Adverse Credit Mortgages

What do lenders look for?

When lenders assess adverse credit, they look at the following:

• The number of accounts that have adverse information recorded against them
• The date the adverse information was recorded. Fewer mortgage deals will be available to those with recent late payments, defaults or CCJs
• The seriousness of the adverse information. A single late payment will be looked upon more favourably than a default or CCJ
• If the default or CCJ has been satisfied
• Whether the financial commitment is secured or unsecured against your home
• If the adverse information relates to telecommunications or utility account

How to get a mortgage with adverse credit

The good news is that there are a number of steps you can take to improve the chances of your application being approved.

Make sure you're on the electoral roll

Registering to vote can boost your credit score immediately as it helps lenders verify your identity and prevent fraud. Registering takes only five minutes and can be done on the GOV.UK website.

Increase your deposit

Putting down a higher deposit reduces the risk to the lender in the event of repossession. If you can't find a bigger deposit, consider buying a cheaper property. A 25% deposit (or 75% LTV) will see more deals available to you.

Reduce your income to loan ratio

Reducing your income to loan (or debt) ratio will show that your mortgage repayments are affordable. A higher income multiple may harm your chances of getting a mortgage approved, particularly with recent adverse data.

Check your credit file

Get a copy of your credit file and check its accuracy before applying.

If you spot a mistake, talk to the financial institution concerned to have it rectified. You can also raise a dispute or enter a Notice of Correction.It is also a good idea to check the date a default or CCJ was registered. Backdating a negative marker could improve your chances of getting a mortgage approved.

Let your adverse information age

Lenders are more likely to approve your application if you can demonstrate that your credit problems are behind you.

Allowing bad credit to age will lower the deposit requirement and result in better interest rates. Whilst some lenders will consider recent late payment and defaults, your options will increase after 2 and 3 years.

Should I wait for my bad credit to disappear?

Negative information will remain on your credit file for six years after the date it was registered but that doesn't mean that you need to wait for it to disappear before applying for a mortgage.

A number of lenders will consider your application if you can demonstrate that your credit problems are in the past and you're consistently making repayments towards your outstanding financial commitments. Some lenders will consider adverse information that is just a year old but your options will increase once they're 2 or 3 years old.

It's important you speak to an impartial mortgage broker like Premier Mortgage Services to improve your chances of success.

I'm a first time buyer with bad credit. Can I get a mortgage?

The answer is yes! Provided your bad credit is in the past and you have a big enough deposit, you won't be disadvantaged simply because you're a first time buyer.

Remortgaging with bad credit

While remortgaging with bad credit is possible, you will need sufficient equity in your home or repay some of your loan to take advantage of the more competitive rates on the market. This will of course depend on how recent your credit problems were and whether there are any mortgage arrears.You could also speak to your existing lender to see if there are any better deals available or stay put until your credit score improves.

Ready to get mortgage advice?

Talk to Premier Mortgage Services today for free initial mortgage advice. You can contact us here.

You may have to pay an early repayment charge to your existing lender if you remortgage.