A good credit score is as important as your deposit or affordability profile when applying for a mortgage although as discussed in previous articles, a good broker could be able to find a lender for you once they know more about your personal financial situation.
Online services such as Experian and Equifax allow you to easily check your credit score. Not only will these show your credit rating, but you can also download reports that will outline just what is effecting your credit.
Be wary of CCJs, late credit card or loan repayments (or not paying them at all), and of course bankruptcy. All of these will leave bad marks on your credit score, and can potentially make it much harder to get a mortgage.
It’s also worth noting that even if you’ve never borrowed money in the past, that doesn’t guarantee a spotless credit score. In fact, when your report has very little to show, lenders will find it hard to assess if you’re reliable or not… meaning they could be reluctant to lend to you.
Having bad credit doesn’t mean you’re automatically declined by every lender, although it does depend on your specific circumstances. You might even be able to get a mortgage with one of the high-street lenders if your credit score isn’t dire… but bear in mind that might not be the best deal available. There are specialist lenders that might be more suited to you.
Getting a mortgage depends on a lot of factors, not just your credit score. Once you are aware of your credit score you can begin to improve it whilst also focusing on getting a good deposit together and making the necessary changes to demonstrate that your mortgage is affordable. In some cases of adverse credit, a lender may offer you a smaller mortgage against a larger deposit.
There are specialist lenders out there that offer mortgages especially for people with poor credit ratings… but often you’ll be faced with much higher interest rates and the requirement of a larger deposit, depending on your specific circumstances.
Generally you’ll need at least a 5% deposit for a mortgage, but with poor credit you’ll most likely need more. A deposit of around 25% to 30% would be more acceptable when you have poor credit.
You should assess all your options thoroughly. It might be more efficient for you to wait until your credit has improved after a few years. Could you afford higher interest rates if you applied now? Think about the fees associated with a mortgage too – can you afford to pay all of them as well as the large deposit amount required? Get professional advice to work out a good strategy for you.
It’s a good idea to speak to a broker or other professional who can help you work out what’s the best way to get your dream home.
Lenders really don’t like you having too many credit applications. Every time your credit score is checked, it will leave a footprint on your file. When lenders can see that your credit report has been viewed multiple times over the past months, or if you’ve been declined elsewhere for a mortgage, they’ll be less likely to lend you what you need.