Lenders can be selective about who they lend to and how much they lend to them and the Financial Conduct Authority requires them to carefully check mortgage affordability to ensure you could afford to pay. To do this, they undertake a mortgage affordability assessment, which considers a number of factors, including your credit records.
When you make an application for a mortgage, lenders will work out a credit score for you. Your credit score helps a lender assess the likelihood of you being able to keep up with your mortgage repayments. It is usually the case that a higher score means that you are seen as a lower risk; the more points you score, the more chance you have of being accepted for a mortgage at better rates.
If you have ‘bad credit’ it means that you have a low credit score. There can be a number of reasons for this, such as missed payments on a loan or not paying bills on time. If you have never taken out any type of credit, you will not have any credit history at all, which can also have a detrimental effect on your ability to get a mortgage.
Having bad credit does not mean that you cannot get a mortgage, but it can make it more difficult to get a mortgage. For example, if you have previously taken out a loan and then you have defaulted on your loan repayments, this could indicate that you will not be able to meet your month mortgage repayments.
There are some lenders that offer certain mortgages that are specifically designed for borrowers with a bad credit history, however these types of mortgage products usually attract much higher rates of interest and fees.
If you have bad credit and this has resulted in you not being accepted for a mortgage, it may be better for you to try and build up your credit score and then reapply at a later date for a mortgage. In doing this, it will improve your chances of getting a mortgage.
It can be really helpful to speak to a mortgage broker who will be able to help you find out what mortgage deals are available and can help you find the product that is best for you and your circumstances.
