Unfortunately, if you have missed a loan repayment you may have a default on your credit report, resulting in bad credit.

A default is the terminology used when a negative payment record is placed on a credit report due to unpaid arrears.

Typically, when a default is applied, the lender no longer views the person as a customer, but as a debtor instead.

Defaults provide a warning light to prospective lenders regarding the level of potential risk involved as they demonstrate that the borrower has had a previous history of mismanaging scheduled payments.

In this guide, we will explore the impact of a default and the process of obtaining a mortgage with a default on your credit history.

Can I get a Mortgage with a Default?

Firstly, if you are in the position of seeking a mortgage but knowing that you have a previous default recorded on your credit report, it is important not to panic and to understand that every lender will take a different stance.

Defaults are a common reason for a mortgage application to be declined, especially by high street lenders, however simply because one lender rejects a mortgage application, does not mean that it would be the end of the journey.

To either take that first step onto the property ladder or to re-mortgage and move is still possible, it’s simply about finding a lender that has criteria compatible with your circumstances.

There are mortgage lenders that specialise in helping customers that have adverse credit and will help you find a mortgage with defaults on credit file.

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However, should you already have had a mortgage application be declined, it is important to establish the full reasons why so that actions can be put into place to rectify the concerns, before making any further applications.

Each mortgage application would add a further marker to a credit file and therefore the next steps should be carefully managed.

Therefore, at this stage, it would be highly recommended that advice from an Independent Financial Advisor is sought to review the personal circumstances, details of any defaults or declined applications, and offer specialised financial advice to discuss other options available.

Financial Advisors are also best placed to find the most suitable option, on the most favourable terms available due to their insight into the lending market however they must be privy to the full circumstances in order to help, therefore it is always best to be open and honest.

If you have an individual involuntary agreement, it is still possible to get a mortgage, for more info, check our guide on how to get a mortgage with an IVA.

Looking for a commercial mortgage with bad credit? You may be interested in the possibility of shared ownership.

Are Some Defaults worse than others?

Quite simply, yes. The severity of default will depend on the type of agreement that payments have been missed within.

There are two types of defaults, depending on the type of credit agreements, as follows:

• Regulated credit agreements – A default may occur following a missed repayment and subsequently, the borrower failing to respond to a Notice of Default issued under section 87 of the Consumer Credit Act 1974. Once a default notice has been received, a borrower would have 14 days to make the outstanding payment, or the default will be added to the borrower’s credit report.
• All non-regulated credit agreements – Where agreements are not regulated, a default recorded on a borrower’s credit report represents that the lender has concluded that the relationship between lender and borrower has broken down.

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How Soon After a Default can I get a Mortgage?

A default will remain on a credit report for six years following the event, regardless of any payments made to clear the debt.

Can a Default be Removed from my Credit Report?

If a default reported on a credit report is accurate, it is unlikely to be removed either by the lender themselves or a credit reference agency.

In this case, the default is legally bound to be reported for the duration of six years, after which it will be removed automatically.

However, if the default is incorrectly reported, it can be disputed by directly contacting the relevant lender.

The lender has a responsibility to accurately amend the information if they have made a mistake.

Unfortunately, errors can occur and therefore it is important that credit files are checked regularly to ensure that the information stored on the file is up to date and accurate.

How Soon Following a Default can I Obtain a Mortgage?

The timing of the negative event on an applicant’s credit history will be key.

The longer duration of time that has passed since the default being added to a credit file, will help as the default is less likely to impact the ability to obtain a mortgage and if successful, the mortgage terms offered.

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Can I get a Mortgage with a Satisfied Default?

Unfortunately, as we have briefly discussed, the repayment of the debt does not clear the default on a credit file and therefore the duration of time that has passed since the default was recorded is more of a concern to potential lenders.

However, by satisfying a default, a borrower’s credit score is likely to improve, which may in turn assist the hunt for a mortgage as some lenders will categorise the risk involved slightly differently.

Want a mortgage for a rental property? They work slightly differently to regular residential mortgages, learn all about them in our buy to let mortgages with bad credit.

How Much Can I Borrow If I Have a Default?

Typically mortgage lenders who are willing to lend to those with adverse credit history may have tighter affordability checks than high street lenders which may impact the total value of any mortgage offer.

Should the maximum level of borrowing offered to be limited due to risk factors involved, higher deposits are likely to be needed.

