Getting A Mortgage With Bad Credit

22nd March 2017

Mortgage with bad credit

What is bad credit and why does it matter?

Can Trussle help if you have poor credit?

How to improve your credit score

What is bad credit and why does it matter?

Having ‘bad credit’ usually means having a poor credit score. Your credit score is an indicator of your financial health, based on how you’ve dealt with credit in the past.

Mortgage lenders and other finance providers use information from your credit file when they’re making a decision about whether they’ll lend to you. Your credit score can also affect the amount you can borrow and the interest rates you’re offered.

There are several credit reference agencies and each one has its own way of calculating credit scores.

Having bad credit doesn’t necessarily mean that you won’t be able to get a mortgage or remortgage, but it can make it more difficult.

Can Trussle help if you have poor credit?

Because we’re able to search for mortgages from a wide range of lenders, we can often find mortgages for those who’ve been rejected for a mortgage previously.

At the moment we can generally help those who fulfil the following criteria:

In the last 6 years you haven’t:

  • had any late payments, defaults, or County Court Judgements (CCJs) on your mortgage

  • had your home repossessed

  • had an Individual Voluntary Agreement (IVA) or Debt Management Plan (unless it was discharged more than three years ago, and you have a mortgage deposit of at least 20%)

  • declared bankruptcy (unless the bankruptcy was discharged more than three years ago, and you have a mortgage deposit of at least 20%)

And in the last 3 years you haven’t:

  • had any defaults or CCJs on an unsecured loan (unless they’re less than £500 and have been settled, and you have a mortgage deposit of at least 15%)

If you use Trussle to apply for a mortgage, your credit score will only be checked once your application has been submitted to the lender. We’ll only submit your application if we think it has a good chance of being accepted, and we’ll always ask you before checking your credit score.

How to improve your credit score

If you’re struggling to get a mortgage due to a poor credit score, there are some things you can do to improve your rating.

1. Stop applying for credit

The lender will usually check your credit score when you apply for a loan. Lots of credit checks over a short period can negatively impact your credit score, so wait before applying for credit again, and take other measures to improve your credit score first.

2. Check your own credit score

Check your credit score with major credit reference agencies Equifax, Experian, or Callcredit. Requesting your own credit report doesn’t impact your rating.

You can get a hard copy of your credit report for a small fee (no more than £2) or you may be able to get an online version for free.

As well as your credit score, your credit report should show you the things that are having an impact on your score, and may offer some tips for improving it.

If you think you’ve spotted a mistake on your credit report, let the rating agency know so they can investigate and amend your record if they agree that something’s amiss.

3. Pay off debts

It’s easier said than done, but try to pay down your debt as much as possible. Although it’s always a good idea to have some savings in case an unexpected cost comes up, using some of your savings to pay off debt may be a good move.

Since missed payments can hit your credit rating hard, you could set up direct debits to avoid missing future instalments.

4. Make sure you’re on the electoral roll

It’s important that you’re registered to vote at your current address as this can impact your credit score. It’s also used by lenders to confirm your name and address. You can register to vote online. If you’re not eligible to vote (because you’re not a British citizen, for example) you can send proof of address documents to the credit rating agencies as an alternative way of confirming your address.

5. Review your accounts

Having lots of open accounts (several credit cards, for example) can negatively impact your score, as it makes it look like you have lots of credit available. However, if closing some accounts means maxing out your remaining credit, this could also have a negative impact.

Review your situation carefully and decide whether it makes sense to close some accounts that you don’t use. If you do this, bear in mind that you need to contact the lenders to close the accounts rather than just cutting up your cards!

6. Use credit wisely

Lenders look at your credit rating to make sure you have a history of managing debt responsibly, which means they may turn you down if you don’t have much of a credit history.

As a result, using small amounts of credit like a planned overdraft or a credit card can help to build your credit rating and improve your chances of being accepted for bigger loans in the future.

However, it’s very important that you manage this debt sensibly and make your repayments on time, otherwise you could end up paying high interest rates and doing more damage to your credit rating than good.

If you’re struggling to get accepted for a credit card, you could try applying for a special ‘credit builder’ card, but you should repay in full each month as the interest rates for these cards are usually very high.

7. Be consistent

Using different phone numbers and different job titles across credit applications can mean that you fail fraud checks, so try to be as consistent as possible. Moving house often or changing banks a lot can also take a toll on your credit score.

8. Wait it out

Serious financial issues like CCJs and loan defaults will stay on your report for six years. If you’re nearing the end of that period, it’s probably best to wait before applying for a mortgage. If you had a good reason for defaulting on a loan - for example you were seriously ill or lost your job - you can ask the credit agency to add a note to your file.

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