Bad Credit Mortgages

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Article created by Christian Duncan, Director – Mortgage and Protection Adviser
Last updated 22nd December 2023

Having a less than perfect credit score does not automatically stop you from securing a mortgage. Although it might be challenging, numerous lenders specialise in granting mortgages to individuals with poor or even no credit ratings. This article will provide a guide on all thing to consider if you have adverse credit and are looking to secure a mortgage.  

Understanding Mortgages for Bad Credit

A bad credit rating should not necessarily stop you from realising your dream of owning a home. Several low credit mortgage lenders understand that a credit score does not perfectly categorise an individual’s financial discipline or ability to repay. These lenders accommodate borrowers who have had financial missteps.  

Identifying the Best Bad Credit Mortgage Companies

Several lenders in the market specialise in poor credit mortgages. Some of them include:

  • Kensington Mortgages Known for flexible lending policies and comprehensive credit assessment techniques.

  • Bluestone Mortgages Features a slew of mortgage products for borrowers with varying credit situations.

  • Kent Reliance Appeals to first-time homeowners with a reliable support system and accommodating policies.

It’s crucial that you use a mortgage broker who understands the pros and cons associated with each lender.

Leveraging Mortgage Broker Services

A mortgage broker bridges the gap between borrowers and lenders. Using a broker can ease the process fundamentally, especially if you have a bad credit rating. A mortgage broker will help you find the best lender that suits your financial requirement. However, be assured they are well-versed in bad credit mortgages. 

Negotiating for Better Rates

Unfortunately lenders base their interest rates based on the risk that particular client poses to them.  Its likely that the poorer your credit profile the worse your interest rate will be.  Its not uncommon to for lenders to have a tiered system.  This gives a transparent approach to lending and pricing.  

Credit Score vs Credit Search

Typically the majority of lenders including the high street credit score.  This means a computer will run a credit search against you, determine your score and base its lending decision on this score.  Not only is this unhelpful its often a bad measure of how good or bad somebodies financial circumstances are.  

An example of this can be where you are not currently on the electoral register at your home address.  This can have a detrimental affect on your credit score but has no direct link to how good or bad somebody might be at paying their financial commitments.   

Your Credit Rating

Getting a mortgage with bad credit might feel like a daunting task, but with the right information, approach, and assistance, it becomes significantly less overwhelming. It is crucial to note that improving your credit score can immensely improve your options, rates, and terms in the long run.

Ultimately, owning a home despite a bad credit rating is possible. It relies upon the expertise of a mortgage broker and finding a lender who is willing to look beyond the numbers.  

The journey to homeownership doesn’t stop at securing a mortgage—consider exploring home insurance options or possible ways to further improve your credit score. Looking out for these additional elements is part of the quest to become financially savvy and equipped for homeownership. Remember, every financial journey is a step toward improving your credit standing.

Improving Your Credit Rating for a Mortgage

A significant factor that the majority of mortgage lenders consider when deciding your eligibility is your credit score. So, how can you improve your credit score to increase your chances of securing a mortgage?

Start by ordering your credit reports and checking for any errors. This includes outdated information, incorrectly reported late payments, or incorrect credit limits. If you spot any discrepancies, proceed to dispute them. It may take some time, but rectifying these inaccuracies can positively impact your score.

Payment history is another aspect that severely impacts your credit score. To show lenders that you are reliable, you should always pay your bills on time. This means any outstanding credit card balances, car loans, and rent. Ideally, these payments should be made in full, but if that’s not possible, at least meet the minimum payment.

Building a healthier credit score also involves reducing your credit utilisation. This means trying to keep your balance to below 50% of your credit limit on all of your credit cards. Paying off debt can significantly improve your credit score and your odds of approval since it reduces your debt-to-income ratio.  Before you do this seek the advice of a mortgage broker.  On occasion having a small amount of debt outstanding and a large deposit can be beneficial.  

Remember that every journey to home ownership is unique. It may take some individuals longer than others to repair their credit history and secure a mortgage. However, it’s a necessary process to guarantee stable, comfortable homeownership. Therefore, view your journey to a better credit score as an investment towards your future.

Bad Credit Mortgage Brokers

They have a deep understanding of the market and have relationships with various lenders that you might not be aware of. The best brokers will understand your financial circumstances and can guide you towards lenders most likely to accept you.

They will also take care of  your mortgage application, making sure it’s presented in the best way possible. Remember, it’s crucial to choose a mortgage broker who is regulated by financial authorities and offers a wide range of market coverage. It’s possible to find a mortgage broker for bad credit who can guide you through this process and help find you a suitable deal.

Bad credit should not put a stop to your dreams of owning a home. By focusing on improving your credit score, fully understanding your mortgage options, and seeking advice from professionals, you’re already taking significant steps towards your financial goals.  You can book a call with your bad credit mortgage broker by completing the contact form above.

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