If you have ever missed a payment or defaulted on the repayment of debts or credit. If you have ever had to manage your debts by reaching an Individual Voluntary Arrangement (IVA) with your creditors. And especially, if you have ever declared bankruptcy – you are likely to struggle to get a mortgage.
In the circumstances described, you are said to have adverse credit – and that is what makes getting a mortgage more difficult. Any lender will look to your record of managing debt and other lines of credit as a measure of your responsibility and reliability towards any new lending in the shape of a mortgage. This is a measure of your creditworthiness.
Indeed, the industry’s regulator, the Financial Conduct Authority (FCA) advises its registered members on the need to conduct creditworthiness checks.
The biggest impact if you are in search of a mortgage is that you are going to encounter more difficulties, fewer lenders prepared to entertain your application, and less competitive offers. It will be difficult to know where to start looking.
An adverse credit broker
That is where a specialist adverse credit mortgage broker may come in. Brokers such as this have expertise and experience that ranges across the whole of the mortgage market.
A specialist broker is familiar with those lenders accustomed to providing adverse credit mortgages and is aware of the extent to which you might need to save for a bigger deposit, be offered a lower maximum loan to value (LTV) by the lender, or a less competitive rate of interest.
Thanks to that network of specialist adverse credit mortgage lenders, your specialist broker is well placed to match your particular financial needs and circumstances with the relatively limited mortgage products available. Indeed, there are likely to be mortgage products only available to those making a mortgage application via a broker – products which are not otherwise available if you were to approach a lender directly.
Not only is an adverse credit broker better able to match your particular circumstances to the products available, but he may also help to ensure that you avoid making mortgage applications where there is a high risk of your being rejected. If you are rejected for any credit application – including a mortgage advance – that rejection is recorded on your credit history and affects your rating still more adversely.
The effect is to make future applications for a mortgage more difficult. You will be grateful, therefore, to the adverse credit broker who is able to steer you away from lenders offering little hope of granting you a mortgage.
All in all, you may be surprised by the network a specialist adverse credit broker has been able to build up. Applicants with a less than healthy credit rating, for instance, are often offered a lower loan to value (LTV) mortgage – they will need to save for a bigger deposit than other homebuyers may need.
While conceding that it is not very likely, credit reference agency Equifax suggests that it might even be possible for someone with adverse credit to get a zero-deposit mortgage – you may need to instruct a suitably specialist adverse credit mortgage broker to find this kind of deal.
Repair your credit rating
Depending on your particular circumstances – the extent to which your credit rating is adversely affected – and the urgency with which you are looking to secure a mortgage, a specialist mortgage broker may also be able to help you repair a poor credit rating.
In an article dated the 17th of March 2020, the Money Saving Expert encouraged anyone to check their credit rating regularly, but especially before making an application with such a potentially significant impact as a mortgage.
To maximise your chances of a higher credit score – and to avoid your rating being dragged down by inaccurate or out of date information – the article suggested as many as 27 ways in which you might boost or repair your current rating.
Some tips are simple and straight forward, such as ensuring that you visit the government website to sign on to the electoral roll in your area. Having your name registered on the electoral roll is often a factor in determining your score by a credit reference agency, or simply to confirm your identity and place of residence.
Other repairs to your credit rating may involve more time and you might want to discuss with your adverse credit broker whether there is sufficient opportunity to make those repairs or to continue your mortgage application with your credit rating as it currently stands.