How to get a bad credit mortgage?
Finding a bad credit mortgage might be simpler than you think. Do not be disheartened if you’re turned down by high street lenders. We specialize in mortgages for people who have a bad credit history.
The Process of a bad getting credit mortgage Is pretty Simple, It’s something completely in your own hands and you can begin with the following Measures:
- 1. Assess your credit report
- 2. Make sure that your credit history is right (addresses records of accounts etc)
- 3. Close any accounts which you do not use
- 4. Register on the electoral roll
- 5. Consider looking at credit builder credit cards
- 6. Save a larger deposit – Consider saving for longer period of time
- 7. Talk to a broker with access to lenders that specialize in adverse credit
Read on for more details
HOW CAN I GET A BAD CREDIT MORTGAGE?
When you have been advised that you’re unable to receive a mortgage, then you’d be forgiven in feeling disappointed and frustrated. For all, this can be a complex and stressful procedure and should you have had money troubles before, or simply don’t have a credit history in any way, there’s a strong possibility that high street lenders will turn you down – largely because they don’t look at every applicant with the right approach and actually spend some time to comprehend what their needs are and if they could manage a mortgage or not.
The prevalence of “bad credit mortgages” has increased significantly over the past 3-4 years as a lot of men and women realise that getting negative marks on their credit report doesn’t need to prevent them from getting a mortgage. However, where do you begin? We’ve prepared this manual by our specialist consultants to offer you the information you need to help you get your mortgage.
1. Assess your own credit report
If a lender has declined you a mortgage it will probably be because what they have seen in your credit history is not to their liking. Whether, in their own eyes, there’s not sufficient evidence for them to state you may repay the mortgage in time, or there are too many inconsistencies along with your address , excessive bank accounts active or an entire slew of different reasons with the result being equally irritating for you.
By assessing your credit file yourself you’re taking the initial steps in making sure it’s up-to-date and accurate. Sometimes it might even be that specific pieces of your credit history are wrong, when you’ve got the chance to set the record straight, it is going help you get the mortgage you’re searching for.
There are several distinct myths about your credit score itself and the effect it’s going to have on you when trying to find a mortgage.
Those famous Credit Myths
Here are some of the common ones we hear, that are untrue:
Addresses could be ‘blacklisted’ by a credit rating agency. A former resident’s financial record can’t affect your’s.
Payday loans may boost your credit score. On the contrary. This does reveal to lenders that you aren’t as good at handling your financial affairs.
Individuals with similar titles can affect your credit. Not correct. Unless someone is fraudulently using your title (that will be a criminal offence that you have to report instantly ) that won’t affect you
Requesting your own credit report hurts your score. Not if you get it done in the right way. Credit rating services won’t affect you, neither will anything that utilizes a ‘soft’ search. If you repeatedly apply for credit, this can is different and may have an influence
Credit report is connected to earnings. Whilst earnings might be connected to your fiscal habits, just how much you make is not employed by credit bureaus. Paying bills on time is much better for the score than getting a higher salary and failing to maintain your payments.
Getting married may affect your credit score if you open a joint account, but any background you have prior to getting married will nevertheless be your own later.
You need to wait six years to improve your credit report. That can be half-right, but merely because particular ‘black marks’ in your credit history – such as CCJs, IVAs, Defaults etc – will take up-to six years to be eliminated, it does not mean you have to wait for this to take place before it’s possible to find a mortgage.
2. Make sure your credit history is right
There are several different factors to ensuring that your credit history is right, but they can be divided into the following areas:
- Make sure your address history is right – you don’t want wrong or inconsistent history
- Verify that there’s no records of fraudulent activity
- Check all outstanding/closed balances are correct
When going through the various stages, should you spot anything that’s wrong make certain to get in contact with the appropriate credit bureau (possibly Equifax, Experian or Call Credit) to be sure the error is rectified. Incorrect details for previous credit accounts, or the address, closing balance or whatever else, may be dealt with by calling them directly to make sure the details are amended.
A vital issue to keep in mind, is whilst you’re getting involved in this procedure, is to prevent numerous hard credit checks – those occur when applying for all sorts of credit, utilities, mobile phone contract, store cards etc.. This can be critical, particularly in the event that you think you have a less-than-great credit score beforehand, it may make a bad situation worse.
