How to get a Bad Credit Mortgage
While securing a mortgage with a bad credit history can be more challenging, it is not impossible. There are steps you can take to improve your chances of getting approved for a mortgage, starting with the basics:
- Register on the electoral roll if you haven't already done so.
- Request copies of your credit report from the three main UK credit agencies.
- Close any unused accounts, such as store or credit cards.
Next, follow these actions:
- Review your credit reports to ensure the information is accurate. If you find any errors, contact the relevant agencies to have them corrected.
For long-term improvement:
- Open a savings account and contribute to it regularly, even if it's a small amount. Whenever you have extra funds, such as during "free" council tax months, deposit that money into your savings account.
For more information on bad credit mortgages, reach out to our team of specialist brokers. They have extensive experience in securing mortgages for individuals with a history of bad credit and can provide access to exclusive deals not readily available elsewhere.
How much does a Bad Credit Mortgage cost?
A mortgage with bad credit typically carries higher costs because lenders adjust their products to account for increased risk. Additionally, the amount a lender considers affordable for you to borrow may be lower compared to other lenders.
Several factors affect the cost, including:
- Type and number of adverse credit events on your credit report. Some events have a greater impact than others. For example, occasional late payment of a mobile bill may be less concerning to a lender than defaulting on a mortgage.
- Age of adverse events. Credit information remains on your file for six years, and generally, the older the events, the less impact they have.
- Settlement of old debts.
- Loan-to-Value (LTV) ratio. A lower LTV ratio, such as 70% of the property value instead of 90%, provides greater security for the lender.
Lenders assess the overall strength of your application, considering factors like electoral registration, frequency of moving or job changes, and debt-to-income ratio. They evaluate the information provided to make a decision. For personalized advice based on your unique circumstances, consult one of our experienced bad credit mortgage brokers. An initial inquiry is free and could save you money.
What causes bad credit?
Technically, there's no such thing as a "bad credit" score. Credit scores are calculated differently by the UK's credit reference agencies, and it's the information in your credit file that impacts your final decision.
Here are some contributors to a "bad" score:
- 1. Not being registered on the electoral roll.
- Past court records, such as CCJs, IVAs, and bankruptcies.
- History of missed payments or defaults.
- Incorrect previous addresses on your credit report.
- Frequent credit applications, especially those declined.
- Outstanding debts and repayment obligations.
- Payday loan information.
You can take steps to improve your credit score, making it easier to obtain a mortgage. However, not all lenders weigh this data in the same way. Each lender assesses your circumstances differently. Our experts can assist you in finding the best potential mortgage based on your credit history and guide you through the necessary steps.
Negative marks on your credit history:
- CCJs (County Court Judgments).
- IVAs (Individual Voluntary Arrangements).
- Debt Management Plan.
- Missed or late payments.
Despite credit issues in the past, it's often possible to secure a mortgage. We specialise in helping clients who have almost given up hope. Contact us to determine if you're eligible for a mortgage now or in the future.