The Real Truth behind Adverse Credit and Mortgages

This is an article on the The Real Truth behind Adverse Credit and Mortgages By: Olivia Portman –Operations Assistant at Open Vision Finance.

The Real Truth behind Adverse Credit and Mortgages

Sometimes due to unforeseen life circumstances or a bad bout of time management we end up with missed credit card payments or even worse a County Court Judgement that is unsettled, due to one too many late bills. Maybe you have entered into a Debt Management Plan as you have found managing debts too much? If this has left you in the dark as to whether or not you will be able to gain a mortgage, we are on hand to help you through the mind field that is adverse credit lending…

To start with there is no such thing as a ‘bad credit mortgage’ there are simply what we call ‘sub-prime’ lenders who will potentially agree to lend but at a higher rate of interest, to those people who have a poorer credit history than high-street lenders would allow. A sub-prime lender is, in short, normally a non high-street bank or building society. These are all still closely regulated by the FCA and are safe to use.

Admittedly the rates can be and are usually higher and arrangement fees are sometimes more, but normally this can be a stepping stone for a couple of years or more, prior to re-mortgaging away in the future to a high-street lender with a lower rate.

Unfortunately, some sub-prime lenders don’t always work in conjunction with government schemes such as Help to Buy or Shared Ownership and usually don’t accept applications from people that have been made bankrupt in the past 5/6 years. There are some exceptions to this depending on overall circumstances, of which Open Vision Finance will be able to provide further advice and details to if required.

What things can you do to improve your credit rating?

  • Close any credit accounts you don’t use
  • Check your credit report to make sure all your information is correct and up to date
  • Pay your bills on time and in full to avoid an unwanted CCJ
  • Set up standing orders to help with managing credit card payments
  • Make sure you are registered on the electoral roll

Obviously, this is no guarantee that your credit rating will improve enough to be accepted for a mortgage as it takes time to repair. Most credit report websites like Experian take 6-8 weeks to update their data, so do bare that in mind.

Most people who bank with high-street organisations, won’t be aware that they don’t cater for clients with adverse credit history, so make sure you seek the correct advice before applying with a lender that will not lend to you, as this can be a damaging exercise as they are not always a light/soft credit search and this will show a credit search has been made against your name, which in turn can lower your credit score.

The good news is that there are more and more FCA regulated lenders coming to the market who will accept most forms of adverse credit, depending on the severity. They will assess you based on how long ago the adverse credit occurred and of course what the nature of the adverse is. They have different tiers of lending including different interest rate brackets. For instance; Bluestone – The Australian Bank do not use a credit scoring system, and accept County Court Judgements, Mortgage Arrears and Defaults. Bluestone also recently brought in the Help to Buy scheme for applicants and are one of the few sub-prime lenders to do so!

Every lender is different, and they all have their own criteria requirements for applicants to meet, but 9 times out of 10 there is a fit for everyone you may just have to spend some time finding it.

For advice on what mortgage you may be eligible for, please get in touch with us! If you aren’t quite eligible for a mortgage just yet, we will ensure that you have a plan in place to improve your circumstances and advice you of when the best time to apply will be!

01823 4440222

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