3. Close accounts which you do not use
To make certain you stay at the top of any credit accounts that you might no longer owe outstanding balances or simply don’t need, it’s well worth shutting these bank accounts. There’s not anything wrong with using and having credit if it’s done manageably, actually this allows you to demonstrate that you’re capable of paying financial obligations, and so a mortgage. In reality, when you have not had credit previously this is sometimes equally as damaging to acquire a mortgage compared to having credit problems.
Closing accounts that you no longer use may help out with lowering your amount of credit and demonstrate a degree of discipline to creditors that they prefer when conducting their checks. Having instant access to an existing credit when it is not in active might be sufficient to dissuade some prospective creditors.
4. Register on the electoral roll
This is occasionally regarded as just another credit report myth, however it’s actually quite important. Being registered to vote aids creditors and credit bureaus confirm your identity and helps in fraud grading , which forms part of the application process
If you cannot enrol to vote an alternative option is having the ability to show your eligibility to reside in the united kingdom. You may send this into the most important three credit bureaus and this could enable you to get the credit you want. This does pose additional complications from the application procedure, it’s ideal to talk to one of our mortgage brokers to learn what this means for you.
Am sure you have heard it before, but a very critical course of action is to ensure each month you cover your obligations in time, whatever they are. For some this might appear clear, but this may even stretch prior to paying the minimum payments each month as well. If you’re late on paying your financial commitments or the situation gets worse whilst you’re to applying for a mortgage it’s safe to suppose that this will make your likelihood of being successful even harder.
5. Consider looking at credit builder credit cards
To some people it might appear strange to enhance their credit report they’d have to acquire more credit. When you have ruined your credit history you want to show the capacity to mend it – a credit score building card, as an instrument makes it possible to do precisely that.
Normally a credit builder card supplier is much more inclined to accept you even in the event that you are declined for different cards however, this will come with a lower credit limit (you can borrow less) and also the expense of borrowing at a higher rate usually. This does mean that you have to be cautious and do the following:
Stay in your credit limit, demonstrate you can live within your means.
Constantly pay back everything you spend every month – punctually. Not only does a higher interest rate imply that borrowing may cost you more, if you’re not able to prove you are able to repay frequently you’re likely to cause additional injury.
Don’t withdraw cash from your credit card since it can cost you more and , establish poor money management.
If you’re in the a situation where credit builder cards are very likely to decline your application don’t keep applying as numerous searches can make matters worse.
Taking each of the above into consideration, if you can borrow and repay sensibly for a couple months it will enhance your opportunities to acquire a mortgage. Just don’t go down this street if you have any doubts that you cannot afford pay off it.
6. Save a larger deposit – Consider saving for longer period of time
Saving more money may feel like an squeeze on your pocket especially if you have already been saving for some time. However, the more money you are able to contribute towards the deposit, the better rate you will be provided and possibly be able to borrow more money.
A word you will become familiar with is is LTV (loan-to-value), this really is the ratio of how much money you’ll need to borrow against the value of the property.
By way of instance, if you’re buying a home valued at 200,000 and put down a deposit of £20,000 your LTV is going to be 90%.
As a rule of thumb, the lower your LTV, the more mortgage choices you will have available for you and the better rates you’ll have access to. This is based on the degree of risk you present to the creditor; the more money you want to borrow in connection with the property value, the greater the risk.
But in the event that you only have 5% – 10% of their value of this house for a deposit (90-95% LTV) it may still be possible to acquire a mortgage. Some lenders might even think about a 100 percent mortgage under certain conditions. The increased deposit you’ve got, the better, however, it doesn’t have to restrict your choices.
7. Talk to a broker with access to lenders that specialize in adverse credit
Most significant of all as a borrower you will be matched with the most suitable lender. Doing so can be hard in the best of times, however if you’re searching for a bad credit mortgage this is sometimes even more difficult because you might have to locate specialist lenders who likely can’t be easily found on the high street
A broker who has expertise with these kind of mortgages are going to be in a much better position to come up with the very best lender – not because they will know where to shop, but also since they will frequently have access to exclusive mortgages or rates which others might not.
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