It is possible to buy a house with bad credit, but it is much harder than if your credit score was good. Each lender will have its own criteria for what it deems to be adverse credit, with poor credit events ranging from a missed bill payment to something more severe,, such as having a home repossessed. Having a poor history with credit could mean some high-street banks might refuse to give you a mortgage outright.
Building societies tend to be more flexible, but there are also specialist providers on the market who cater specifically to people who have experienced difficult life events like divorce or illness, which has had an impact on their credit. However, despite being more flexible when considering your bad credit mortgage application, they will likely charge higher than average interest rates and ask for a bigger deposit.
What issues can affect your credit?
Negative events in your history that will have a bearing on your score and report include:
- Late or missed payments on credit arrangements
- Previous repossessions
- Mortgage arrears
- A County Court Judgement (CCJ) in the last six years
- Debt management plans or individual voluntary arrangement (IVA)
Should you apply for a mortgage with bad credit?
Whilst it is possible to get a mortgage with bad credit if you have had credit problems within the last six years, it would be advisable to wait for them to drop from your file. In the meantime, you can work on building up your credit by making repayments on time and not taking out credit unnecessarily. If you want to apply immediately however, you should consider the pros and cons to doing so below.
- A lot of choice- research has found more than 1,600 mortgage deals open to customers with bad credit.
- Fast way to be a homeowner- you will be able to get on the property ladder quicker if you apply for a mortgage now.
- Buy at current house prices- if you are able to get a mortgage with bad credit, you will avoid house price increases.
- Need a bigger deposit- you may be required to put down a higher deposit to secure a bad credit mortgage.
- Higher rates- you will often have to pay higher interest rates if your credit history is poor.
Also Read: How Do I Lookup My EIN Number?
Remortgaging with bad credit
It is normally possible to remortgage with bad credit, but it is worth trying to boost your credit score if you have time. Ensuring you make your monthly mortgage repayments on time will help you to build a stronger credit history (as long as all other debts are paid on time too). If your credit rating has increased after a period of time with a specialist provider, it could be possible to remortgage with a high-street lender.
Whether you can get a better rate will be based on your credit score, your income, your home’s current value, and the equity you have in it. A prospective lender will also do affordability calculations to check that you’re able to afford the new rate payments in the future.
There are a wide range of remortgaging deals available on the high street, as well as those through building societies and specialist providers, so it is always worth shopping around. Typically, you will need to pay fees to remortgage, which you should consider when making your decision.
How to get a mortgage with bad credit
If you have an adverse credit history there are a number of things you can do to boost your score.
- Present yourself as a lower risk- only apply when you have a stable income and try to offer a larger deposit
- Fix your credit history- create a pattern of consistent payments and responsible credit use
- Give it time- negative events on your record can be viewed as less serious over time, particularly if your financial situation has improved
- Account for your partner’s debt- buying a property with a partner will mean their credit history will be considered as well as yours
- Speak to an adviser- consulting an expert adviser, like our team at Finance Advice Centre, will help you access providers and deals that will be more suitable to your financial situation, and they can guide you through the application process
Contact Finance Advice Centre today to get professional and specialist advice about your bad credit mortgage from one of our experienced team members.
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Also Read: How To Do A Credit Check?