Bad credit mortgages

Getting a mortgage with bad credit history can be difficult. If you had a history of missed payments, defaults, County Court Judgments (CCJ), Individual Voluntary Arrangements (IVA) or bankruptcy, it will be shown on your credit report for a minimum of 6 years.

Can I get a mortgage with bad credit?

In most cases, yes but there will be a price to pay. Most likely you will be paying a higher interest rate and you might need to have a larger deposit. Many specialist mortgage providers will accept applicants with not so great credit history, including defaults, CCJs, Debt Management Plans or unsecured credit arrears.

When you apply for a mortgage, the lender will check your credit history to see how well you manage your finances. It will look at the credit score or the whole history so it is good to check your credit history before you apply.

Based on the finding, they will either accept or decline. At Glade Financial we will ask you to provide a credit report so we know if there are any problems and can find the lender who will accept you, regardless of your credit history. Of course, there are rare situations when the credit history is not acceptable by any lender and we would not recommend a mortgage. In those situations, we will advise you to work on improving the credit score, arrange to pay outstanding commitments and wait until the overall credit score improves.

Can I remortgage with bad credit?

It is possible to remortgage with bad credit as long as you can prove that you are responsible and keep up with your monthly mortgage payment. There might be an option to refinance your debt and raise additional capital from your property to pay off your existing debts, as long as you have enough equity and the payments are affordable.

Checking your credit report

Three credit scoring agencies are used by the banks to check your credit history – Equifax, Experian or TransUnion. We would recommend using Experian and sign up for a free trial to download your credit report. You can also use websites like CheckMyFile to see all three reports combined. We would ask all our clients to download the copy and send us before we recommend any lender.

What is adverse credit history?

Adverse credit history term is used by the lenders to describe applicants who had an issue with the credit in the last 6 years. This can be defaults, CCJ, bankruptcy or IVAs. Adverse also can mean missed payments on the secure and unsecured credit commitments for more than 1 month and include the use of payday loans.

Missed payments and defaults

Failing to make payments on time, will result in a mark on the credit report. If there are more payments missed, the more likely the credit will become the default. If the default happens, it will not come off your credit report for 6 years, needs to be disclosed and ideally settled before applying for the mortgage (although not always necessary). Missing payments on the mortgage are considered the worst offence and lenders are very reluctant to lend to people who had a history of missed mortgage payments. On the other hand, missing payments on unsecured loans, phone bills and credit cards are seen as less serious and can be commonly accepted.

CCJ

County Court Judgments are court orders if someone takes action against you if you fail to pay a financial commitment. If you get the order, the court decided that you owe them money and you must pay the sum ordered. It is possible to get a mortgage with previous CCJ but there are conditions attached. Contact us for a free consultation.

IVA

An individual voluntary agreement is a court-approved arrangement when you and your creditors agree on the way you pay back your debts. IVA will be added to the public Individual Insolvency Register and will be removed 3 months after it ends. To be approved for a mortgage you would need to be discharged for 3 years. No active IVAs would be allowed for a mortgage application.

Bankruptcy

In the worst-case scenario, when there is no other option and you cannot pay your debts, you can declare yourself bankrupt. Bankruptcy has serious consequences and shouldn’t be taken lightly. It will always need to be declared if applying for the mortgage but some lenders would accept the bankruptcies if discharged or happen more than 6 years ago.

Payday loans

Payday loans can also affect your credit history and some lenders will not accept you if you had a payday loan in the last 6 years. That’s why there is a need to look for a specialist lender who will consider the individual circumstances. In any case, you should not have any outstanding payday loans if you apply for a mortgage.