Dreaming of owning a home but worried about your credit score?
If you're considering purchasing your first home, relocating, or seeking to remortgage, concerns about how a poor credit rating may impact your plans could arise. But it is not impossible - discover your available options and learn steps to improve your credit score.
What is classified as having ‘bad credit’?
Having ‘bad credit’ means that you have a low credit score, typically below a certain threshold set by lenders. This low score may stem from various factors such as:
Missed or late payments
High credit card balances
Defaults on loans
Been served a County Court Judgement (CCJ)
How to increase your chances of getting a mortgage if you have bad credit?
Securing a mortgage can be a daunting process, especially if you currently hold bad credit. However, there are proactive steps that you can take to improve your credit score to increase your chances of acceptance, which can be a good place to start .
To strengthen your credit score, you could consider:
Registering on the Electoral Roll: Establishes proof of address stability.
Regularly checking your credit report: Spot errors early and correct them.
Timely payment of bills and debts: Paying on time demonstrates financial responsibility.
Using credit wisely: Keep credit utilisation below 30% and avoid maxing out cards.
Closing unused accounts: Streamlines your credit profile.
Improving your credit score and securing a mortgage with bad credit may take time and perseverance. It's crucial to stay positive, remain focused on your financial goals, and continue implementing responsible financial habits.
Save for a larger deposit
Lenders typically offer mortgages with a lower loan-to-value ratio to individuals with a poor credit history. This means they lend a smaller proportion of the property's value compared to the value of the property. Consequently, providing a larger deposit not only improves the terms offered by your lender but also enhances your likelihood of mortgage approval.
Demonstrate financial stability
Aside from improving your credit score, showcasing financial stability can bolster your mortgage application. This includes maintaining stable employment, reducing existing debt, and avoiding any new credit inquiries or financial obligations in the months leading up to your mortgage application.
Remember, building a solid financial foundation takes time and dedication. By implementing the strategies outlined in this guide, you're taking important steps towards achieving your dream of owning a home.
When it comes to securing a mortgage with poor credit, it's not just about your credit score; your entire credit profile matters too. While a poor credit score is often discussed, a broader poor credit profile can have its own set of challenges. Banks and lenders delve into your conduct, scrutinising missed payments, late payments, defaults, and other financial missteps. Even if your credit score appears decent, these factors can significantly impact your ability to secure a mortgage. It's crucial to address not just your score, but also the entirety of your credit profile when navigating the mortgage application process. Taking steps to improve your overall financial behaviour can make a substantial difference in your mortgage prospects, even with less-than-perfect credit.
If you're still unsure about your next steps or need personalised guidance tailored to your situation, don't hesitate to seek professional advice. Our mortgage adviser Zak is here to help you navigate the complexities of the mortgage process with expertise and support.
Your dream home awaits, and we're here to help you make it a reality.
*Your home may be repossessed if you do not keep up repayments on your mortgage
