Research by specialist mortgage lender, Pepper Money, found 15% of people have suffered credit problems including missed payments, County Court Judgements (CCJs), defaults, unsecured arrears or secured arrears in the last three years.
And, of these people, 16% were thinking about buying a property.
This would suggest there are 7.86 million people who have experienced credit problems of which 1.26 million were potential homebuyers.
But while would-be borrowers with credit problems are traditionally seen as more risky by lenders, Pepper Money said, there are still options available for those who have encountered money difficulties.
Adverse credit mortgage
Paul Adams, sales director at Pepper Money, said: “With growing levels of unsecured debt and increasing numbers of missed payments, CCJs and defaults, more people are finding that they have a record of adverse credit on their credit file.
“But they also still have ambitions to take the next steps in their lives – to purchase a new home and apply for a mortgage, and many of those are the people who require an adverse credit mortgage.
“The good news is that there are plenty of competitive options from lenders like Pepper Money, where decisions are made by underwriters who will take a pragmatic view of the customer’s previous circumstances and future ability to maintain payments on a mortgage.
“The not so good news is that many of these potential borrowers are writing off their own chance of getting a mortgage before they even speak to a broker.”
Indeed, Pepper Money found 93% of people surveyed with adverse credit in the last three years didn’t’ know it was possible to get a mortgage with a CCJ registered as recently as six months ago.
It found over two thirds of people with adverse credit who were thinking of buying a home in the next year were worried their mortgage application would be turned down because of the credit history.
And nearly half of those who experienced adverse credit before purchasing their current property said it had affected the mortgage process.
Yet only 5% of those with adverse credit had been declined a mortgage when buying their current home.
Getting advice
Pepper Money, said while there are most definitely opportunities for those with adverse credit to get on the property ladder, it was important to use an adviser or broker to help guide you through the process.
Paul Adams, sales director at Pepper Money, said: “This research shows that the potential adverse credit mortgage market is larger than probably anybody had assumed.”
He added: “Our research proves that we all need to work harder to spread the message that previous credit problems do not have to mean future mortgage problems and professional advice can help people to find the right mortgage for their requirements.”
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