Adverse credit

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Lenders will conduct a credit check on you before making a decision to lend or not. Your credit history will determine the interest rate and the deposit required. Each lender will have a different approach to how they assess an applicants credit history.

 

Some lenders will use their own credit scoring and others will assess your credit report:

• A credit score is a three digit number that determines your ability to repay loans, which is based on statistical models.

• A credit report is a full history of the loans and credit cards that are active or previously paid off, these are all listed one by one.

 

Why is it hard to get a mortgage with credit issues?

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One of the major causes of the 2007-8 financial crisis was seen to be the extensive lending to customers with poor credit. The fallout of this has made lenders adopt stricter credit guidelines and therefore, restricting many people from accessing the mortgage market.   

 

Typical credit issues.

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Over the 25 years we have been operating, we have managed to identify key areas where mortgage applications get rejected by lenders. We have grown our expertise and found effective solutions to help our customers.

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Not only will our skilled staff analyse your credit data but they will also share with you the ways to improve this in the future and at what point obtaining a mortgage will be possible. 

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The types of credit issues we can help with:

• Defaults

• CCJ

• Debt management plan (DMP)

• Mortgage arrears

• Payday loans

• Repossessions

• Bankruptcies

• Individual voluntary arrangements (IVA)

• Debt relief order

• Unsecured missed payments

• Low credit score

• No credit history

 

​Sometimes people make mistakes or simply forget things. Some have genuine problems which are now resolved, others small blips which now haunt them credit wise. None of these affect their ability to pay now. We will look at your credit file and tell you how we can help.

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Furthermore, lenders we use understand poor credit mortgages, and have specialist products or provide underwriters who can look at individual credit reports and make an informed decision. Don't spend hours on the computer locating a lender and product, for the computer to say NO. Let us do the leg work.

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Defaults

A default occurs when there is an outstanding debt and is closed by a creditor. This is because you may of missed multiple payments over a long period of time (e.g. 6 months). You will receive a default notice before the account is closed. 

When the account has been closed, you may this be able to satisfy this debt. We recommend all defaults are satisfied as this will likely save you thousands on your mortgage, however it is not a requirement. 

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CCJs

It certainly makes it harder to get a mortgage with a CCJ as the number of lenders is restricted, however it shouldn’t stop you. 

It will make a difference if the CCJ is satisfied or unsatisfied. Some lenders will not consider you if you have a unsatisfied CCJ, while others will. It is always a great idea to satisfy these as it will end up saving you money with a lower interest rate. 

It is also depends on how recent CCJ is, number for CCJs and value of the CCJs. Good news, there is no limit to the value, instances or value. Crucially you should seek advice from the experts as very few lenders will consider this. 

Case study: 

A County Court Judgement is court order served to you when you do not repay a credit commitment. This is usually a last resort for a creditor and is served after a long period and multiple notices. 

Occasionally it may be possible to remove these from your credit file if it was registered by mistake or unfairly 

 

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Missed payments

Late payments (arrears) happen all the time. Sometimes cashflow can be an issue or you may simply forget to make a payment. It makes a difference if you just miss one payment or multiple payments in a row. Additionally, missed payments on your mortgage will be viewed more harshly compared to a credit card or personal loan.  

 

IVA

An individual voluntary arrangement is an agreement between you and your creditors to repay debts, which is legally binding 

It is arranged by insolvency practitioner

The monthly payment and timeframe is agreed upon and interest is frozen. A lump sum payment can also be agreed. The debt is cleared at the end of the agreement. Unlike a DMP, an IVA will show up on your credit file. 

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Poor credit score

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You still get a mortgage with a low credit score - there are lenders that specialise in mortgages with low credit scores. A score over 700 is generally considered 'good' and a score below 500 is considered 'poor'. There are two main factors that influence a credit score: the number of credit commitments and repayment of these credit commitments.

 

The main 3 credit reporting agencies are: Experian, Equifax and TransUnion. Each has a different scoring system and not all your credit commitments will be registered with all three. Not all lenders will consider your credit score so it is best to check with the experts. 

