Can I get a mortgage if I have a poor credit rating?

POSTED: 22nd July 2014
IN: Personal Guides

Life doesn’t always go as smoothly as we’d like, and there are times when your finances can get a little out of hand.

undefinedFew people are lucky enough to sail through life without any minor monetary glitches and so if you’ve got a poor credit rating and are worried about getting a mortgage, you’re not alone.

Unfortunately, a poor credit rating can have a negative impact on a person’s ability to get a mortgage, but with help from the right lender, you may be able to secure the home of your dreams.

Why do I have a poor credit rating?

If you’re struggling to get a mortgage because of poor credit, one of the following is usually responsible:

  • You’ve not always paid bills on time in the past, or you’ve not paid them at all
  • You’ve never borrowed and therefore can’t prove to lenders that you are reliable
  • You’ve had a County Court Judgement (CCJ) against you

It can be helpful to check your credit score before applying for a mortgage so that you can prepare and seek advice if it isn’t as high as you’d hoped. There are various credit score checkers available. You have a legal right to see your credit report and it can be helpful to see where a bad credit rating comes from. On very rare occasions, there may be an administrative error that may need correcting.

It’s often said that mortgages are impossible to attain with a less-than-perfect credit score but that is not always the case. You’ll just have to put in some extra effort to convince lenders that you’re a reliable and trustworthy borrower.

What will lenders want to know?

Lenders will not only look at your credit report, but they’ll also ask you for other types of information so that they can discover more about your financial situation.

You may be asked to present payslips from your employer, or if you’re self-employed then three years’ of accounts may be required.

You will be asked to disclose any debts that you currently have and it is important to be honest and give as much information as possible. Pay off these debts before applying for the mortgage if you can, to show that you are responsible when it comes to finances.

Go on the electoral register

It may come as a surprise, but being on the electoral register can help to strengthen your credit score a little. This helps lenders to conduct certain checks on you, while helping them to prevent fraud. This is a quick and easy way of increasing the likelihood of securing a mortgage and you can sign up easily on the About My Vote website

Prove you are reliable

While mortgages are sometimes attainable despite a bad credit score, if you have any unresolved issues on your file, then it may be unwise to apply for a mortgage. But if the problems are all in the past and you’re in a good financial position now, then there are ways that you can redeem yourself and prove to lenders that you are worthy of a mortgage.

Credit builder cards are just one way of improving your situation. They’re relatively easy to maintain, but they certainly aren’t a quick fix. They work on the premise that you will borrow an amount of money and will have to pay it back over a period of 12 months. As long as you successfully repay in the course of the year, then your record will be updated with a log of 12 months of successful repayments. 

The great thing about a credit builder card is that the credit limit is much lower than the standard credit card, this means that it is much easier to make repayments. However, while the limit is lower, the interest rates can be much higher and so to avoid being out-of-pocket, make sure you pay the full amount on time each month.

There are various terms and conditions for credit builder cards though, and deals can vary, so it’s worth doing your research to find the right one for you before you make a decision.

If you’re unsure as to whether or not you will be able to afford the repayments then it’s best to not get a credit card at all, as you may end up damaging your credit score even further.

Consider marital status

Believe it or not, many potential homeowners within the UK have been refused a mortgage because of their partner’s credit rating. As frustrating as it can be, there are times when lenders may consider the financial situation of a couple as a whole rather than individually. This is particularly common when people share their finances, for example if they take out a joint bank account or apply for a mortgage together.

As a result, even if your credit history is squeaky clean, if your partner hasn’t managed their finances sensibly over the last six years, you may also be affected. It’s worth noting that this rule can even apply even if you are no longer together. If this is the case and you want your case to be assessed on your credit score alone, financial disassociation is the best way to report unfair or incorrect financial connections. This can be achieved by applying to a credit reference agency who will discuss your new situation with you.

Compare interest rates

Whether you have a poor credit rating or not, it’s always a good idea to compare as many mortgage deals as possible before applying so that you find one that is most suitable.

Find the right lender

Before you do anything, however, you need to find the right lender for you. Some lenders specialise in helping people with poor credit ratings to get onto the property ladder, so it may be worth getting in touch with this type of lender if you feel that your poor credit rating might get in the way of you moving into your new home. 

Some banks and building societies assess whether a person is suitable for a mortgage using a computer that decides based on facts alone. This probably isn’t the best method of securing your mortgage and instead it can pay to look for lenders who make their assessments on a more individual basis and will listen to your circumstances to find out why your credit score is the way it is. In some cases, these lenders may decide to lend you the money regardless of your bad rating, providing they feel that your poor credit is justifiable.

At Aldermore we assess every application on a case-by-case basis with what we like to call ‘common sense lending’. We’ll discuss your situation with you to get to the root cause of your poor credit rating and will work with you to find a way to
secure you a mortgage so that you can get settled into your new home.

For more information and guidance on bad credit mortgages, please don't hesitate to get in touch with our specialist team.

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