Typically, lenders will offer to lend up to x5 your annual income if you do not have any blemishes in your credit history.

If you have defaults, you are likely to find it difficult to get a mortgage approved, but this not mean it’s impossible.

You will usually need to provide a large deposit and will be offered less competitive interest rates as you are seen as a greater risk.

If your adverse credit history is more than 3 years ago, lenders may be more willing to lend up to 4x your annual income.

How can my income affect getting a mortgage with a default?

The majority of lenders accept 100% of your basic salary, but only 50% of overtime and other additional income.

Some lenders will request a minimum of 3 years self-employment, while others are satisfied with just 12 months.

It’s common for lenders to demand those in employment to have been in their current role for at least 1 year.

The mortgage amount will also be impacted by your outgoings and other financial commitments, as these can impact how much you can afford to pay back each month.

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Should I Check My Credit History? 

It’s always a good idea to check your credit history to see if you have anything else on your file that may negatively impact your chance of having your mortgage approved.

Even though there isn’t a set credit rating that lenders will be looking for, maintaining a healthy credit rating will improve your chances of your mortgage being approved.

Although please note: Different lenders use different credit rating agencies (CRAs) when checking your report.

Therefore, checking your reports at different providers is a good idea as they may vary.

It’s also important to know how many and when any defaults you have taken place.

Lenders will want to know this, as many have a threshold to the amount and severity they will consider.

Where can I find my credit report? 

It’s possible to check your credit history for free once annually from each agency.

So, apart from time, there is no barrier to check the information before you submit your mortgage application, especially if you suspect you may have a history that would lead to being declined.

The report will also show you late payments, arrears and the presence of any CCJs, IVAs or bankruptcies, all important to be aware of when preparing to make a new mortgage application.

How to Get a Mortgage with a Default Summary

We have discussed the factors involved with being issued a default and the impact that defaults have on credit files and the ability to obtain mortgages.

As such, it is highly advisable that a copy of a credit file is obtained before applying for a mortgage to check the report for any inaccurate data.

Details of the credit report can also be provided to an Independent Financial Advisor, who can advise the financial options currently available.

Give us a call on 03330 90 60 30 to speak to an advisor, or contact us for mortgage advice that’s personal to you and takes your credit history into account.

That way you’ll know where you stand in the mortgage market and we can guide you on your route to securing a suitable loan.

CheckMyFile is a UK credit report service that utilises data from the three major credit reference agencies: Experian, Equifax and TransUnion.

CheckMyFile is a privately-owned company that launched in 2000 and promises never to sell on or pass on customers data for marketing purposes.

In this guide, we will take you through everything you need to know about CheckMyFile, including its benefits and potential limitations.

How Good are CheckMyFile?

CheckMyFile aim to provide the most accurate credit report and therefore the site combines data from a range of sources in addition to the major credit reference agencies including;

• The Electoral Roll.
• Registry Trust.
• Various Banks and Building societies.
• Telecoms service providers.
• Other credit providers.

Why are Individuals Given Credit Scores?

A credit score is a numerical representation of an individual’s creditworthiness.

The number provided is usually between 300-999 and is calculated by reviewing an individual’s credit history.

The higher a person’s credit score, the more desirable that the individual is as a customer to a lender.

An individual’s credit history report contains many pieces of information including:

• Details of open accounts and missed payments.
• Information from the Register of Judgments containing details of any Individual Voluntary Arrangements (IVAs) and bankruptcies.
• Details of financial related links such as previous partners.
• Information from public sources such as the Electoral Roll and telecoms companies.
• Ratios of borrowing levels.

The purpose of a credit score is to provide a credit rating system that is used by lenders when reviewing any type of banking or borrowing application.

As a credit score is vital to lenders, individuals should protect and nurture their score, including ensuring that all of the information underpinning a credit score is accurate and correct.

Recommended reading: 

• Getting a mortgage with bad credit.
• Remortgages for debt consolidation.
• Mortgage application declined.
• Mortgage after repossession.

What is a Good Credit Score?

There are differences between the major credit reference agencies and lenders on how they calculate credit scores, including the range of scores available.

Some use a ‘Spring system’ with a credit score range between 0-100 whilst others, calculate scores of up to 1000.

In addition, all lenders will have different lending criteria of what level of credit score they deem favourable and willing to accept customers with and therefore it is tricky to advise of a universally ‘good’ credit score.

