Having a history of bad credit may mean it’s tricky to get a mortgage – but not impossible. Darren Polson offers advice on how to prepare for an application if you have a poor credit rating
The Question
My partner and I would like to buy a home together, but he has a low credit rating. He’s got a lot of debt and although he’s now paying it off, with my help, there is still a blight on his credit report.
Will we be able to get a mortgage and, if so, will we need a higher deposit or a bigger income than normal to be eligible? Thanks for your help.
Darren’s Answer
Getting a mortgage with bad credit is possible, but it can be more challenging.
Different lenders take different approaches. Some will be very driven by your credit file and credit score whereas others will manually review your application and credit behaviour to determine whether you are able to repay the mortgage.
If you do have a lower credit score or credit history issues, this can impact the interest rate you pay and the amount you can borrow, meaning a larger deposit is sometimes required.
It sounds like you are doing all you can but make sure you’re reviewing your credit report regularly. Keep it up to date and ensure that the information is accurate.
If you do find anything that needs correcting, contact the relevant lender (or your credit file provider) and ask for an amendment.
Some things to keep in mind and actions to take when it comes to maintaining or improving your credit score,include:
- Registering to vote – make sure you’re on the electoral roll
- Showing lenders you’re responsible by meeting all your payments, for example, utility bills and credit card payments, on time
- Checking for fraud – if you’ve been the victim of fraud, your score may be lowered unfairly
- Paying off outstanding debt – where possible, pay back loans before trying to get a mortgage
- Cancelling unused credit cards and bank accounts
Improving your credit score is not a guarantee that you’ll get a mortgage. But it can be a good place to start, and it’s bound to increase your chances of being accepted.
A mortgage broker can also apply for a mortgage Agreement in Principle. This is where a lender will do a soft credit check to find out your score. This will show on your credit file but it’s not visible to other lenders, so even if you get declined it won’t affect your ability to apply for a mortgage, but it will give you an indication.
It is important to speak to a mortgage broker who can review all options with you and provide advice tailored to your individual circumstances.
Meet our expert…
Darren Polson is head of mortgage operations at Aberdein Considine. He has been writing a regular column for What Mortgage for over two years and is now here to answer YOUR questions.
If you have a question for Darren please email kate.saines@emap.com or leave a message in the comments below.
