Bad Credit Mortgages

A bad credit mortgage is a mortgage from a specialist lender provided to a borower with bad credit from either a CCJ, deafult, late payment history, IVA or bankruptcy. In comparison to ‘high street’ lenders, mortgages from specialist lenders usually come with a higher rate of interest however these lenders can have a greater deal of flexibility than ‘high tsreet banks and building societies’.

Bad credit can be caused in a few different ways. Credit commitments can come in the form of an outstanding balance on a credit card or a personal loan. A utility bill for your electricity or gas can also contribute to a credit commitment. Not paying these commitments can cause a late payment history and then lead to defaults being on your credit file. This can also then lead to county court judgements (CCJ) being issued.

Your credit file is where the data of any defaults, missed payments CCJ’s etc is collected and this is where potential lenders will look when assessing your application.

As a starting point, you should assess all the issues in your credit history. Once you know what specific issues are getting in the way of your application, you can work on correcting them. This process may take some time, but trust us, it’s worth it.

Register on the Electoral Roll

When registering to vote, you have to provide proof of your current address. Having a fixed location will make you a more reliable option in the eyes of potential lenders.

This can be done even if you are currently living in shared accommodation or at home with your parents. All that is really required is a place where the mortgage lender will be able to reliably contact you.

Pay Bills on Time

To improve your credit report, you must keep up to date with bill payment deadlines. If a lender assesses your finances and sees that you are regularly missing deadlines on everyday payments such as energy, internet and phone bills, they are significantly less likely to consider you for a mortgage application.

Repay Outstanding Debt

You can’t prove to lenders that you are a responsible and reliable borrower if you have outstanding debt. Any lender will be reluctant to accept a mortgage application from someone they believe can’t handle the repayments.

Save Up a Larger Deposit

Low-deposit mortgages have a much stricter acceptance rate, and with a poor financial record, your chances of approval will decrease even further. But if you save up for a deposit of around 20–30%, you will have a far lower loan-to-value ratio and dramatically improve the chances of your mortgage application being accepted.

Other strategies could be getting a credit card and spending and clearing the balance each month. This demonstrates to lenders that you are proficient when it comes to managing your money. You should also keep your bank account address up to date to improve your overall profile and update your address and contact information with your credit reference provider.

There are three main credit reference agencies that operate in the UK; Experian, Equifax, and TransUnion. Each one operates at a slightly different scoring scale, so you can check to see where yours falls below:

Experian

Very Poor: 0 to 560
Poor: 561 to 720
Fair: 721 to 880
Good: 881 to 960
Excellent: 961 to 999

Equifax

Poor: 0 to 438
Fair: 439 to 530
Good: 531 to 670
Very good: 671 to 810
Excellent: 811 to 1000

TransUnion

Very poor: 0 to 550
Poor: 551 to 565
Fair: 566 to 603
Good: 604 to 627
Excellent: 628 to 710