How Can I improve my credit score?

Although there is not a universally ‘good’ credit score, credit scores are all impacted by a range of events and activities as follows;

• No history of borrowing.
• Mortgage arrears.
• Late payments, especially a pattern occurring.
• Defaults on borrowing.
• Debt management plans.
• CCJs.
• IVA.
• Repossession.
• Bankruptcy.

Some of the above events will be stated on a credit report for a set number of years and therefore will impact a credit score for a longer period of time however others can be counteracted by improvements to a financial position elsewhere.

There are instant ways to build a credit score should these not have been completed already such as register with the electoral roll.

However, some of the events, such as no history of borrowing can only be rectified slowly, over time.

To build a credit history from scratch an individual could initially open a UK bank account (if they haven’t done so already) and set up a few direct debits for regular bills.

Another tip is to ensure that certain household bills are set up in the individual’s name who is building their credit score.

Unfortunately, building a credit score from scratch takes time as a pattern of borrowing and regular repayments need to be established slowly, over a period of time.

This can also be achieved either by using an overdraft or low balance ‘credit builder’ credit card.

In addition, a credit score can be impacted by errors on a credit report and therefore it is vital to regularly run a report and check the information is accurate.

If you have concerns regarding the duration of time a specific event is retained within your credit report, contact our friendly team who will be able to advise both regarding the specific issue, but also financial options that could be available within the meantime.

Need more help? Check out our quick help guides: 

• Can you get a mortgage with a CCJ?
• How much deposit do you need for a bad credit mortgage? 
• Can I get a mortgage with bankruptcy? 
• Payday loan mortgages.
• Bad credit commercial mortgages.

How often is a credit report updated?

CheckMyFile is only updated once the source information has been received and reviewed by a lender and therefore most updates are submitted on a monthly basis.

In addition, there can be a time delay between the different agencies updating their information which can cause discrepancies however they are likely to be resolved over a short period of time.

CheckMyFile however sources information from a range of credit reference agencies, therefore, providing a more comprehensive oversight for lenders to make an informed decision upon when reviewing an application for borrowing.

Is there a charge to access CheckMyFile?

There is a free 30-day trial available with CheckMyFile and therefore there are no charges to access a report within this time.

Ahead of a mortgage application is it advisable to undertake an audit of all accounts as well as request a free credit report to check it for errors.

Always ensure that there is plenty of time to log any queries with the credit referencing companies before an application.

Therefore, it is advisable to use the full duration of any trial to ensure that any issues with the data are being resolved and updated.

Should the subscription continue longer than the month’s free trial, the charge is £14.99 per month.

However, it is easy to cancel a CheckMyFile account anytime via the expert help area once logged into your account.

What is CheckMyFile Summary

CheckMyFile are a multi-source credit reporting service that enables customers to review all of the information feedings into their credit score.

CheckMyFile is also simple to use and therefore we recommend it.

We recommend checking your credit report regularly to ensure that the information is accurate, and so that any concerns can be rectified as soon as possible.

Should you have any concerns regarding your credit score, please feel free to contact our friendly expert team who can assist with advising any next steps as well as financial solutions available to you at the current time.

Call us today on 03330 90 60 30 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.

Having an individual voluntary agreement (IVA) can cause issues when looking to secure a mortgage,  however this guide will provide some insight into overcoming some of the common hurdles.

What is an individual voluntary agreement (IVA)?

An individual voluntary agreement or IVA is a process to avoid bankruptcy where a person signs a contract to make certain repayments of debt to the lenders.

People often opt for an IVA when they are facing financial troubles and cannot pay off all debts in full.

When entering into an IVA, the interest is frozen on outstanding debts and possibly the repayments are lowered to a more manageable amount.

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How does an IVA after your credit rating?

A credit score illustrates how worthy of credit an individual is at a given time.

The score is calculated by credit reference agencies by reviewing an individual’s credit history.

Lenders will use a credit score to analyse an individual during a credit application.

An applicant’s credit score will determine if an offer of credit can be made and the terms available to them such as the interest rate offered.

Someone with an IVA will have their credit score impacted. If an IVA is still active, further credit may not be offered, due to the level of risks that lenders would face.

An IVA agreement will stay on the financial records for six years following the date of the IVA agreement.

Once the agreement had concluded, a completion certificate should be issued to formally document that the IVA has been settled.

At this point, it is worth checking that the credit records have been updated correctly.

