Got a bad credit history? Suffered financial problems in the past? You may struggle to qualify for a mortgage at present. Did you know that at least a quarter of all mortgage applications are rejected by mainstream lenders due to the applicant's credit rating or employment status?
You can get turned down for a wide range of relatively minor problems, such as not being on the electoral roll, not having a bank account, receiving income benefits and even making several mortgage applications over a short period of time. Minor misdemeanours recorded on your credit record, such as missing a credit card payment or forgetting to settle a utilities bill, can also affect your eligibility for a mainstream mortgage.
If you have a bad credit rating you may find it difficult to get a mainstream mortgage or remortgage. However, providing you have a reasonably sized deposit at your disposal, there are a small group of lenders willing to provide mortgages for people with a poor credit rating or adverse credit history.
Limited options
If you run into serious arrears, perhaps because you get divorced, fall ill or lose your job, getting a mortgage on the high street can be extremely difficult. You face real difficulty getting a mortgage if you have a County Court Judgement (CCJ) against your name. It doesn't really matter to the lenders if you’d sorted out your credit problems since and become an affluent and successful member of society because your poor credit history means they are likely to regard you as too much of a lending risk.
During the boom years of the housing and mortgage markets, there were dozens of mortgage lenders willing to advance a homeloan to almost anyone, regardless of how bad their credit record might be. They reasoned that falling behind on your mortgage or being declared bankrupt, for example, was often not the fault of the individual concerned, but could be a result of divorce or misfortune. And in many instances, they were right. Such lenders usually charged higher interest rates the more damaged the credit record was. However, following the credit crunch, these so-called 'sub-prime' lenders disappeared from the market and today's mainstream mortgage lenders are simply not interested in borrowers with poor credit histories.
Having a bad credit rating does necessarily not stop you from securing a mortgage deal, but it does make it significantly more difficult.
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