Adverse Credit

Bad credit? Let us help you with a poor credit mortgage


Do you find yourself underserved by the UK High Street Banks?

Millions of people have a mix of defaults, mortgage arrears or missed payments on unsecured credit, with other consumers who find themselves in Debt Management Plans, IVAs (Trust Deeds in Scotland) or who have been made bankrupt.

While other brokers may turn you away, we consider every client on a case by case basis, so if you need help with your mortgage, get in touch.

What is bad credit? 

There is no universal definition of 'bad credit'; each lender will see your circumstances differently. Every lender has a different set of criteria for what constitutes an attractive investment. Therefore, even if you've been rejected for credit before, this does not necessarily mean every lender will not accept you.

Nevertheless, a few factors are seen as 'higher risk' by most high-street lenders. These include:

  • Missing credit card payments and bills
  • A track record of applying for credit too often
  • Defaulting on a loan
  • Having your home repossessed
  • Been declared bankrupt.

It's important to note that each factor carries a different level of risk depending on the time passed and the amount of money involved. Smaller factors, such as missing one credit card or bill payment, are unlikely to affect your score enough to stop you from getting a mortgage.

However, having your home repossessed or being declared bankrupt are considered very high-risk, making it much harder for you to find a lender who will accept you. Having a county court judgement in the last six years is also regarded as a high-risk factor. Building societies tend to be more flexible than high-street banks, but you may still struggle.

Can I get a mortgage if I have bad credit? 

This particular mortgage, also known as an adverse credit mortgage or sub-prime mortgage, is designed for bad credit history.

You'll find that you don't have as many options to choose from, but you may find some lenders who focus on this type of specific arrangement. 

These lenders will consider personal circumstances, such as family hardship, health, and other severe life disruptions.

'Bad credit' mortgages work as regular mortgages do, except they'll come with more costs and restrictions to compensate for the additional risk. This includes higher interest rates and limits on how much you can borrow.

You may also be required to come up with a larger deposit, often at least 20-25% of the property's value.

Applying for a mortgage with adverse credit 

You may undergo a more rigorous vetting process if you have a poor credit history when applying for a mortgage.

The lender will inquire about any credit problems, and you must be up-front about them. 

Once you disclose your prior circumstances, they may ask to see additional evidence regarding your financial situation.

They will want to investigate your income, your savings and evaluate your spending. They might request more bank statements and payslips from you. 

This provides the lender with peace of mind that, should they accept you, you could now afford the mortgage repayments even if interest rates may rise. In short, they want to see how well you manage your money.

It's wise to improve a poor credit rating. Although a good credit score takes a long time to build, it's always advisable as it allows you to be seen in the most desirable light.

There are a few things you can do to seem at your most attractive to lenders:

  • Take the time to budget wisely. Reduce your costs where you can and always aim to have money left over at the end of each month
  • Pay your bills (such as loans repayments, utilities, rent) on time and in full
  • Be realistic about your finances and about what property you can afford
  • Supply a guarantor who can share repayment culpability with you.

Checking your credit score 

Alternatively, it is always an option to wait until you have built your credit rating before applying to lenders. This way, your chances of being accepted by a high-street lender will increase, substantially lowering your costs.

There are several things that you can do which will help to raise your credit rating:

  • Pay bills on time 
  • Don't miss any repayments for loans or credit cards 
  • Make sure you close down unused credit
  • Register for the electoral roll.

Whatever you decide, it is important to optimise your score. Keep your credit report up to date, and make sure you monitor it. If you feel extenuating personal circumstances are relevant, you can add a note of correction on your report for lenders to see. 

To view your credit score, you can use an online credit report generator. It is worth trying a few different generators, as all of them will be slightly different. Using them won't affect your credit score.

Each lender has its own system of credit evaluation, so there is no universal cut-off score. It's best to prioritise score as highly as possible, whatever your circumstances.

It's always best to speak to an advisor

A mortgage broker will help you find the right product for your needs and help you apply, especially when it comes to complex mortgages.

The Lending Channel will help you to find a deal you're most likely to be accepted for, taking your past credit issues into account. We always evaluate your eligibility on a person by person basis.

If you'd like to discuss your situation, get in touch by using our loan enquiry form, or give us a call.

The Lending Channel is a member of the National Association of Commercial Finance Brokers (NACFB).

2/1 King James VI Business Centre, Friarton Road, Perth, PH2 8DY
Tel: 01738 583008 | Fax: 01738 500402

The Lending Channel are authorised and regulated by the Financial Conduct Authority.
Company number SC334818
Data Protection Act: Z2030159


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