It’s not a case of being paranoid – your credit report really is important to you!
These days, the vast majority of traditional High Street lenders are only interested in applicants with good credit scores. If there’s even the most moderate damage to your credit report, you can pretty much forget about it. Bad credit mortgages are largely non-existent on the High Street – as are most other types of unsecured and secured loans for ‘subprime’ applicants.
But this doesn’t necessarily mean that you cannot qualify for a mortgage with an imperfect credit history. If your credit report is blighted by defaults or missed payments, there’s still every chance you could get a good deal. It’s simply a case of knowing where to look and targeting the most appropriate lenders.
The overwhelming majority of major High Street banks won’t give your application a second thought, but the same cannot necessarily be said for the UK’s growing network of specialist lenders.
To What Extent Do Defaults and Missed Payments Affect Your Eligibility?
All banks establish their own unique criteria when it comes to mortgage applicant eligibility. For the most part, however, any indication of repeat or major defaults is going to cause you a problem. These kinds of credit issues stay on a person’s credit report for a minimum of six years. This means that even if you haven’t put a foot wrong for the past five years, an issue from six years ago could come back to haunt you.
For the most part, major lenders don’t make things particularly complicated when it comes to poor credit applicants. Instead, they simply refuse to do business with them. Irrespective of your financial status in general, your credit score could very well count you out of the running.
Specialist Lenders and Subprime Mortgages
Away from the High Street, you may have more luck working with a subprime mortgage specialist. As the name suggests, a subprime mortgage is designed specifically for an applicant considered too ‘high risk’ for a conventional mortgage. Even if he or she ticks all the right boxes, aside from that all-important credit score.
The biggest difference with these independent lenders is the way in which every application is considered by way of individual merit. If your credit score isn’t up to scratch, they’ll take into account the rest of your case accordingly. Your employment status, proof of income, general financial status and so on. They may also consider the extent to which your credit score isn’t as immaculate as it could be.
If you’ve simply made a few mistakes and defaulted on a couple of payments several years ago, they’re unlikely to interpret this as justification for handing you a bum deal.
Independent lenders are generally more forthcoming with regard to their acknowledgement of the realities of modern life. The simple fact of the matter being that maintaining a flawless credit report is getting more difficult all the time. The odd phone bill payment here, a mortgage payment there, an accidental breach of a credit limit – all the kinds of simple eventualities that could (and do) happen to any of us.
Unfortunately, also the kinds of oversights that can wreak havoc with your credit score.
Compare the Market for a Good Deal
If you have complete confidence in your capacity to repay the loan as required, you’ve every chance of gaining access to a good deal. Bring your case to an independent specialist broker, who will then be able to compare the bad credit mortgage market on your behalf. Depending on your circumstances, it could also be worth considering alternative options like a bridging loan – all of which your broker will discuss with you.
So while it’s true to say defaults and missed payments won’t make your life any easier, they don’t necessarily have to stand in the way of owning your own home.
This article was provided by UK Property Finance.