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Windfall Clauses

IVA’s often contain a windfall clause which means that if a sudden cash sum is received during the duration of the agreement, it is given to the creditors.

The clause relates to any sum of money received such as a cash prize, inheritance or pay-outs.

Therefore, if someone who is subject to an IVA manages to gather the funds for a cash deposit during the period of the IVA, creditors may challenge the source of the money.

Looking for a commercial mortgage with bad credit? You may be interested in the possibility of shared ownership.

Improving a credit score following an IVA

As more time passes following the settlement of an IVA, a potential mortgage applicant’s credit score will improve, therefore increasing the chances of obtaining a mortgage.

After six years, an IVA will drop off a credit history, however, a credit score will be impacted due to the lack of borrowing. Lenders will therefore be nervous as recent responsible use of credit has not been documented.

Top tips to improve your credit rating:

1. Check your credit report – Request a report from a reputable credit reference agency and review the content. If there are any errors, either contact the company directly or the credit reference agency whom the report was run with to investigate.

At this point, it is also worth checking the financial associations listed and requesting the removal of any old information, such as links to ex-partners.

2. Register to vote – By registering to vote you will be added to the electoral roll, which is another record that lenders can check to confirm the identity and address of applicants.

3. Apply for credit wisely – Every credit application will leave a mark on your credit file, which other lenders can see. Therefore, the history of any denied credit applications may also be visible.

4. Keep credit usage low – When applying for new credit, lenders will review a number of elements of your credit file, not only any outstanding balances but also the value of available credit.

5. Build a good credit history – Building a positive credit file shows that you can be responsibly borrowed, make regular and appropriate payments and remained within the credit limit. If you haven’t had any credit before, lenders will be nervous as there haven’t been any records of managing credit.

There are financial products on the market aimed at those who are building a credit history or recovering their credit file, such as ‘credit builder’ credit cards.

Often the interest rates will be very high therefore they are designed for the balance to be paid off in full every month for customers to document a pattern of responsible repayments on their credit file.

Want a mortgage for a rental property? They work slightly differently to regular residential mortgages, learn all about them in our buy to let mortgages with bad credit.

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How to get a mortgage with an IVA

Settling an IVA can improve an applicant’s chances of success when applying for a mortgage.

However certain lenders will always refuse applicants that have ever had an IVA, whilst others would consider applicants.

However, there is a middle option. There are a number of lenders who will consider lending to mortgage applicants who have settled their IVA three years ago.

To be in the best position for this option, not only is the IVA settled but applicants have rebuilt their credit history by documenting responsible borrowing and repaying debts over time.

In this scenario, it would be beneficial for applicants to have a higher deposit, between 15% and 25% of the value of the property value.

This reduces risks to lenders and therefore increases chances that lenders will be prepared to issue a mortgage offer.

Any mortgage offers provided to those applicants with a bad credit history are likely to be at a higher interest rate and for a lower value, due to the risks to the lender.

Before applying for a mortgage, it would be sensible to seek the advice of an independent mortgage advisor who can investigate options and advise on the best approach, before searching the property market.

Note: If you have a debt management plan, or a default, it’s also  still possible to attain a mortgage with bad credit, but as with an IVA there are more things to consider.

Applying for a mortgage with an IVA? Contact us Today 

Our expert mortgage advisors are here to help you find a lender which you can secure a good deal from.

Deals available will be based on your financial situation and so you’ll have a much easier time finding a loan which is best for you.

Give us a call on 03330 90 60 30 to speak to an advisor, or contact us for mortgage advice that’s personal to you and takes your credit history into account.

That way you’ll know where you stand in the mortgage market and we can guide you on your route to securing a suitable loan.

While it’s true that you can find it much more difficult to find a suitable commercial mortgage when either you or your business has a bad credit history that doesn’t mean that there are no options for you at all.

In fact, there are many specialist lenders out there who show much more flexibility when it comes to finding a commercial mortgage with bad credit.

You just need to know where you stand with your financial situation and we’re here to help you out.

How to Get a Commercial Mortgage with Bad Credit

Before we begin, here are the major factors that determine your ability to get a commercial mortgage with bad credit:

• Current financial status.
• The severity of the poor credit.
• How much time has passed since the bad credit.
• The lender’s criteria.

Ultimately, having an adverse credit rating can impact your ability to secure a commercial mortgage, but it doesn’t necessarily make it impossible.

