Obtaining a mortgage becomes more challenging and costly when you have (had) bad credit but it’s not out of the question.
When individuals mention having bad credit, they often refer to possessing a low credit score or negative elements in their credit report. These factors can make obtaining a mortgage more challenging and costly. Reasons for a poor credit rating may include late or missed payments, county court judgments (CCJs), or numerous credit applications within a short period.
Additionally, if you’ve never borrowed money before, your lack of credit history could result in a low credit score. So when applying for a mortgage, your credit score is one of the key factors that lenders consider. A low credit score can make it difficult to secure a mortgage, and even if you are approved, it could mean higher interest rates and less favourable terms.
Tips for improving a low credit score
Late or missed payments on your credit report can be particularly concerning to lenders. However, the impact of these markers decreases over time and they will eventually be removed from your report after six years. Some lenders may still consider applicants with missed payments from several years ago, so it may be worth waiting before applying for a mortgage.
Before starting the application process, it’s important to review your credit report for any errors and take steps to improve your score if necessary. Don’t just focus on your score, you should also check the entire report for accuracy and dispute any incorrect information with the relevant credit reference agency. Many agencies also offer tips for improving a low credit score.
‘Association’ section of your credit report
If you have a bad credit score and are looking to get a mortgage, your mortgage adviser will be able to suggest lenders with more lenient criteria that may accept your application. It’s best to avoid making multiple applications as this could damage your credit score. Make sure you choose a credit broker who only charges you if your application is successful.
If you are considering applying for a joint mortgage with someone who has bad credit, it is important to know that their credit rating could potentially affect yours. This includes joint accounts, loans or credit cards that you share with them. It is recommended that you check the ’association’ section of your credit report to understand how their bad credit may impact your overall score.
It’s worth noting that if one person in the partnership has bad credit, it could result in a higher interest rate on the mortgage, a larger deposit required or even being turned down completely. Lenders will want to assess your financial position as a couple, especially if you are married.
We recommend checking your credit rating with Check My File, learn how to do it here.
Commitments could impact affordability
When purchasing a shared ownership property, your monthly payment is divided between the mortgage and rent paid to the housing association that owns part of the property. Lenders may be more willing to accept you as you’re only applying for a smaller mortgage (25% to 75% of the purchase price). However, this isn’t always the case as your current credit commitments could impact affordability.
If your application is accepted, improving your credit score could allow you to remortgage for a larger share or even the property’s full value through ‘staircasing’.
Best to act sooner rather than later
When preparing for a mortgage or remortgage, improving your credit score can make a big difference. Keep in mind that positive changes may take up to six months to reflect on your credit report, so it’s best to act sooner rather than later.
Increase your chances of approval
To prepare for a mortgage application, it’s important to keep in mind that lenders consider more than just your credit score or report. Lenders also assess your monthly expenses before approving your application and may request several months’ worth of bank statements to verify that you can afford your payments.
To increase your chances of approval, it’s wise to pay off debts, reduce spending and avoid opening new lines of credit or using overdrafts. This demonstrates financial responsibility to potential lenders and may even improve your credit score in the long run.
Less than perfect credit history?
If you have been turned down elsewhere, or have had some issues in the past with your credit or with your employment or self employment status, we will take the time to understand what you want to achieve and what your actual needs are, and then take a common sense approach in finding the right solution. We have access to a comprehensive panel of mortgage lenders and so we may have access to lenders that you have not previously heard of, but who are more sympathetic to your situation.
To discuss your options contact the team at Yes Mortgage Services Limited – telephone0800 612 5596 – email [email protected]
At Yes Mortgage Services, we offer a comprehensive range of products from across the market.
Irrespective of whether you are looking to buy a new home, re-mortgage an existing property, or looking to protect your family from the unpredictability that life throws at it or protect your income if you are unable to work due to accident or ill health.
Yes Mortgage Services are committed to offering you the highest possible standards of service. We can undertake the whole process from answering the initial questions through to handling multiple product applications. Ensuring that everyone gets treated with the same urgency and maintaining your best interests are our main goals irrespective of the value of the mortgage.
We recognise that both we and our customers have everything to gain if we look after your best interests and treat you fairly in all aspect of our dealings with you.