Navigating poor credit mortgage applications

Mortgages

If your credit history isn’t favourable and you are looking for guidance on how to improve your chances of getting a mortgage, this blog is for you. We’ll take you through how lenders assess credit history, what mortgage options are available for those with adverse credit history and steps you can take to improve your credit score, as well as ways you can increase your chances of being approved.

How lenders assess credit history

When it comes to assessing credit history, lenders look at a number of factors. The following information applies to those in England and may vary if you live in Northern Ireland, Scotland or Wales, so you will need to check accordingly.

Mortgage lenders carry out credit checks to get a feel for how credit worthy you are. The higher your score, the more likely they will be to approve your mortgage application. The way each lender carries out credit scoring may differ, though here are some typical things they will look for:

  • Personal details.This includes any names that are associated with your credit, past and current addresses and your date of birth.
  • Employment history. Your past and current employers listed on past credit applications.
  • Loan information.On current loans and revolving credit accounts and credit limits, any late payment dates and your current status.
  • Collection accounts.That are open and resolved.
  • Bankruptcies. The only public record noted on your credit report.
  • Credit inquiries.This includes those from prospective credit card issuers and prospective lenders.

It’s a good idea to review your credit report as part of the mortgage process so you can understand your credit history. We recommend Checkmyfile which you can read more about here.

What mortgage options are available for poor credit applicants

If you have adverse credit, it is still possible to get a mortgage, though your options could well be more limited.

Some high street lenders may not be prepared to offer you a mortgage though building societies tend to be more flexible. And there are specialist lenders who are also more flexible. Specialist lenders include those who work with people who have been faced with illness, divorce or other difficult events.

Although they are more flexible, specialist lenders typically charge higher interest rates and ask for larger deposits.

 

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The good news is that there is a lot you can do to increase your chances of being approved for a mortgage.

Steps to improve your credit score before applying

The following steps can be very helpful before applying for a mortgage:

  • Take time. To work on your record and repair it by consistently making necessary payments and showing responsible credit usage. Over time, blemishes could be seen as less serious.
  • Take your partner's credit history into account.If you are buying with a partner, be mindful that their credit history will be taken into account as well as yours.
  • Time your application right.Apply for a mortgage when your income is stable and ideally, when you can offer a higher deposit, which may necessitate looking at cheaper properties.
  • Be honest. Lenders will conduct thorough searches. Attempting to hide adverse credit can make things worse.
  • Be prepared.Lenders will want to know why you got into financial trouble and the actions you’ve take to remedy the situation since then. So, having an explanation ready is prudent.

The role of specialist mortgage lenders in poor credit mortgages

Specialist lenders can help in various ways. They offer manual underwriting which means they can be more flexible than traditional banks using automated systems. And relevant specialist lenders can provide relevant bespoke solutions.

How to increase your chances of approval

The good news is that there is a lot you can do to increase your chances of being approved for a mortgage. They include:

  • Save so you can put down the biggest deposit possible
  • Establish how much you are going to be able to afford. Our calculator can help you here
  • Having a permanent or steady income
  • Check your credit score before your potential lender does so you can ensure it’s as high as possible
  • Correct any errors listed as quickly as possible
  • Make sure you’re registered to vote
  • Ensure you’re delinked from ex partners or flatmates
  • Close any older, inactive accounts
  • Avoid applying for other credit just before applying for a mortgage
  • Spend less
  • Avoid going into your overdraft
  • Speak to a mortgage broker

At James Leighton, we are experienced in adverse credit mortgage applications. We can help you navigate your application and alleviate any stress. Contact us for helpful advice today.