There are specialist lenders who offer commercial finance, but they will have specific criteria you will have to satisfy.

How Does a Bad Credit Rating Affect a Commercial Mortgage?

The reason lenders like to see your credit history and would prefer a good credit history is because it is an indicator of your liability to make the loan repayments.

When the credit rating is poor or your credit history shows a past of missed payments, defaults or repossessions, this serves as a red flag to a lender and they are likely to determine you a too high risk to lend money to.

In these cases, your mortgage application is likely to be declined by many lenders, but it is still possible to secure a mortgage with a poor credit rating.

High street lenders, in particular, can be a lot more reluctant to provide commercial mortgages to those with bad credit.

However, you will find niche and specialist lenders more willing to take less than ideal credit ratings into account.

It does highly depend on the specifics though as a default that occurred more than 12 months ago is not going to pose as much of a problem than the same occurrence less than 6 months ago. And so it does depend on the severity of your bad credit.

The best thing to do in this instance is to speak to an expert commercial mortgage advisor who can take a look at your credit profile and give you an idea of the possibilities available to you.

Factors that can contribute to a bad credit rating include the following:

• CCJs – a county court judgement is when you’ve owed money to a person or company, and they’ve had to go to the courts to recover the funds. If you’ve had a CCJ but have ‘fully satisfied’ the CCJ, then you may still be able to get a mortgage.
• IVAs or debt management plans – if you have taken out an individual voluntary agreement (IVA) to help clear debts, then most lenders may require a larger deposit from you, and a history of keeping up payments on your debt management plan – however, there may be some bad credit mortgage providers that will consider your case.
• Bankruptcy – you may still be able to get a mortgage if you’ve been declared bankrupt, however, lenders will need to know when the bankruptcy was discharged, and how any credit has been managed since.
• Payday loans – it is still possible to get a mortgage if you’ve had a payday loan, but generally, payday loans are a clear sign of a bad credit rating.

Looking for a commercial mortgage with bad credit? You may be interested in the possibility of shared ownership.

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What are The Criteria for a Commercial Mortgage with Bad Credit?

So you may be wondering what requirements there are for bad credit commercial mortgages. Well, there are several factors that your acceptance for a mortgage will be dependent on, including:

• Your Current Financial Status – This is referring to your current income and outgoings which determine your ability to make repayments.
• The Deposit – The deposit can vary depending on the structure of the loan and your personal circumstances. A larger minimum deposit is most likely to be required the worse your credit score is.
• Profitability – Lenders will take into account your earnings before interest, tax, depreciation and amortization (EBITDA) and are much more likely to provide mortgages to those with higher EBITDA figures.
• Business Plan – When overlooking bad credit, the lender may wish to see business plans to get a better sense of security from the deal.
• Relevant Industry Experience – The lender may also take into account your experience within the industry that your business operates in. Just like having a good business plan, this gives the lender more confidence that they are going to see a return on their loan.

Having said this, all lenders are different and the requirements between them all can vary quite considerably.

Additionally, their willingness to accept a commercial mortgage application can vary too!

Consider looking at your application from a different perspective and treat it more like a business proposition.

The more profitable and committed you are, the more attractive the application will seem to the lenders.

Non-Status Commercial Mortgages

Another viable but riskier possibility for those seeking bad credit commercial mortgages is to look into non-status commercial mortgages.

Non-status mortgages often do not require a credit check or even necessarily proof of income but the loan is taken out against a commercial property.

This can be good for those with severely adverse credit histories and have explored all avenues but cannot seem to get a commercial mortgage but, they should be seen as a last resort.

The reason for this is not only that your property will be at risk should repayments not be met, but the required deposit and interests rates tend to be significantly higher.

The best route to take would be to explore other options you have first, and the most sensible way to do this would be to speak to an expert commercial mortgage adviser.

This way you can get more information about lenders whose eligibility requirements you can meet.

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Semi-Commercial Mortgages and Development Finance

There are also some who wish to refinance or purchase a property for combined residential and commercial use to drive a rental income.

An example of this would be a pub or bar with rentable rooms.

It is in every way just as possible to acquire a mortgage with bad credit for semi-commercial purposes and similar eligibility requirements, such as verifiable income, loan amount, type of business, etc, still stand.

