If you have a history of debt, late payments or lack of credit history, you may be wondering whether it’s still possible to get a mortgage.
You may have come across the term bad credit mortgage, or adverse credit mortgage, but what does this mean?
With the help of adverse mortgage advisors, those with negative credit history can still secure a mortgage.
This blog will discuss what an adverse credit mortgage is and how those with bad credit are still able to get a mortgage.
What Does Adverse Credit Mean?
If you have adverse credit, this means you have had previous problems with your finances. This can be anything from missing payments, being in debt, having a CCJ or even having no credit history at all.
All of these problems can affect your chances of getting a mortgage. In cases like these, you need help from specialists like adverse mortgage advisors. These brokers will have access to specialist lenders who may be willing to give a mortgage to those with a history of adverse credit.
Getting a Mortgage with Bad Credit
It’s widely perceived that those with bad credit won’t be able to get a mortgage. Although this is likely with high street lenders, there are mortgage lenders out there willing to help.
Going to a specialist adverse mortgage advisor will give you the best chance of getting accepted. They will use their expertise to find a lender willing to give your application a chance.
However, there are certain situations where you won’t be able to get a mortgage, such as recently declaring bankruptcy or consistently missing mortgage payments.
However, it all depends on your personal circumstances. Some lenders will be more lenient than others, so your mortgage advisor will know what is best for your situation.
What Counts as Adverse Credit?
Not sure whether you have bad credit? The following financial issues are classed as adverse credit on your credit profile and can make getting a mortgage much more difficult.
If you have any of the following, and you’d like to get a mortgage, you should speak with a specialist bad credit mortgage advisor for the best possible chance of finding a willing lender.
When you miss a payment, or make a late payment, this will count as a default on your credit profile. All lenders have different criteria, but if you don’t pay for three to six months, it’s likely to be recorded against you as a default.
This shows lenders that you haven’t stuck to the payment agreement you’ve made, which can stay on your profile for six years.
A County Court Judgement (CCJ) is when you owe someone money and a court has ruled that you must pay it back. If you have a CCJ against you, this can negatively affect your chances of a mortgage.
Debt Management Plan
Someone may set up a debt management plan to get their finances back on track. To do this, you will come to an agreement with your creditors to make monthly payments to pay back the debt you owe. This is an informal agreement which you can leave at any time.
Filing for bankruptcy means that all your debts will be wiped because you have no way to pay them off. This is one of the most severe types of adverse credit and can make it difficult to secure a mortgage, especially if the bankruptcy is recent.
An Individual Voluntary Arrangement (IVA) is similar to a debt management plan, however an IVA is a formal agreement meaning that it is legally binding, unlike a DMP.
Missed Mortgage Payments
If you have previously missed mortgage payments, this will show up on your credit file. Mortgage lenders won’t look favourably on this type of adverse credit.
No Previous Credit
You may have no previous credit for many reasons, such as:
- You don’t have a UK bank account
- No employment history
- You’ve only recently moved to the UK
- You’re not registered on the electoral roll
- You’ve never paid any bills
Mortgage lenders use your credit history to see whether you’re likely to struggle with mortgage repayments, so if you have no previous credit, they’re unable to work out how financially stable you are.
Secure Your Mortgage
Just because you have a history of bad credit, doesn’t mean getting a mortgage is impossible. With the right help from adverse mortgage advisors, they will be able to look at your personal finances to work out the best steps for you.