Bad Credit Mortgages

Have you ever wondered how to get a mortgage with bad credit? Our aim at Ideal Home Loans is to make it easier for you to find a mortgage regardless of your credit score.

Bad Credit Mortgages

Getting a Mortgage with Bad Credit

Have you been denied a mortgage based on your credit history?

Have you ever wondered how to get a mortgage with bad credit? Our aim at Ideal Home Loans in Wiltshire is to make it easier for you to find a mortgage regardless of your credit score.

We understand that it can sometimes be difficult to find a lender able to provide a mortgage in these circumstances. With help from our experienced specialist mortgage advisors, you can get access to a potential mortgage with minimum fuss.

Mortgages with Bad Credit

No matter what the reason for your bad credit – CCJ’s, late payments or missed payments (default), we can help you apply for and secure a mortgage.

What is a Bad Credit Mortgage?

A bad credit mortgage is simply a term used to describe a mortgage arranged with a specialist lender for a borrower who has experienced financial difficulties in the past.  Typically, a bad credit mortgage for someone who has had debt problems will be offered at a slightly higher rate than that found from your usual high street lenders and may also require a slightly bigger deposit or a larger amount of equity.

In our experience however, it is not necessarily the case for everyone that, just because they have experienced problems in the past with their credit, they will need to go down the route of getting a bad credit mortgage from a specialist lender.  The market has evolved over the last few years and some mainstream lenders are now considering elements of adverse credit, and those eligible can still obtain standard interest rates.  Our expert mortgage advisers in Westbury, Wiltshire are sympathetic to your needs and are fully qualified. Following an initial discussion and sight of your credit report, we should be able to ascertain which route you may have available to you.

BAD CREDIT MORTGAGE RATES

Interest rates offered for bad credit mortgages are invariably higher than that provided by your mainstream lenders due to the perceived additional risk for the lender.  Appetite for lending to those that have experienced credit problems, however, has increased over recent years and more mortgage providers have entered the market to give a much greater choice.  In addition, many lenders have continued to review and improve their rates together with their criteria as the competition increases, and as such, margins over the standard mortgage rates have decreased.

The interest rate offered will be determined by the severity of the credit history but, also other factors can be taken into consideration such as your loan to value (sometimes referred to your LTV and determined by the amount of deposit or equity you have).

Typically, because of the complexity of the pricing of bad credit mortgage rates, these are not widely advertised nor shown in best buy tables.  Much more research is therefore required which is where an experienced Wiltshire specialist mortgage advisor from Ideal Home Loans will be able to use their knowledge of the varying lenders criteria to source the most suited available product for you.

BAD CREDIT MORTGAGE LENDERS

Since the financial crisis in 2008 where mortgage providers heavily restricted the availability of their products to only those that had clean credit histories and big deposits or low loan to values, the growth of the specialist lender has steadily re-emerged.

A bad credit mortgage lender is a categorisation of a type of mortgage provider who specifically caters for those who have experienced financial difficulties in the past.  Due to the very nature of their existence, their criteria and interest rates will be geared to this sector of the market.

Whilst many mainstream lenders will either not have a set ruling for an applicant with bad credit or have this at a very restrictive level, a bad credit mortgage lender will set out their stall in specific detail of what they are happy to accept, including the type of the event, the amounts and the time frames of when it occurred.  A bad credit mortgage broker will be able to use their expertise, experience and knowledge to match the suitable lenders to the potential borrower.

CAN YOU GET A MORTGAGE WITH BAD CREDIT?

While it can be more difficult to secure a mortgage with a bad credit history, it’s certainly not impossible. There are practical steps you can take that may improve your chances of being accepted for a bad credit mortgage.

How to improve your credit for a mortgage:

  1. Consider doing these things now:
  • If you aren’t on the electoral roll, get registered.
  • Request copies of your credit report from the three main UK agencies.
  • Close any accounts you don’t use – e.g. store or credit cards.
  1. Next, do this:
  • When you get your credit reports, check that the information they contain is accurate. If anything is wrong, get in touch to get it corrected.
  • Make a list of all your sources of income and outgoings, so you understand how money flows into and out of your household. Use this to work out a realistic budget and stick to it.
  1. Longer term actions:
  • If you’re struggling with your budget, look at the figures again – maybe you haven’t allocated enough for food and household items (for example) or perhaps there’s something that could be altered. Revisit your budget and adjust it from time to time as your circumstances change.
  • Open a savings account and put something into it every month – no matter how small a sum. When you have a little bit extra – such as your ‘free’ council tax months – put that money into your savings account.

For further information on bad credit mortgages, contact our team of specialist brokers. They have a wealth of experience of securing mortgages for people with a history of bad credit and have access to exclusive deals you wouldn’t necessarily find on the high street.

HOW MUCH WILL A BAD CREDIT MORTGAGE COST?

A mortgage with bad credit is usually more expensive because the lender will price their products accordingly in their assessment of risk they are carrying. As well as potentially costing you more, you might find the amount they will consider affordable for you to borrow is less than some other lenders.

What issues have an impact on cost?

