Bad Credit Mortgages Podcast

Have you ever wondered how to get a mortgage with bad credit? Our aim at Ideal Home Loans is to make it easier for you to find a mortgage regardless of your credit score.

What is bad credit?  

If we go back ten years or so, bad credit meant County Court Judgements, Bankruptcies and Defaults. 

Today, unfortunately, missing payments on credit agreements, such as a mobile phone contract or utility bill, could mean you fall under some lenders’ definitions of bad credit, even if you’ve caught up on those payments and are back up to date.

How do I know if I have bad credit?

The starting point for anybody looking at applying for a mortgage is to get a copy of your credit file. They can be obtained from credit reference agencies such as Experian or Equifax and you can usually download it as a PDF from their website to provide to your Mortgage Broker. 

We can then explain it to you and then look at the best way forward and what sort of cost would be involved with obtaining a new mortgage.

How can I improve my credit score?

On our website, there’s a whole page dedicated to credit, including lots of tips on how you can start to improve your credit score. Firstly, you should always check that the information held on your credit report is correct. If you think it’s incorrect, raise a query with a credit reference agency.

Simple things like ensuring direct debits and credit agreements are paid on time also helps your score. Budgeting can also improve your credit flow, so that you have more cash in the bank at the end of the month, and therefore you’re more likely to pay your existing credit agreements on time.

Will anyone lend to me with bad credit?

Yes, both high street lenders and specialist lenders will consider a mortgage application from people that have a poor credit history, but it depends on how bad the poor credit record is. 

What lenders do is look at what percentage of the property value they’ll lend to you and the interest rate they’re going to charge you, based on how bad the credit information is on your credit file.

As long as you’re discharged from bankruptcy,  you’ve got no current legislation that stops you from getting a mortgage. There are mortgage lenders out there that will lend you the day following your bankruptcy discharge.

There are lots of different circumstances that cause bad credit, which is why it’s important to speak to a Mortgage Broker so that we can run through the circumstances with you. We have access to nearly twelve thousand mortgage deals, so there should be a lender who can help, whatever the circumstances.

Can you get a mortgage with a 500 credit score?

Typically, scores below 750 may be a little difficult, but it all depends on what amount of deposit you have available. If you’ve got a very bad credit score, but you have a 50% deposit, for example, you’re more likely to find a lender. 

With a credit score of 500 isn’t impossible to find a mortgage, at Ideal Home Loans, we’ve actually been able to help clients with a score as low as 300.

Can I get a mortgage with a CCJ (County Court Judgement)?

Lenders will look at County Court Judgements in two ways, whether the CCJs are still current and how long ago you got them. Some lenders may even discount a CCJ if it was issued against you more than two years ago. Again, all lenders vary, so speaking to a Mortgage Broker is the best way to find a lender who will accommodate this.

Can I get a mortgage with a Default?

A default is put on your credit file when you have a credit agreement and miss three payments on the account. Again, depending on when they were issued and the amount, some lenders will completely ignore them, for example, a mobile phone communication default under £500. Other lenders consider defaults if they were issued within the last two years.

Can I get a mortgage with an IVA (Individual Voluntary Agreement)?

Most lenders want to see that the IVA is being run sufficiently and that you’re not in arrears with any of it. It’s quite common practice to Remortgage your house to pay off an IVA,  but it depends on whether it’s up to date and how much of a deposit you’ve got.

Is the process any different for First Time Buyers?

The process for First Time Buyers is exactly the same as for anyone else. The only thing that First Time Buyers traditionally find difficult is getting the deposit together. 

In the budget this week, the chancellor bought back 95% mortgages, which will open the marketplace for many First Time Buyers. This will help them get onto the property ladder, as they will only need to find a 5% deposit.

If you are a First Time Buyer with bad credit, however, expect lenders to want between 20% and 30% deposit in order to obtain a mortgage.

Is the process any different for a Remortgage?

Remortgaging with bad credit is easier than getting a new mortgage with adverse credit, as you already own a property. It’s a quicker process because all you do is move your mortgage from one lender to another. 

The rules do still apply, so it depends on how bad the credit situation is and what equity you’ve got in the house. As with any mortgage, the lender will review your income to make sure that any new commitment is affordable to you.

How can Ideal Home Loans help?

We operate on a basis that we support clients from start through to finish of the process. We’ll review your credit file for you to get an understanding of past credit problems, as well as how those circumstances came about, which is very important to the lender. 

We can then search the marketplace of nearly twelve thousand mortgages, to find a sympathetic lender and advise you of the most suitable deals available. 

Once you make a decision, we act as the go between for yourself and the lenders, so you have one point of contact throughout. 

We can speak to the estate agent you’re buying the house from, the new lender and appoint solicitors, to make it as stress free as possible for you.

How to get in touch

You can get in touch with the Mortgage Brokers at Ideal Home Loans through the enquiry form on our website, where you can leave your enquiry and we’ll come back to you. We quite often talk to clients for two or three weeks to make sure they’re happy before they decide they are ready to proceed.

Even on lockdown, these discussions can take place via WhatsApp, Facetime, Zoom or even simple conversations over the phone until we’re ready to meet clients face to face again.