In today’s economic climate, having a less-than-perfect credit score can make securing a mortgage seem like an uphill battle. But don’t lose heart; it is possible to secure a mortgage even with a bad credit history. This article aims to provide you with the top tips for a successful bad credit mortgage application in the UK.
Know Your Credit Score:
Get a copy of your credit report from one of the three main credit reference agencies in the UK—Experian, Equifax, or TransUnion—before you apply for a mortgage. Knowing your credit score helps you understand your position and identify areas that may need improvement. The higher your credit score, the better your chances of securing a mortgage.
Save for a Larger Deposit:
A larger deposit shows lenders that you are financially responsible and can help offset the risk they take on by lending to someone with a bad credit history. A bigger deposit can also potentially secure you better mortgage terms and lower interest rates. Aim for a deposit of at least 20% or more, if possible.
Repair Your Credit:
Before applying for a mortgage, it’s crucial to work on improving your credit score. You can do this by:
- Paying your bills on time
- Keeping your credit utilisation low
- Registering on the electoral roll
- Avoiding applying for multiple credit products in a short period
- Rectifying any errors on your credit report
Choose a Specialist Mortgage Broker:
Working with a mortgage broker who specialises in bad credit mortgages can help you navigate the complex mortgage market. These brokers have extensive knowledge of lenders who are more likely to approve applicants with poor credit histories, increasing your chances of securing a mortgage.
Be Prepared to Pay a Higher Interest Rate:
Lenders may charge people with bad credit a higher interest rate to make up for the higher risk that they will not pay back the loan. Be prepared to pay a higher interest rate initially, but remember that you can potentially remortgage at a lower rate if you demonstrate consistent, timely mortgage payments and improve your credit score.
Consider a Guarantor Mortgage:
A guarantor mortgage allows someone with a good credit score, such as a family member, to co-sign your mortgage application. This provides additional security for the lender, improving your chances of approval. Keep in mind that the guarantor becomes legally responsible for the mortgage if you fail to make payments.
Be Honest with Your Lender:
It’s essential to be completely honest and transparent with your mortgage lender. Disclose any past credit issues and provide a clear explanation. Demonstrating that you’ve learned from past mistakes and have taken steps to improve your financial situation can increase your chances of getting approval.
Securing a mortgage with bad credit in the UK is challenging, but not impossible. By following these top tips, you can improve your chances of a successful mortgage application. Remember, improving your credit score and financial habits can lead to better mortgage terms and interest rates in the future. Stay persistent and committed to achieving your goal of homeownership.
Get a free initial consultation from a mortgage broker.