Your credit rating is an indication to a potential lender as to your past reliability with regards to financial products. Before being accepted by any lender for a mortgage, they will check your credit history to ensure that the risk of making the loan is acceptable.
When you make your mortgage application the mortgage lender will, of course, run a detailed credit check on you, but will also be looking so see if you are being sensible with your application and will be looking very closely at your income and outgoings. If you do have a bad credit rating, it does make obtaining a mortgage a lot harder, but it is certainly NOT impossible.
There are two main credit reference agencies that are likely to be used by lenders to check on your credit history, these are Equifax and Experian. Between them, they will have a vast range of data on your financial past and will grade you according to how great a credit risk you are. They will know of any past problems you have had with financial providers. Having a bad credit history reduces your chances of being accepted for a mortgage drastically.
Can I Get A Mortgage With My Bad Credit History?
The good news for people who do have a bad credit history, is that you should still be able to get a mortgage regardless. As with any type of bad credit loan, however, you will be seen as a high risk and will, consequently pay a higher than usual interest rate. What you must watch out for, is not to apply to mortgage lenders who might automatically reject your application, as this will be recorded as a rejection, and damage your credit rating even further.
How Can I Get An Adverse Credit Mortgage?
In the last five years there have been an increasing number of lenders willing to get involved with adverse credit mortgages. Some of these are lenders who specialise in bad credit cases, however an increasing number are well known high street lenders.
Why is this market expanding? Well…one reason is that possibly more people actually have adverse credit ratings nowadays, and so lenders have to include this group in order not to loose market share. Another likely explanation is that with the ever increasing pressure that lenders are under to increase profits, this market is just too lucrative to miss out on.
With the adverse credit mortgage market opening up, you might choose to apply to your local high street bank or a mainstream mortgage lender, as they may very well be able to accommodate you. As mentioned previously, however, be careful when making an application. Lenders will very often take even an initial enquiry as a sort of ‘mini application’ and will run a quick credit check on you before answering your query, even whilst you are on the phone. The danger is that you will consequently be caught up in the ‘bad credit rejection spiral’.
Our advice is to proceed via an independent mortgage advisor who specialises in bad credit mortgages. He will know immediately which of the currently available deals are best for you, and just as importantly, will know how likely the lender is to accept you – thus avoiding the rejection spiral.