When it comes to undertaking a building project, on the other hand, development finance is slightly different as a lot more information such as:

• Planning Permission.
• Material Costs.
• Contractor Information.
• Duration of the Project.
• Associated Building Regulations.
• Gross Development.
• Exit Strategy.

Development finance deals are still available for those with bad credit and looking for a commercial loan but usually, there will need to be valid reasons for the adverse credit history which can help satisfy the lender’s concerns.

Want a mortgage for a rental property? They work slightly differently to regular residential mortgages, learn all about them in our buy to let mortgages with bad credit.

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How to Find a Bad Credit Commercial Mortgage

Lenders with low-risk thresholds are quite difficult to find if you have an adverse credit history, particularly mainstream lenders that you would find on the high street.

Finding a lender that you will likely fit the eligibility requirements for is not the easiest thing to do on your own.

Our expert mortgage advisors are here to help you find a lender which you can secure a good deal from.

Deals available will be based on your financial situation and so you’ll have a much easier time finding a loan which is best for you.

Give us a call on 03330 90 60 30 to speak to an advisor, or contact us for mortgage advice that’s personal to you and takes your credit history into account.

That way you’ll know where you stand in the commercial mortgage market and we can guide you on your route to securing a suitable loan.

It’s common to run into issues when applying for a mortgage, especially in recent years, where there has been significant economic turbulence, that has caused financial difficulties for many, increasing the likelihood of a bad credit score.

Moreover, the banking crisis made mortgage lenders introduce stricter lending criteria and there are various ways of buying a new home.

Shared Ownership is one of them.

Perhaps you have had to declare bankruptcy or missed debt repayments in the past making it a struggle to get onto the property ladder, in which case read on to discover your potential options.

There are many in a similar financial situation to you, preventing them from purchasing a property due to lenders being reluctant to provide mortgages to buyers with bad credit scores.

The reason is, it’s a too high risk for them! And they could potentially lose out.

What is the Shared Ownership Scheme?

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With the shared ownership scheme you can purchase a share of a property in the scenario where you can’t necessarily afford the initial deposit or a mortgage large enough to cover a whole property.

Generally, these shares are either 25%, 50% or 75% of the property.

The other share of the property would be held by a local housing association and this is the portion of the property that you would pay an amount of rent for to the housing association.

This may not seem like the most cost-effective method at first, but remember, this scheme also allows you to acquire a mortgage with bad credit.

Over time you can increase your share on the property from 25% to 50% and then to 75% to finally 100% ownership of the property.

This is the reason why it’s a terrific option for first-time buyers or those looking to get back on the property market after previously owning a property but are struggling because of their credit rating.

Who is Eligible for a Shared Ownership Mortgage? 

Those who can take advantage of this opportunity will meet one or more of the requirements listed below:

• First-time buyers.
• Previous property owners who no longer own a property and are unable to afford the mortgage for a full property.
• People who have an annual household income of less than £80,000 (£90,000 in London).
• Those who wish to move and already have a mortgage under the shared ownership scheme.

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Shared Ownership Mortgage with Bad Credit?

Even if you meet the criteria listed, it still may not be enough to meet the credit score requirements to get a mortgage.

Lenders can still see your credit history and determine that you are too high risk for a mortgage, particularly high street lenders.

This does, unfortunately, mean that having bad credit can still restrict the mortgage options that are available to you, giving you less choice when it comes to finding a lender.

There are lots of other lenders that may offer a mortgage for clients with previous bad credit.

However, with the easing of restrictions on the financial market over the past several years, there have been many more lenders available that cater to people with bad credit and are able to more freely negotiate a policy which is right for you.

You may find it easier to find a mortgage with bad credit than in the past if you have previously undergone rejection.

If you are struggling and worried about bad credit items on your record, the most sensible approach would be to have a conversation with a specialist mortgage broker.

They will be there to talk you through the process of finding a mortgage with bad credit, discuss your options and also recommend suitable lenders tailored to fit your circumstances. This will give you a clear and easier route to shared ownership than going it alone.

Note: Are you looking for commercial property but have a bad credit history? Bad credit commercial mortgages may be an option for you.

Shared Ownership Mortgage with Bad Credit Considerations 

What deposit do I need for a shared ownership mortgage? 

Whether or not you will be accepted for a mortgage will depend on your credit score but also it’s important to note that if you are accepted for a mortgage, the deposit can also be changed based on your credit score.

Usually, good credit will mean that only a 5-10% deposit is required at maximum, but this can vary between lenders. However, a bad credit score can see a deposit raise to up to 20% of the property value.

