So, you’re looking to take the first step on the property ladder or maybe you’re due to remortgage, but your credit history isn’t great…
Does that mean you’re automatically out of the mortgage market?
But your options will be limited and it could prove more difficult for you to secure approval from a lender when they consider your financial history. However, there are options available for those with bad credit and not all hope is lost if your credit file isn’t squeaky clean!
Why your financial history is important to lenders
When assessing your eligibility for a certain mortgage or product, a lender will request your permission to perform a credit check. This check allows the lender to see a detailed version of your credit history and the positive or negative factors that contribute to your overall score. It shows whether you consistently pay on time or whether you have any late or missed payments, defaults or CCJ’s from any other credit agreements you may have.
If you can demonstrate that you have good credit history, the lender is likely to approve your application and provide you with an Agreement in Principle (AIP.) If your credit history isn’t too good, you may still be eligible for a mortgage but with limits attached.
What options are available?
Though in some cases high street lenders will approve mortgages for buyers with poorer credit histories, most people tend to find more luck when approaching an Independent Financial Adviser for the services of an adverse mortgage lender.
What is an adverse mortgage lender?
An adverse mortgage lender is a company who specialise in providing mortgages to people with bad credit. Though they and the mortgage itself work in the same way as traditional lenders, you will normally be required to agree to put down a larger deposit before being provided with an Agreement in Principle.
What conditions are there?
Depending on your individual circumstances, some lenders may require a 15%-20% deposit, though in some cases you may be asked for 25% plus.
As having bad credit history will lead to you being classed as a higher risk, alongside needing a larger deposit, you will also be subject to paying a higher rate of interest.
You may also be charged higher fees for taking out the mortgage (known as an arrangements fee.)
Check your credit report
Before setting out on your quest for a mortgage, analyse your own credit report and look for any negative factors that need improving.
You can get a free copy of your credit file on the following websites –
When discussing your financial situation with a lender – be honest. They will be interested to know what caused you to get into difficulty and what steps you’ve taken to resolve it.
If your application for a mortgage is rejected, make an effort to improve your credit rating as best as you can and check it again every few months to see when you’re likely to be accepted.
Tips to improve your credit rating
- Always make your repayments on time
- Avoid applying for too much credit
- Ensure your personal details are up to date
- Register on the Electoral Roll
- Stay within your agreed credit limits
How was your experience when securing a mortgage?
Maybe you’re wondering if approaching an adverse lender is right for you?
If you found this post useful, share your thoughts, questions or any advice in the comments below and don’t forget to share this article!
To your successful move,
Think carefully before securing other debts against your home. You may have to pay an early repayment charge to your existing lender if you remortgage and other fees may be payable. Your home may be repossessed if you do not keep up repayments on your mortgage.
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