Lenders take a number of issues into account, including:

  • The type and number of adverse credit events on your credit report: some have a bigger impact than others. For example, a lender might not be too concerned if you occasionally paid your mobile bill late, whereas if you have defaulted on a mortgage, that will be viewed as a more serious issue.
  • How old adverse events are: credit information stays on your file for six years; generally speaking, the older the events are, the less impact they will have.
  • Whether old debts have been settled.
  • The LTV of the mortgage: this is a measure of security for the lender. If they lend, say, 70% of the value of the property rather than 90%, should something happen to prevent you keeping up your payments, they have a better chance of getting their money back.

A lender will look at the big picture shown by all the information you provide and make a decision based on the overall strength of the application. As well as the above, this can include issues like whether you’re on the electoral register, how often you’ve moved to a new house or changed your job, and how much debt you have in relation to your total income.

So, what will it cost me to get a mortgage with bad credit?

For a general idea of your chances of being approved for a bad credit mortgage, try our Bad Credit Calculator.

It’s worth bearing in mind that this simply provides an estimate of what might be possible – it’s not an offer. For advice tailored to your unique circumstances, speak to one of our experienced bad credit mortgage brokers. An initial enquiry costs nothing but could save you money and frustration with your mortgage search.

WHAT ARE THE CAUSES OF BAD CREDIT?

Technically, there’s no such a thing as a “bad credit” score because credit scores are calculated in different ways by each of the UK’s credit reference agencies. Your score is not what will impact your final decision; it is the different information that makes up your credit file – the whole picture and not just isolated events.

What are the contributors of a ‘bad’ credit score?

  • Not being registered on the electoral roll
  • Any previous court records such as CCJs, IVAs and bankruptcies
  • Previous history of missed payments/defaults
  • Wrong previous addresses on credit report
  • Frequent credit applications, especially declined ones
  • How much you owe and what you are currently repaying
  • Any payday loan information

You can take steps to improve your own credit score, which will make getting a mortgage easier, but not all lenders will use this data in the same way. Your circumstances will be looked at and dealt with differently by each lender, but our experts can help you find the best potential mortgage for you credit history and help walk you through the steps to arrange it.

It’s worth bearing in mind that it’s often not as bad as you think – those people who have had credit issues in the past could still get a mortgage, and we specialise in helping clients who have almost given up hope.

HOW DO YOU KNOW IF YOU HAVE BAD CREDIT?

If you are being chased by debt collectors, or receiving letters from credit card companies, it will be clear that your credit history is not as strong as it could be. For some, however, the first real sign they have a bad credit rating is when they are declined a mortgage by a high-street lender. This may be a surprise if you have not had a long period of a credit history (or no credit history at all), but for others it may be less of a shock, simply because they may be aware of missed payments or any court actions in the past.

Mortgage with a Low Credit Score

In the UK, most people have three credit scores, one from each of the credit reference agencies – Experian, Callcredit and Equifax – who collect data on people’s financial behaviour. Lenders will access one or more of these agencies when conducting a credit check.  Do note, however, that a lender will use its own assessment of your credit rating rather than that given by any of the agencies.

There is no easy way to compare scores and no simple answer to the question of where someone sits overall with regard to credit rating. Add to that the fact that different lenders interpret data differently and you can see the problem.

However, as a broad guideline:

Experian generates a score from 0–999 and breaks results down into five categories, as follows:

Experian Score
Value
0 – 560Very Poor
561 – 720Poor
721 – 880Fair
881 – 960Good
961 – 999Excellent

 

Callcredit will generate a credit score out of a possible 710, and use the score to calculate a rating from 1 to 5:

Call Credit Rating
Value
1Very Poor
2Poor
3Fair
4Good
5Excellent

Equifax generates a score out of 700 and breaks results down into five categories, as follows:

Equifax Score
Value
0 – 279Very Poor
280 – 379Poor
380 – 419Fair
420 – 465Good
466 – 700Excellent

How Do You Get Your Credit Report?

Being able to obtain your own credit report has never been easier thanks to the internet, and we would always strongly advise people to take a hands-on approach to this, especially when they’re looking to get a mortgage and are concerned they might struggle to get credit of any sort, not just a mortgage.

If you haven’t already, take a look at one of our preferred choices, or if you want more information on the content of your credit report, we have a definitive guide which should give you what you need.

CAN I REMORTGAGE WITH POOR CREDIT?

A poor credit score could be the result of many varying factors and not just simply a history of adverse credit.  Situations such as high levels of available credit where unused credit cards still remain open on record could affect someone’s score, and therefore can be easily rectified if needed.  So yes, it is certainly possible to remortgage with a low credit score – however, it is very much dependent on your own individual circumstances as to what might be possible.

Even if at the time of looking to remortgage with a poor credit score you are unable to do so, with a little planning and expert advice, you may be able to work towards a position of being able get a remortgage and perhaps,  even obtain a much better suited product.

BAD CREDIT MORTGAGE CALCULATOR

Many calculators are in existence today to assist you with varying aspects of the house buying or remortgage process.  These vary from indicating how much you may be able to borrow to how much stamp duty you may have to pay.  A bad credit mortgage calculator will help you understand your potential chances of securing a mortgage based on your circumstances and credit rating.  This can be of great use when you begin your journey of looking into your options.

