Having a bad credit score may not automatically exclude you from taking out a mortgage, according to a mortgage broker which is pioneering a new way of helping budding first-time buyers.
Mojo Mortgages, an online broker, said while credit scores are usually the starting point of a mortgage journey, its research has found having a bad credit rating had no correlation to whether someone was actually ‘mortgage ready’.
In fact, even if someone had a bad credit score, they may still be able to get a mortgage because the method of ‘scoring’ also takes into account full credit reporting data.
This means, as well as looking at the credit score, it will also assess factors such as how much debt you own in relation to your income and the likelihood of going into a negative bank balance in six months’ time. It will also consider the stability of your income.
Mojo is set to launch its MortgageScore service in January to help customers in just this situation. Indeed, it will tap into open banking data to help buyers understand their eligibility for a mortgage and help them get mortgage ready by providing personalised coaching.
A customer’s score is calculated out of a thousand, and those who score 400 to 500 are deemed as ‘mortgage ready’, although, they may have to go down a specialist lending route as they are towards the bottom of the scale.
Specialist lenders
There are a number of specialist lenders who exist to support borrowers who might have complex circumstances and who therefore need a more tailored approach to their mortgage purchase.
Pepper Money, is one such example. In recent research it found many adults who had experienced adverse credit in the last three years and wanted to get a mortgage were planning to either make cutbacks to spending or pledged to be better at paying bills and credit cards.
Yet Pepper said these factors alone may not make a huge difference.
Paul Adams, sales director at Pepper Money, says: “Cutting down on spending may have little impact on their credit score, however, and customers in these circumstances might be better off speaking to a broker about their options in the specialist mortgage market.”
Although it is not being launched until January, people can sign-up to MortgageScore now ahead of its January launch to ensure they are first to access the service.
