Process for arranging a bad credit mortgage
To apply for a mortgage with bad credit, and make sure you get accepted for the best deal you can get, there's a few things to keep in mind along the way.
Get your credit files
This has to be step 1. How do you expect to know the best lender for you if you don't know how severe your credit issues are? The strange thing is, different credit firms and banks report their information back to different reference agencies, and what's showing with one may not show with another. So, with potential mortgage lenders using the 3 main credit reference agencies Experian, Equifax, and Call credit, if you had just your Experian credit file which says you're clean credit, but applied to a lender that uses Equifax, you may find yourself being declined and wondering why. For this exact reason, because the 3 files can differ massively in terms of what is actually registered, it's vital to have a copy of each.
NOTE: You will NOT be penalised or scored any differently for searching your own credit file with these agencies, credit score is only affected by applications for credit. AND - ITS FREE! Sign up for the free trials below and order your reports now.
Don't make multiple searches
IMPORTANT! Don't go to your bank or make multiple applications online! Most people bank with high street organisations, none of which cater for borrowers with adverse credit. 'Advisers' in these banks are targeted to get you credit scored and out the door asap, and will often do so with little regard to the effect it may have on your credit score. Applying with a lender that will not lend to you can be a damaging exercise, not to mention a waste of time.
Get a reasonably priced broker
The advice you can get from a broker who knows what they are doing, who knows which lenders will consider you before you even apply, is often invaluable. Still, it's important not to pay the earth. Maximum fees tend to be 2% of the loan amount, however these are top end and its rare a broker will ask for the full amount. Generally anywhere from £0 for straightforward cases, to £300 for cases that need some work, up to £1000 for more tricky circumstances, would be a fair pricing scale. Every case is different however, and your adviser should make things clear to you and gain your agreement before proceeding with any actual applications. To get a quote from one of the specialists we work with get in touch
Find additional deposit or repair credit file and Re-apply
If you have credit issues preventing you from mortgaging at a specific loan to value (LTV), sometimes lowering the risk to the lender can help. Where it's unlikely an applicant with a £1,000 default registered a few months earlier will get approved at 90% LTV, raising capital so the LTV is 85% may just be enough for a lender to do it. If not, and there's nothing that can be done, time will really be the only healer. There are however, certain things you can do to improve your credit score more quickly, see our article on improving score here for more info.
TOP TIP: One of the best things you can do to increase your credit score is to obtain an adverse specific credit card, and spend and repay in full on a monthly basis - this helps to prove you can borrow and live within your means at the same time, and you'll notice your score improve over the coming weeks and months. There are 2 options here, the first is a standard credit card specifically for those with bad credit, the second is for those who are declined for standard cards and need a guaranteed-acceptance card (usually if you have had more severe and more recent adverse credit). We'd recommend trying for the Aqua card first, then go for the Mastercard if declined.
Bad credit mortgage costs
Obviously rates and fees will be higher than if you were clean credit, because the number of lenders is limited and having a poorer credit history means you are considered by lenders as higher risk - so they charge more to offset this. You'll be surprised however, at just how competitive the rates are, and that you can get a mortgage with poor credit at rates not too dissimilar to mainstream deals.
What credit issues are acceptable for mortgages:
We have arranged mortgages for people with poor credit in the following situations:
- No credit history
- Low credit score
- Late payments
- Missed mortgage payments
- Debt management Schemes
- Mortgage customers with multiple credit problems