CIS Mortgage Bad Credit
Your home may be repossessed if you do not keep up repayments on your mortgage.
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David Sharpstone, Business Owner at CIS Mortgage Advice joins the Mortgage and Protection Podcast to discuss all you need to know about Bad Credit Mortgages
What is Bad Credit?
There is quite a big scope of what a mortgage lender might consider to be bad credit. From the least, right through to the most severe bad credit on a sliding scale could be:
Missing or paying late on a credit agreement, whether it’s a bank account, mobile phone bill or credit card, if you miss one payment and that’s marked on your credit report some Mortgage Lenders would consider that to be bad credit. This is quite minor and one or two in the last twelve months doesn’t usually prevent you getting a mortgage.
Defaulted payments, if you miss six payments in a row on any kind of agreed credit agreement and it usually gets passed over to a credit collection agency.
A CCJ (County Court Judgement) could come from anything from failing to pay your parking ticket through to not paying your credit card, and a CCJ is pretty bad.
At the more severe level there are IVAs, bankruptcy and repossession. There are different lenders that will deal with different circumstances, however.
How do I know if I have Bad Credit?
If you’ve got as far as having bad credit but didn’t know about it, it means that there’s a good chance you’ve ignored letters from whoever you owe money to, but if you happen to move house and don’t update your address this can also be a cause.
The easiest way to check your credit history is to get a free credit report from Experian and that would tell you everything about your financial history. Equifax is another credit reference agency, and Transunion which I believe is free for life.
Every time you make a payment on your credit agreements, the lender will register that payment as being on time or late through one or all of the above agencies.This will build into a record of your account conduct going back years. It will show county court judgments, and whether they’ve been satisfied or are outstanding, who you’re financially associated with.
Will anyone lend to me with Bad Credit?
Generally speaking if you’re a First Time Buyer with a 5% deposit and you’ve got some CCJs or Defaults you’re going to find it almost impossible to get a mortgage. Most Mortgage Lenders might choose to disregard a small amount of Bad Credit, for example, a defaulted payment under £500 registered over a year ago, if everything else about your profile looks great.
If you’ve got big CCJs or Debt Management Plans, there will be Mortgage Lenders that will lend to you, but you need to consider that you’re going to be a higher risk and therefore can expect to pay a higher interest rate and therefore a higher monthly payment. This might only be for a couple of years and then you can Remortgage to a lender with a cheaper interest rate.
The other thing to consider is if you’ve got some quite severe bad credit, expect to have a minimum of 15% deposit when you’re buying a property or 15% equity if you’re looking to Remortgage.
There are lenders that we use for subcontractors that permit a certain amount of bad credit, but the same rules will apply, higher interest rates generally speaking and slightly higher deposits.
Speak To An Expert
Can you get a mortgage with a 500 credit score?
A credit score in itself is subjective, so Experian will have one opinion of your credit score and Equifax will have another. With some agencies, five hundred would be pretty good out of five hundred, but out of a thousand it’s pretty low.
There are mortgage lenders that will lend to people not based on their credit score, who don’t care what the credit score is, they’re just looking for the actual account conduct, and to see that they’ve got a little bit of history.
Can I get a mortgage with CCJS or an IVA?
Yes, for CCJs it would depend on when it was registered, whether it was satisfied, how many of them there were, the size of debt owed, and sometimes even the circumstances around the debt.
For IVAs it’s very difficult to get a mortgage, it’s not impossible, but hardly any lenders will do a mortgage with an IVA (Individual Voluntary Agreement).
How can I improve my credit score?
First of all make sure you’re registered to vote at the property that you’re currently living in, as one of the first things that mortgage lenders look at is whether you are registered on the electoral roll.
If you don’t have any credit history, you need to consider building up a little bit and a mobile phone contract would help. There are also credit building credit cards such as Capital One and Vanquish. Do a little bit of shopping on a credit card and pay it off every month to show you’re a responsible borrower.
Other ways to improve your credit would be to check through your credit file to ensure all your addresses and everything on your credit report is correct. If it’s not, contact them and update your details. There is a brand called CreditLadder.co.uk whereby if you’re renting a property, you can opt to have your rental payments registered against your credit report, and that’s also a great way to improve your credit score.
Is the process any different when it comes to bad credit for Subcontractors or First Time Buyers?
The only difference is that a subcontractor wouldn’t necessarily have access to the entire market. The actual process of applying for the mortgage is the same.
How can a Mortgage Broker help if you have bad credit and you’re looking to get a mortgage?
The main thing would be experience. It’s all very well that technology can compare all of these great deals, but if you don’t know how to navigate your way through a credit report, a Mortgage Broker can help you to spot issues very quickly.
They can help you apply to the right lender. Otherwise you could end up destroying your creditor score by doing unnecessary credit checks with lenders that are likely to turn you down. A broker would save you all of that time and not ruin your credit score in the meantime.
Approved by The Openwork Partnership 02/08/23