying bills will help credit agencies and lenders to look upon any remortgage application more favourably.

Can I afford to Remortgage?

Regardless of an applicant’s credit status, lenders will always make an affordability assessment before they decide whether to offer a mortgage or remortgage. They will take all aspects of your income, outgoings, borrowing and spending into account to arrive at a ‘debt-to-income’ ratio. In 2014, the Financial Conduct Authority recommended when lenders make an offer of a mortgage, that the debt-to-income ratio should be no greater than 45%.

You can get a rough idea of where you stand with this by following these steps:

  1. Work out your monthly income. Add together everything that comes in to you each month, and if you have sums that arrive annually, add them up and divide by twelve before adding to your monthly total.
  2. Add up your monthly outgoings. If you have any annual or quarterly bills, calculate what it works out to per month and add them to your monthly payments – mortgage, council tax, credit card, etc.
  3. Take you monthly expenses, divide them by your income, and multiply by 100. This will be your debt-to-income ratio as a percentage.

Increasing your income or reducing your outgoings will lower your debt-to-income ratio. The lower it is, the better!

How can I Remortgage with Bad Credit?

If you want to remortgage to free up money for renovation work, investment or a special holiday, but have a poor credit history that might deter mainstream lenders from offering you a deal, then there are quite a few alternative options on the market.

Specialist lenders who work with people who have suffered past adverse credit events offer deals and rates that you will not typically find on the high street. If you can’t wait for more time to pass and let certain items drop off your record, you will be happy to know that you can get a remortgage deal with bad credit.

You’ll need to talk to a mortgage broker who knows the market and can identify which lenders will be able to provide what you need.

Bad Credit Mortgage Broker

The team at The Mortgage Centres deals with clients from every background and level of property ownership – from experienced landlords with multiple mortgages to first-time buyers and couples in established homes looking to remortgage to fund renovation work.

As unlimited mortgage brokers, we are not tied to products from any mainstream branded lender and can access the whole of the UK mortgage market to choose the best deals and rates for our clients. Our specialist advisers work with a wide network of bad credit lenders, often able to find deals would won’t see on the high street, and get access to exclusive rates. This blend of independence and unlimited market access means we can offer you the very best guidance moving forward, as well as the best chance of securing a competitively-priced bad credit remortgage.

Whatever your credit history, we will know who to turn to, and how to best present your case in your application. If you are looking for a remortgage with bad credit, please get in touch with our team today to get a free initial consultation and a no-obligation quote.

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