Mythbusting Bad Credit Mortgages

Having a bad credit history or a low credit score inevitably makes it a bit harder to find a competitive mortgage.

However, there are many misunderstandings about the bad credit mortgage market, which we often hear from new clients who presume they’ll never be able to get onto the property ladder!

Today, our mortgage brokers runs through five of the most common mistakes surrounding bad credit mortgages and shines a light on the facts you need to know.

Myth One: It’s Impossible to Get a Mortgage With Bad Credit

Thousands of people have an adverse credit history, ranging from a one-off series of late payments a few years ago to having experienced more severe credit issues, including bankruptcy.

Many high street banks will automatically reject applicants with poor credit ratings, but that doesn’t mean you can’t apply elsewhere or that your circumstances make you ineligible for any mortgage product.

Bad Credit Reality

Your best chance of finding a bad credit mortgage advisor with acceptable rates is to work with an independent mortgage broker, who will negotiate terms on your behalf.

Revolution works with a network of niche lenders who consider every application on its merit and won’t reject your application out of hand because you have a less-than-perfect credit rating.

Myth Two: We Can’t Get a Joint Mortgage Because One of Us Has Poor Credit

Another common mistake is to assume that your financial association with a partner means that one bad credit rating counts you both out of getting a mortgage.

Bad Credit Reality

Suppose you decide to apply for a joint mortgage. In that case, lenders will run through the same assessments on both applicants, including assessing your annual income, debt-to-income ratio, and, yes, credit history.

Two partners without a financial link can apply independently for a mortgage without one impacting the other.

Alternatively, we routinely arrange adverse credit mortgages for joint applications, again referring to specialist lenders who have expertise in assessing bad credit applicants for risk, using different evaluations than a mainstream lender.

Myth Three: I Should Apply For as Many Bad Credit Mortgages as Possible

We appreciate that applying for a mortgage can feel frustrating if you have been rejected by your usual bank and think that you may as well apply to every potential lender.

Bad Credit Reality

Multiple applications mean multiple credit searches. The impact can be extremely negative, and rather than improve your prospects, make it even harder to find a bad credit mortgage.

Lenders looking at a credit report with adverse history, plus multiple searches, will perceive that as desperation for lending, which may be the deciding factor.

The safest option is to consult a broker – we research the available mortgages, work out which you are eligible for, and then construct a compelling application. 

Myth Four: There Is No Way For Me to Improve My Credit Rating

Credit history can follow you around, and being rejected for a mortgage after some late payments five years ago is disappointing, to say the least.

However, please don’t assume you can’t do anything to improve your score or that it’ll remain the same forever!

Bad Credit Reality

Reports on your credit record stay there for six years. If you’re close to that time and have had a serious credit issue, it could be worth holding fire for a few months until the report is no longer visible.

There are also lots of options to improve your score!

Registering on the electoral roll, closing unused accounts, or consolidating debts might all work in your favour and bump up your credit score.

Myth Five: Bad Credit Mortgages Are Always High Interest

Indeed, you’ll generally pay more in interest charges as a riskier bad credit applicant – but, as we’ve just discovered, credit ratings will change, so you don’t need to settle for unnecessarily high mortgage costs.

Bad Credit Reality

Initially, a bad credit mortgage will cost more in interest, but a broker can negotiate and find the best deals currently on the market.

In time, as your rating improves, it can also be beneficial to remortgage and find a better mortgage when previous credit issues have vanished from your credit report.

Bear in mind that remortgaging does carry costs, such as a valuation charge, and it’s usually best to wait until you’re out of any fixed-deal period to avoid paying additional expenses such as an early repayment penalty.

Bad Credit Mortgage Advice

We hope this guide has helped clear up some common myths around applying for a mortgage with bad credit!

For more information about anything discussed here, help to improve your credit score, or details of the most competitive bad credit mortgages available, please get in touch.

Revolution Brokers are available on 0330 304 3040 or via email at info@revolutionbrokers.co.uk.

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