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Getting a Mortgage With a Bad Credit History

By: Jack Claridge - Updated: 15 Aug 2015 | comments*Discuss
Affordable Home Advice

There are many people in the United Kingdom – and indeed throughout the world – who suffer from adverse credit which means that when it comes to applying for loans, mortgages or other such credit they find that they are refused, often without even knowing the reason why.

How Do I Find Out About My Credit Rating?

If you have been refused credit and are not sure why this has been the case then you should perhaps consider contacting one of the credit reference agencies operating in the United Kingdom. These credit reference agencies are petitioned for information from your credit file every time you apply for credit and all instances of applying for credit are logged for future reference.

You can find out, for a fee, the reason why you have been refused credit and can also receive a copy of your credit file so that you can make attempts to put your file in order by trying to make arrangements with those to whom you still owe money.

Can I Apply for a Mortgage with a Bad Credit History?

The simple answer to this is yes but the practice behind the theory is harder than it might seem. If you have adverse credit you will find that a lot of mortgage lenders will refuse you on the grounds that you are a considerable risk to them. This means in principle that your choice of mortgage lender has already been dramatically reduced and that you may have to turn to mortgage lenders who deal specifically with individuals with adverse credit.

There are quite a few mortgage lenders who specialise in dealing with individuals with adverse credit however since the so-called ‘credit crunch’ hit the United States and the United Kingdom the number of lenders has decreased.

How Do I Apply for Mortgage with a Bad Credit History?

The most effective way to apply for a mortgage with a bad credit history is to consult with a financial advisor. Most financial advisors will have a list of lenders that they can petition with your details to see who can offer what and at what rate. You will find however that applying for a mortgage with an adverse credit history normally means that you will have to find the deposit and also that the mortgage will be of a variable interest rate. This means that as the interest rates are changed by the Bank of England so too are the rates of your mortgage. For example if the Bank of England increase the interest rates then so too will your mortgage lender.

Can I Improve My Credit Rating?

Yes you can, again there are companies who specialise in helping individuals with adverse credit and who offer lump sum loans that consolidate all of your debts into one monthly payment. However it is worth noting that these companies are in plentiful supply at the moment as many people are having problems with bad debt so it is worth shopping around before settling on any one company. Again if you feel that you need to take advantage of such a company it is best to seek the advise of a financial advisor before doing so to ensure that you are getting the best deal.

Raising a Deposit for a Mortgage with a Bad Credit History

This unfortunately is something that most people with a bad credit history have to do for themselves. Normally it will involve borrowing the money from friends or family but in some cases, depending on your mortgage lender, your financial advisor may be able to secure what is known as a one hundred per cent mortgage. This means that the mortgage amount in full is lent to you to purchase your home however you should be aware that this may dramatically increase the amount you pay back and as a result may leave you with large monthly repayments especially if the interest rate is increased by the Bank of England.

Further Information

If you wish to find out more we recommend that you consult with a financial advisor who will normally offer a free consultation to find out what help you need. In addition it may be worth contacting your solicitor if you have one and also contacting one of the credit reference agencies for a copy of your credit file.

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catchy - Your Question:
Came out of an iva bout 2yrs ago we in rented accommodation now looking for our own home but have no deposit how can qe get round this.

Our Response:
I'm afraid this is not an easy question to answer due to the fact that as a standard practice, all mortgage lenders undertake credit checks on new applicants and from this they will be able to see your IVA. While there may be some specialist lenders prepared to offer your mortgage despite your 'high risk' status, they will command a higher deposit usually of 50% plus in order to insure against the risk.
AffordableHomeAdvice - 17-Aug-15 @ 12:15 PM
After being in an Iva for 2 years we have sold up and paid off our IVA in full to wipe the slate clean.How much deposit do we need to get a mortgage?I have been told that we would need 50% as it has not been cleared for a year.Is this right?Does anyone know of any lenders (I appreciate they will higher rate) who would offer us a mortgage?
Chicken - 15-Aug-15 @ 5:23 PM
Came out of an iva bout 2yrs ago we in rented accommodation now looking for our own home but have no deposit how can qe get round this.
catchy - 14-Aug-15 @ 6:33 PM
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