Bad credit mortgage calculators will ask relevant questions about you specifically so that your response is tailored to your personal situation.  Many will also ask for your credit score as provided by some of the more widely recognised credit reference agencies and as such, it is advisable to have this to hand when inputting your details.

BAD CREDIT MORTGAGE ADVICE

Finding yourself in the position of needing bad credit mortgage advice is not probably something that you had planned to do however, if you find yourself in this position you’re not alone and a great number of people contact us for exactly this.

With many search engines and best buy tables catering in the most part for those who fit the “norm,” they tend to be less applicable to those needing specialist advice.  Speaking to an adviser who is an expert in this sector and who will be able to use their knowledge and experience of the varying lenders criteria, should help in securing the most appropriate scheme for you.

This may even be on a rate provided by a standard high street mortgage provider from the outset but, where this is not possible and a more specialist rate is on offer, they can help to put a plan in place, enabling you to be in a more favourable position during your mortgage lifetime.

Contact us today for free and impartial bad credit mortgage advice.

BAD CREDIT MORTGAGE BROKERS

At Ideal Home Loans we receive many enquiries from would be borrowers who find themselves in a position where they have had some credit difficulties in the past.  These are put in contact with one of our many bad credit mortgage advisors who are specifically trained in this area to ensure they are best placed to give the most appropriate advice.

In general terms, a bad credit mortgage broker is a title given to an advisor who specialises in this area of the market and who specifically focuses on this to ensure they are knowledgeable in this sector. They will also have the ability to recognise when a bad credit mortgage is required or where a standard lender would still be available.

What Else Can I Do to Secure a Mortgage?

The best thing you can do is to show you are less of a risk to lenders.

Having existing debts is not necessarily a bad thing, provided you are able to demonstrate your ability to continue to pay the monthly payments due in the future.

The next step is getting in touch with one of our expert team.

Don’t be put off by any previous negative experiences with other brokers or high-street lenders; we have a wealth of experience in dealing with mortgage lenders who are more sympathetic towards our clients, who may have experienced credit issues in the past. We maintain excellent relationships with these lenders to give you the best possible chance of successfully obtaining a mortgage with bad credit.

BAD CREDIT MORTGAGE FAQS

Are you tied to high street lenders?

No, we have unlimited access to the market which means we can go that extra mile to find you the mortgage which is right for you.

Do overdrafts make credit scores worse?

Used responsibly, an authorised overdraft shouldn’t impact your credit rating. If you keep it pretty much up to the limit for an extended period of time, however, then it could have an impact on a lender’s decision.

What do I need to get started?

In short, you only need to pick up the phone or send us a message. However, if you can obtain a copy of your credit report and have that to hand when you speak to us, this will speed up the process. It is important as part of this process that you do not make multiple searches on your credit file when you are looking for a mortgage. This is typically caused by applications for credit cards, finance options, loans etc. Whilst doing this doesn’t stop you from getting a mortgage, it can be warning sign for some lenders.

What does a bad credit score look like?

It’s very hard to say exactly as lenders look at different criteria when they assess a mortgage, but if you’ve got CCJs, any recent defaults or IVAs or you’re on a Debt Management Plan you may need to seek specialist advise in order to obtain the right mortgage for you.

How does bad credit affect you?

When there is a record of bad credit in the background, lenders will typically class you as a higher risk. That means you may not be granted further credit and, if approved, you are likely to be offered a higher rate of interest. It may also affect job applications, especially those within the financial sector.

Can I apply for a joint mortgage if my partner has bad credit?

For a joint application, both borrowers’ credit histories will be taken into consideration. Depending on the severity of the credit history, there are lenders that can still consider discharged bankrupts, as well as applicants who are in an IVA or have defaults and CCJs on their credit report.

Can I refinance a mortgage with bad credit?

It could still be possible to refinance your mortgage if you have a history of bad credit. Your overall financial situation will be taken into consideration, and obtaining a copy of your credit file is recommended. It may be advisable to speak to a specialist mortgage broker to evaluate your options.

Can a mortgage broker help with bad credit?

A mortgage broker who specialises in applicants with a history of bad credit will be able to advise you on the most appropriate mortgage for your needs, as they will have the necessary knowledge of this market. If a mortgage isn’t possible at the time, they can then still offer you guidance on how best to work towards a solution in the future.

Is it possible to remove bad credit from your record before seven years?

Unless a record is registered incorrectly, typically it is unable to be removed. If you believe something has been recorded on your report in error, we would first recommend speaking to the account provider and also the credit agency that it has been recorded with. Do ensure you check all the reference agencies to ensure any errors are rectified.

Does marrying someone with bad credit give you bad credit?

Being married to someone with bad credit doesn’t necessarily give you bad credit. However, if financial accounts are taken out jointly, this will create a financial connection which can sometimes affect the other person’s credit and how they are viewed by lenders. Taking out credit with a partner who has bad credit could ultimately result in your application being declined or approved at a higher rate.