Getting a mortgage if you have defaults or late payments on your credit report
People with a history of credit problems such as defaults, arrears, late payments, bankruptcy or County Court Judgements are often described as having adverse credit.
An adverse credit mortgage specialist has access to all the mainstream and specialist lenders who are sympathetic to people with previous financial problems.
When an individual makes an application for a mortgage, the lender has the facility to search the person's credit files to determine what sort of risk they present. Individuals who have experienced adverse credit problems in the past are often turned down for a mortgage by high street lenders as they are regarded as high risk.
However all is not lost and the good news is having an adverse credit history does not necessarily prevent you from securing a mortgage or remortgage. Following the credit crunch, there are still a few lenders active in this niche market although products are less competitive compared to what they were before the financial collapse.
Getting a mortgage
The adverse market was estimated to be worth £25bn back in 2006, but as lenders recoiled following the credit crunch, the options for individuals with damaged credit files all but dried up. Today things are starting to improve with a small number of specialist lenders returning to the market and is an area of lending which is expected to grow again in the next few years. When it comes to getting a mortgage, the options open to you will depend on whether you fall under the light, medium or heavy adverse classification and what amount of deposit you have available to purchase your home. Every lender differs and there is no one size fits all criteria. On the whole, the grimmer your scenario gets the higher your interest rate and deposit required is going to be. Contact an adverse credit mortgage specialist today for impartial, no obligation advice.
A stagnant economy has taken its toll on borrowers credit files
A report by the Centre for Social Justice suggests that household debt has doubled in the last decade as rising numbers of families struggle with the cost of living. In 2012, British households owed an average of £54,000 including mortgages, which is a colossal jump when compared to a decade ago when the figure stood at £29,000. During the past few years the rising cost of living and a sluggish economy have forced many people to the edge of or over a financial cliff resulting in missed payments, defaults and CCJs, all of which will come back to haunt them should they be in a position to take on a mortgage in the future.
More and more people are likely to have tainted credit records due to increasing amounts of arrears, defaults, CCJs and the increasing use of IVAs and bankruptcy proceedings. Levels of consumer debt through credit cards, loans and store cards have been at record levels and the use of payday loans has spiralled.
Not that adverse credit should be confused with debt. Adverse credit happens when people default on debt repayments.
Popular reasons why people are turned down for a mortgage
Credit defaults - If you have previously built up arrears on what you owe and failed to keep to an agreement on a credit card, personal loan, or an energy bill, it will show on your credit report as a default. You may find that a high street mortgage lender turns down your application because of a default being listed on your credit report. Any defaults will remain listed on your credit report for a period of six years from the default date.CCJs - These indicate to the lender you have experienced serious financial problems in the past and many high street lenders will reject your application.
Bankruptcy or IVA - A history of bankruptcy or an IVA will inevitably lead to you being turned away by the high street lenders.
Lack of or insufficient credit history - First time buyers often have insufficient borrowing history for the lenders to be able to determine your creditworthiness. Lenders need to judge how likely they are to get their money back and they do this by looking at how well you have managed any previous borrowing on credit cards or personal loans. If you have what is regarded as a thin credit file, meaning you have either little or no previous credit history you are likely to be looked upon with disdain by some lenders.
No Obligation - Free Quotations
To get a free no obligation quote from an independent mortgage broker who has access to the whole of the market in the UK, simply complete our no obligation enquiry formYou'll receive advice on the best deals for you. Quotations are FREE, so it costs you nothing to see what your options are.