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Can I get a mortgage with a poor credit score?

One of the most common questions we get asked is, can I get a mortgage with a poor credit score? The answer, of course, depends on your circumstances. But for the most part, yes it is possible to get a mortgage with poor credit history.

While you may not be able to obtain a mortgage from a mainstream lender. There are plenty of other specialist lenders out there who may be willing to lend you money. That’s why, in this scenario, it’s important to use a specialist broker that can search lenders to obtain the best possible deal.

So don’t let a bad credit score discourage you. We have successfully obtained mortgages for people with CCJs and even IVAs on their credit reports. However, there are some steps you can take to greatly improve the chances of getting approved for a loan.

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Can I get a mortgage with poor credit? Tips and steps to take

If you have poor credit history there are some steps you can take that will greatly increase your chances of being approved for a loan or mortgage.

Repair your credit history

It’s never too late to improve your credit history. Start by paying down your credit card debt. This will improve your credit utilization score, thereby increasing your credit score.

Present as a lower risk

Make sure you present yourself in the best possible light. For example, if your partner has a good credit score, make sure you apply for the loan jointly with them. This will ensure their credit score is included in the application.

Be honest

Being upfront and honest about your financial situation will greatly increase the chances of being approved. Mortgage lenders carry out extensive searches before agreeing to fund a loan. So don’t try and hide anything.

Explain your circumstances

Lenders know that people get into financial difficulty from time to time. So If you do have bad credit, explaining the situation can help. Tell them what happened and what you have done about it since then to prevent it from happening in future.

Make sure you can comfortably afford the loan

Before applying for a loan you should make sure that you can comfortably afford the repayments. Lenders have different criteria for lending depending on your income. But you can check how much you can expect to borrow by using our affordability calculator.

How to improve your credit score

If you have bad credit, it doesn't mean you are forced to put up with the situation forever. There are steps you can take to improve your credit score which will greatly increase the chances of you being approved for a mortgage.

Here are a few simple steps you can take to start improving your score today:

Register on the electoral roll

Registering on the electoral roll helps lenders to confirm your name and address. So if you are registered to vote at a previous address, make sure this information is updated.

Start building your credit history

You may think having no credit history means you are low risk. But in fact, the opposite is true. Having little to no credit history makes it difficult for lenders to assess the risk. One of the best ways of building your credit score is to obtain a credit card and pay the balance off each month.

Pay your bills on time

You should aim to make regular payments on your utility bills and credit cards. Any late payment will be recorded on your credit report which can negatively impact your credit score. So always pay your bills on time and pay any credit card balances off each month.

Pay down your credit card debt

You can improve your score by reducing your credit utilization. Credit utilization is the percentage of available credit you have used. So if you have a £2000 credit limit and you have used £1000, you have a credit utilization of 50%. Try to keep your credit utilization below 25% if possible.

The different types of bad credit

Not all bad credit is treated the same way. Most lenders will view a missed utility bill in a very different way to a Country Court Judgement for example. So you must understand exactly what is on your credit report before applying for a loan.

Here we’ll explain the four most common types of bad credit and how they might impact your ability to obtain a mortgage.

Missed payments

Missing a payment on a loan or utility bill is recorded as a missed payment on your credit history. This will stay on your file for a period of 6-years. However, because lenders pay more attention to recent events, a missed payment from several years ago will have little impact on your ability to obtain a loan.

Also, not all missed payments are treated equally, a missed mortgage payment for example is considered much more serious than a missed utility bill payment. So if you find yourself in financial trouble, you should prioritize payments to the most important first.

Some lenders also offer payment holidays which allow you to take a break from payments without affecting your credit history. You should only make use of these as a last resort however because interest will still be charged during the holiday period.

Individual Voluntary Arrangement (IVA)

IVAs are used to help people in severe financial difficulty. They are an agreement with a lender to pay down any outstanding debt over a defined period. If you continue to make IVA payments on time the lender can not take any further action to reclaim the loan.

However, IVA’s are recorded on your credit history as serious defaults. This makes it extremely unlikely that you will be offered a mortgage while your IVA is still in force. Most lenders require the IVA to be completed without further default before offering a loan.

County Court Judgments (CCJs)

A County Court Judgement (CCJ) is an order made by the County Court for you to pay back the money you owe to the claimant. They can be issued for any number of reasons including breach of contract, non-payment of damages and failure to pay parking fines.

All CCJs are recorded on the public Register of Judgements. However, if the CCJ is paid in full within one month of issue you can apply for a Certificate of Cancelation from the County Court. There is a £15 fee for this service. If successful, the CCJ will be removed from public record and no record of it will appear on your credit history.

If the CCJ is NOT satisfied within one month, it cannot be removed and will stay on the Register of Judgements for a period of six years. A record will also show up on your credit history. Should the CCJ be settled during that time you can apply for a Certificate of Satisfaction to show it has been ‘satisfied’, but it will remain both on the public record and your credit history.

Regardless of whether you pay the CCJ within one month or not, a record of the defaults and missed payments that led to the CCJ will show up on your credit history and may affect your ability to get a loan. The advice here is to settle the CCJ within one month if you can and then apply for it to be cancelled. This will remove it from the public record and ensure it does not appear on your credit history.

Bankruptcy

Bankruptcy is a legal status for people who are unable to pay off their debts. A person declared bankrupt loses control of their assets which are then sold to pay off creditors. On the flip side, all court proceedings against the bankrupt have to cease. Bankruptcy orders last for 12 months after which they are discharged.

However, bankruptcy is recorded on your credit history for a period of six years. This can make it very difficult, but not impossible to obtain credit. Some specialist lenders will consider a mortgage once discharged. But you can expect to pay a higher rate of interest.

How to check your credit score

You can easily check your credit score for FREE by contacting any of the major credit reference agencies such as Experian. Your score will be represented as a number between 0-999. Where 999 is the best possible score.

If you have a poor credit history you may want to pay a small charge to obtain a more comprehensive credit report. This will show you all the information lenders use to assess your loan application, including any defaults, CCJs or IVAs you have.

Need advice applying for a loan?

If you have bad credit and would like more tailored advice about applying for a mortgage. Don’t hesitate to get in touch with our experts today. We have helped many people just like you successfully obtain a mortgage. So no matter what your situation we can help.

If you'd like to discuss the answer to the questions 'can I get a mortgage with a poor credit score?' in more detail, get in touch today by calling 020 3011 1988 or complete the contact form here for more information.

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As a mortgage is secured against your home/property it may be repossessed if you do not keep up with the mortgage repayments.

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