Can I still get a Loan or Mortgage with Bad Credit History?

 
Loans for those with poor credit histories are called sub-prime or impaired credit mortgages. And the plain fact is that these are now very few and far between.
 
If you can find one - talk to a mortgage broker who specialises in bad credit - it will probably be very expensive. 
 
Lenders are reluctant enough to put their heads above the parapet for normal loans. The thought of lending to someone with credit problems and few county court judgements or someone with uneven earnings is enough to send them scurrying back to their holes. 
 
It's not impossible but far more difficult and more expensive than it used to be. 
 
You might do as well to sit tight and rent. There is little point in biting off more than you can chew as any future problems will be magnified by the high interest rates on the few remaining sub-prime loans.. 
The problems below will cause you to have a bad credit rating, including (but not limited to):
 
  • Mortgage, secured loan and rent arrears
  • County Court Judgements (CCJs)
  • Defaults
  • Individual Voluntary Arrangements (IVA)
  • Discharged bankrupt
  • Repossession
  • Self-employed with no accounts

Can I get a mortgage with bad credit?

Well that's a question we get asked an awful lot of times, and the quick answer is yes. 
 
But, and it's a fairly big but, it is not easy by any means and you should be wary of anyone who tells you that it's easy!
 
If you are looking to Remortgage it is easier for sure, especially if the size of mortgage you are after is low in comparison to the value of your property.
 
So Bad Credit Mortgages are still possible to arrange even in these difficult lending times.
 

What is a bad credit mortgage?

  • Poor credit rating
  • huge credit card and loan debts
  • CCJ's
  • mortgage or rent arrears
  • defaults
  • IVA's

One or more of the above means that most mortgage lenders will view you as a "bad credit mortgage" case.

Borrowers are considered on past credit history and payment profile apart from the normal income, outgoing and employment status.
 
As a rule of thumb the mortgages and remortgages available to a prospective borrower will be dependent on the nature of any credit problems, their severity and when they were registered on their credit file.
 
The more recent the problems and the higher the value will generally be reflected in the interest rates of the products available.
 
The majority of lenders who offer these products allow for a certain level of credit problems on a specific product and up to a certain loan to value (LTV), as above this will be reflected in the rate. It's worth bearing in mind that the lower the LTV is, the less risky it is for the lender.
 

A bad credit history should be just that, history!

 
If you've suffered a bankruptcy, that doesn't necessarily mean you can't get a home loan. The key is having patience and doing the work needed to get banks interested in lending to you again.
 
Think positive -Maybe the number one roadblock to getting a mortgage loan after a financial disaster is the (understandably) common mind set that nobody wants to lend you money right now. 
 
This is not necessarily true. In fact, it may be easier to get a home loan after a bankruptcy than it is for simply having bad credit. But you have to recognise that all is not lost and that you have to take concrete steps to put you in the best financial position. 
 
Adhere to your bankruptcy conditions -The first concrete step back on the road to good credit is to honour your bankruptcy. In other words, make the payments you're supposed to make, and make them in full and on time. 
Use your bankruptcy time to clean up your credit -Typically people in financial distress can get a home loan after even one year of bankruptcy. With other forms of bankruptcy, it might take two years to qualify for a home loan.
 
Here's a tip - A secured credit card is usually easy to get and can start you back on your way to good credit. Use it sparingly and pay it off (once again) on time and in full. 
 
A good record of timely payments on a secured card can be the first big step in restoring your credit and qualifying for a home loan. 
 

Disclaimer

Whilst every effort is made to ensure that the legal information contained on “YouandYourRights” is accurate, it does not constitute legal advice tailored to your individual circumstances. If you act on it, you acknowledge that you do so at your own risk. Neither the Proprietor nor Dean Dunham can assume responsibility and do not accept liability for any damage or loss which may arise as a result of your reliance upon it.

 

 

Last updated: 22 June 2013

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