If you have a bad credit rating, it may be difficult to secure a mortgage – however, it is still possible. We discuss further in the following post.
A credit rating, or credit score, is a report of your financial history, normally not going back longer than six years. It comprises various details, including:
In the UK, there are three main agencies that hold credit history information on an individual, these are Equifax, Experian and Callcredit. Lenders will normally pool together the information from all three agencies to assess someone’s ability to manage debt.
A higher credit score is likely to result in a bank offering an individual better interest rates on a loan, including a mortgage. On the other hand, a person with a low rating may struggle to get a mortgage from a high street bank; however, other options may still be available.
Because of the various factors involved, it is not always clear cut whether a person has bad credit or not. That said, there are some key factors that may indicate that you have a bad credit rating, these include:
For a clearer picture of your credit score, you can apply for a copy of your credit history from the three main agencies.
If you think you have a bad credit rating, before making a formal mortgage application, you should talk to a lender about any products that you may be eligible for. Unsuccessful credit applications should be avoided because these show on your credit rating and could negatively affect it.
There are mortgages available for people with a bad credit rating. These are colloquially known as bad credit mortgages, also called sub-prime mortgages or adverse credit mortgages.
Strictly speaking, these do not exist and are simply mortgages a lender will offer a person with bad credit. Such deals tend to:
So called bad credit mortgages can be costly, so are not for everyone. For those wanting to receive more regular rates, there are things you can do to improve your credit rating. These include:
If you’re currently unable to get a regular mortgage, don’t give up hope. Work on improving your credit rating and, in a few months, enquire about applying again.
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