Everyone has a past. But, when it comes to finance and loans, some people may find it more difficult than others to shake off past credit blips. Getting a mortgage with a low credit score or a complex credit history can be tricky… but it’s not impossible.
Let’s start with defining what ‘complex credit’ or a ‘low credit score’ actually means.
A credit score is a number attached to how likely you are to pay a loan back on time. This is based on your previous financial behaviour. Lenders will run checks and review your credit when considering whether to accept or decline an application.
Credit can be deemed ‘bad’ or ‘poor’ due to many factors, and those with unclear credit histories usually suffer from being placed in this category. The most common reason your credit score can be low is if you’ve missed payments or not paid them on time. However, other reasons include:
You could be one of the most financially organised people in the world, but if your credit history isn’t clear, your score can be compromised.
Generally, a score between 500 and 700 out of 1,000 is deemed as poor credit, and a score between 0 and 500 is considered very poor.
Lenders want to be able to lend to people. However, poor credit scores, or a spotty credit history, mean more risk to a lender and some adjustments may be made to account for this. For example, you may be able to borrow less money and rates may be higher than if you had good credit.
There is no minimum credit score that will be advertised for mortgages. Most, if not all, lenders will individually evaluate each application on a case-by-case basis as a one-size-fits-all approach isn’t always appropriate in these situations.
We appreciate that not everyone has a perfect credit history, and it doesn’t only impact those who’ve missed payments or have a lot of debt. Self-employed individuals, for example, can have issues with irregular cashflow, making it hard to predict an overall income for a given period, and this can be hard for some lenders to assess.
In each application, the lender will need to know if you have any credit problems such as defaulted loans or unpaid loans, as well as everything you would need for a standard mortgage application:
If you have missed payments previously, you may be asked for additional evidence that you can afford to pay a mortgage now.
It’s easy to make assumptions, but do you know you definitely have bad credit? If your missed payments or CCJs were a long time ago, your credit may be better than you think.
Online credit reporting tools will help you put a number on your profile and get an up-to-date analysis of your creditworthiness.
If you have your credit score and it is on the lower side, start to rebuild it. Simply making all future bill and credit repayments on time will help raise that score. Other tips for improving your credit score include:
Typically, the larger the deposit you can put down, the more mortgages you become eligible for… however complex your history is. This is because you will be borrowing less and therefore there is less risk to the lender. This can be secured through savings, inheritance, or a gifted deposit.
If you are concerned about whether you’re likely to be accepted for a loan or mortgage, put your details into a bad credit mortgage calculator. These can be a great indicator and will not leave a mark on your credit history. However, for a more bespoke analysis of your likelihood of being accepted for a mortgage, it’s always best to speak to a person directly.
‘Low’ income is subjective, but lenders will generally put a borrower in this bracket if they are on National Living Wage or less.
Having a low income isn’t a barrier to buying a house, but it may limit the amount of money you can borrow as a lender will need to ensure you can afford monthly repayments.
As with credit limits, there is no set level of income required to get a mortgage. Instead, lenders will assess every application on a case-by-case basis.
To make yourself more attractive to lenders, consider doing the following:
No credit history is different to poor credit. This simply means you haven’t borrowed or had a credit card before so cannot prove you are a responsible borrower when a lender assesses if you’re able to manage your finances effectively.
To start building your credit score and improve your chances of getting a mortgage, consider doing the following:
We know a one-size-fits-all approach doesn’t work, so we don’t take one. Whether you’re starting your saving journey or are ready to pull the trigger and make a big purchase, we’re here to help with a bespoke solution that suits you. We have a range of mortgages to choose from, including low deposit options and packages built with complex credit in mind.
Subject to status. Your mortgage is secured on your property. Your property may be repossessed if you do not keep up repayments.