What is a bad credit mortgage and do I qualify?
It can seem that bad credit mortgages are an impossible to get but this is not the case – New Start Financial helps to arrange these mortgages daily. After the 2008 ‘credit crunch’, specialist lenders almost disappeared and with them bad credit mortgages. Fortunately, there has been a slow return of specialist lenders and it is now possible to get a mortgage with a bad credit rating, even if you have been discharged from bankruptcy. Mortgage loans for bad credit borrowers do definitely exist – but you are unlikely to find the right solution on the High Street.
A bad credit mortgage (sub-prime, adverse credit mortgage) is a mortgage issued to borrowers with low credit ratings.
Credit score vs credit history
Credit score is what most lenders use to determine your credit risk which is made up of your past credit history, the size of your deposit, job history in fact anything that the lender feels will affects your credit worthiness. Most lenders use this system which can lead to ‘the computer says no’ scenario. Specialist lenders tend though to look at each case individually assessing your credit history record rather than looking at a score. They are interested in what has happened since your problems and how serious the previous problems were.
Can I get a mortgage with bad credit score or credit history?
There are many lenders that consider applicants with a whole range of credit problems, but it really depends on your individual circumstances and on the particular lender. Some high street lenders may in exceptional circumstances consider smaller, historical issues if the rest of the application looks sound, whereas for more severe issues these are going to require access to a specialist lender.
What are the most common factors that affect your credit score?
• Your payment history – whether you have paid your credit commitments on time.
• Never borrowing and therefore not being able to prove to lenders that you are reliable
If you have never borrowed (especially true for younger people), you will not have much credit history meaning your score is likely to be lower.
• County Court Judgement (CCJ)
A County Court Judgment (CCJ) is a type of court order that might be registered against you if you fail to repay money you owe.
Credit history – how long will it affect me for?
Bad credit is visible for 6 years. Lenders will be able to see missed payments, County Court Judgments (CCJs) and defaults which will have an impact on what lenders are available to you in that period.
Electoral Roll – can it affect my credit rating?
If you’re not already on the electoral roll, you should get on it. Lenders use it to check that you live where you say you do and not being on an electoral roll affects your credit score. Registering on the electoral roll is free and you can do it online at the About My Vote website.
What other factors that can affect my credit score and the bad credit mortgage decision?
• Short term credit (pay day loans, door stop lenders)
• Defaults on your file
• If you’re in a Debt Management Plan (DMP)
• If you’re in or have been in an Individual Voluntary Arrangement (IVA)
• Debt Relief Order
• Being on the voter’s roll
• Financial Associates
• Number of credit applications
• Utilization of current credit cards (maxing them out)
• Household income
Why use a specialized broker?
Sub-prime mortgages are mortgages for borrowers that don’t fit standard criteria and need a little more help in finding the right solution. Following the credit crunch specialist lenders almost disappeared from the market and High Street Lenders appetite for risk disappeared, so for a number of years applicants with special needs really had no options.
Now though whilst the High Street stays firmly in the camp of credit score lending there are a number of specialist or niche lenders who actively want to lend to clients with failed credit score borrowers with minor problem or ‘near prime’ all the way up to more severe problems such as having defaults, CCJ’s, pay day loans, missed payments, debt management schemes and bankruptcies.
A good specialist brokers can help you find the best solution for you based on your circumstances – if your credit score is damaged they can help find you a lender who is right for you even though you have probably been declined by a High Street lender. A good broker will have an in-depth knowledge of the market and they will be able to recommend the most suitable mortgage for you minimising the risk of your application getting rejected.
Specialist Mortgage Adviser
To find out exactly what you're eligible for and at what rates please give me a call on 03456 123835 or fill out a quick enquiry form here.