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Bankruptcy 

You can get a mortgage after being bankrupt but it is more complex. Not every lender will accept bankruptcy in the last 6 years, which makes it a difficult task searching for the right one. 

To increase your chances of getting a mortgage, talk to mortgage specialists, who understand the market and will be able to match you with the right lender. Additionally, usually lenders will only offer these products through brokers. 

As bankruptcy is considered a major credit issue, lenders will only offer mortgage products with higher interest rates, but this will depend on how long you have been discharged for. 

You can only apply for the mortgage once you have been discharged, this is usually 12 months. Some lenders will consider mortgage applications as soon as you have been discharged so this shouldn’t stop from getting a mortgage. 

You should always declare you have been bankrupt, even if it was over 6 years ago. This is because it is a logged on the national hunter database, and lenders will likely check this at underwriting stage. Being upfront about credit issues to your mortgage broker and lender is always the best strategy, as it will save you time, money and effort. 

Likely mortgage providers will want to see a clean credit history since being discharged. However this is not a necessity. 

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DMP

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A debt management plan is an informal agreement between you and your creditors, to repay these over a certain amount of time. As this is an informal agreement, it is not a legally binding contract. This usually agreed when you are unable to repay the credit commitment and more time to make payment. The creditors are not required to freeze interest and May add extra charges on top. 

This can be arranged directly with the creditor or through a third party (e.g. debt management company). Often debts are bundled together for the individual so a single monthly payment can be made. 

It is not necessarily noted on your credit file but lenders may be able to flag these, as it will show on your bank statements. So it is best to disclose this. 

Having a DMP is not a reason to stop you applying for a mortgage. Some lenders do accept recent or ongoing DMPs (however at a higher interest rate). It is very possible to make a purchase or remortgage while being in a DMP. 

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Repossessions

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Getting a mortgage after a repossession can be tough. Unfortunately, you would be rejected most lenders, however, with the help of a specialist broker, it may be possible to find a lender who would assist. It would depend on a number of factors: ​

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• Why the property was repossessed

• When the repossession occurred

• Credit profile since the possession

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Payday loans

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Payday loans are a very short term form of finance designed to help people overcome cashflow issues. Lenders often don't take a positive view on these types of loans as it indicates a higher risk of financial difficulties. We recommend people arrange an overdraft with their bank or take out a personal loan, rather than use payday loans. 

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If you have taken out payday loans in the past, it is best to discuss this with your mortgage advisor and these are visible on your credit file. The impact of this will depend on the frequency and time since your last payday loan. Additionally, if your circumstances have are now improved, it is easier to convince a lender to proceed with your mortgage application.  

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Highstreet lenders vs specialist lenders

 

The majority of mortgages are made via the Highstreet lenders, such as Barclays, Lloyds, Natwest, etc. They offer great deals and low rates, however they usually adopt a ‘one size fits all’ methodology. Therefore, any applicant with a significant credit blip will likely not fit with these lenders’ inflexible criteria. On the other hand, specialist lenders (often only accessible via mortgage brokers) can help applicants who do not fit the traditional high street approach. Our specialist advisors know each lenders’ specific criteria and are able to navigate you to the best deal, depending on your circumstance.

 

Despite having credit problems, you will be able to receive up to 5 times your income. Although, if you have current credit commitments (such as loans or hire purchases), these will be taken into account when assessing your affordability.

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How can I get a get a mortgage with previous credit issues?

 

A very good first step is to sign up to one of the major credit reporting companies (such as Experian or Equifax) and request to see your credit report. Not all issues have the same effect on your mortgage application, it will often depend upon the type, amount and date of the credit issue. For instance, a £100 missed utility bill payment 2 years ago will not have the same impact as a £500 county court judgment registered 6 months ago.

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We will review your credit report free of charge.

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At Manor Mortgages Direct, we have the skills to analyse this information from your credit report and qualify credit history to a specific lender and product.