Get the best mortgage, even with bad credit or missed payments

If you are one of 4 million people who checked their credit score for the first time during the pandemic, it might not have been fun to read. Recent research suggests that over 6 million UK adults have experienced adverse credit issues in the past 3 years.

Mortgages

Issues such as missing payments, defaults, or CCJs appear on your credit report and can make it more difficult to access credit in the future. In particular, a bad credit rating can make it difficult to find a mortgage. Indeed, a bad credit history is considered by lenders as an indication that you are high risk. So what can you do if you need to get a bad credit mortgage?

First of all, there really is no such thing as a “bad credit mortgage”. What there are are lenders who are more willing to approve applications from people who have had credit problems in the past. Some of them are specialty lenders, but even if you have a poor credit history, you may also be able to find a mortgage from a high street lender. The key to success is to approach your application intelligently and not to do anything that could make your situation worse.

Assess your situation

Before you begin your property search, carefully consider your current financial situation. Do you understand why your credit rating is so bad? If so, have you solved the problems you encountered in the past?

Although we often have to relocate for circumstances beyond our control, you should ensure, as far as possible, that you are in the best financial health before considering entering into a mortgage agreement. Take the time to honestly take stock of your income and expenses. Consider your job security. Only once you are confident that you will be able to manage a mortgage should you consider going ahead with buying a home.

Talk to a professional

A mortgage broker who specializes in applications from people with bad credit histories can help you get the best deal available. Bad and adverse credit mortgage brokers develop constructive relationships with lenders, which gives them insight into the criteria applied by lenders.

This is valuable, as lender criteria not only differ among themselves, they also change over time. Using a broker who is up to date with what lenders are looking for can give you the edge. Also, some offers are “broker-only”, which means you won’t find them if you apply independently.

If you decide to use a broker, look for one that describes itself as “global-of-market”, as this will give you access to the widest range of offers.

Be honest

You’ve been honest with yourself, and now is the time to continue that honesty with your broker and any potential lenders. Don’t try to hide why your credit score is bad or why you’re in financial trouble. The more your broker knows, the better they will be able to help you.

Dishonesty in a mortgage application is usually discovered because lenders and underwriters will carefully check the details you have provided. It is very unlikely that you will get a mortgage in this scenario.

In the worst case, lying on a mortgage application could result in a conviction for fraud. So be frank.

Start to repair the damage

If you have some time left before you intend to buy, you can begin to repair your credit report. You can take a few very simple initial steps, such as making sure you’re registered to vote and making sure your name is on all household bills – assuming of course you pay them on time.

You can also request a copy of your credit report and ensure the information is accurate, as well as remove any financial association that is no longer current. Financial associations are people with whom you have had a financial relationship, usually an ex-partner. If the financial relationship has ended, you can have it removed from your credit report.

Unexpectedly, you can improve your credit score by getting a credit card – if you don’t already have one and can afford it. Indeed, lenders will see a well-maintained credit agreement as proof of financial stability.

Put your papers in order

Payslips, bank statements, etc. Make sure you have all the necessary documents to complete your application accurately and support your claim.

If you are self-employed, make sure your accounts are up to date. Ideally, have an accountant sign your accounts, as this is viewed more favorably by lenders.

Maintain financial stability

Once you have applied, you should try to maintain as much financial stability as possible. If you are an employee, avoid changing jobs, drastically changing your job profile or becoming self-employed. All of this can delay your application.

Also avoid taking out short-term, so-called “payday” loans. This is a red flag for lenders, suggesting that you are unable to manage your money responsibly. If you need a short-term loan, it’s far better to approach your bank for an overdraft extension or consider using a credit card – with the usual caveat that it’s manageable. .

If your finances have taken a hit during the pandemic and you’re struggling financially, that doesn’t mean you’ll have to give up hope of moving to a new home. With professional help and some planning, mortgages are available, especially if you are able to maximize your deposit. Just follow our advice and use the resources below to take a step closer to normalcy.

Resources and help

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