This can depend largely on recent bad items on your credit history, or more severe financial events in your credit history such as having declared bankruptcy, been served a CCJ or experienced a past property repossession.

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What interest will I pay with a shared ownership mortgage if I have bad credit? 

You may see quite significant increases in the interest on the mortgage loan, especially if the deposit being offered is no higher than what has been asked for by the lender.

This is an issue that would need to be discussed with a mortgage broker as the interest heavily depends on the amount that is being loaned, the amount in repayments and your credit score.

Credit Report Discrepancies

Don’t just rely on others to tell you that you have a bad credit history, it’s always smart to obtain a copy of your up to date credit report so that you are always in the know when it comes to your credit history.

When you go to speak to lenders, always bring a copy of the credit report with you so that when explaining anything in your credit history that comes into question, you have a point of reference and a clear understanding of where you stand.

You can obtain a copy of your credit report through credit reference providers such as Call Credit, Experian, Equifax and others.

Want a mortgage for a rental property? They work slightly differently to regular residential mortgages, learn all about them in our buy to let mortgages with bad credit.

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Is a Shared Ownership Mortgage the Right Choice?

Ultimately, the decision is yours to make.

Having a bad credit score due to previous financial events is not the ideal situation, but if you want to get into property ownership, or return to property ownership, then the truth is, a shared ownership mortgage is a viable option for many.

If you still have questions about your situation or shared ownership mortgages, then get in touch with us today to talk to a professional mortgage broker, who will help make your path to homeownership and help map out the journey, even if you have a bad credit history.

Of course, everyone wants to make sure that they are getting the best available interest rate when they take out a mortgage.

However, if you have bad credit you will most likely find that you are not eligible for the most competitive rates on the market.

Interest rates offered to bad credit customers are usually considerably higher than those provided to customers with an unblemished credit history.

This is merely down to the risk factor you pose to the lender.

All is not lost though as there are more lenders out there who can still get you a good deal on mortgages with bad credit.

Our aim is to help you understand how your credit history can affect how your mortgage is affected in terms of eligibility and rates depending on your current circumstances.

Hopefully, you will find the answers to any questions you may have below.

How do lenders treat applications from bad credit customers?

Over the last few years, there has been an increase in the number of lenders entering the mortgage market with a lot more willing to take a more flexible approach to applications from those with bad credit.

More providers now than ever are approving mortgages for customers with a less than perfect credit history.

Obviously, those with minor credit flaws will be more likely to qualify for the better interest rates whereas those with more severe credit issues will face rates at the higher end of the scale.

The market sector has changed insignificantly in the last 10 years and has now become more competitive for bad credit customers.

You must ensure that you are using a specialist advisor in order to get the best deal. Contact one of our expert advisors who are on hand to help you today.

Do lenders have different criteria?

Most lenders don’t make their criteria public knowledge, so it often feels like stepping into the unknown when applying for a mortgage when there are so many providers in the mortgage market.

Still, there is a wide range of professional and specialist brokers available to help.

It is our job to make the process as simple as possible by pairing you with a specialist lender who will make you the best offer based on your circumstances.

Note: Are you looking for commercial property but have a bad credit history? Bad credit commercial mortgages may be an option for you.

How different credit issues impact the rates you may be offered

Whilst some credit issues weigh heavier on your credit report than others, it is worth mentioning here that the type of credit issue you have experienced may determine the interest rates that are available to you, if your application is even successful that is.

Bankruptcy, for example, has a bigger impact than say a missed or late payment but all these things are carefully considered by the lender when reviewing your mortgage application.

Credit issues can vary from arrears to CCJs and right up to the more serious factors such as bankruptcy and repossession.

Although you may still be able to get a mortgage with a CCJ or default.

Don’t be put off if you have one or more of these marks on your credit file as there are specialist providers out there that may still offer you a favourable rate.

Obviously, the more adverse issues that appear on your credit file, the less chance you have of securing a lower rate on your mortgage. Some lenders may look less favourably on your application if you have multiple adverse issues on file.

How does the upturn in the market affect bad credit mortgage rates?

If you look at the current mortgage rates online, it is clear to see that business is booming and lenders are feeling more confident.

This has had an influence on the bad credit mortgage sector but in a positive way.  If you look at the rates from 10 years ago on a bad credit mortgage, you will see that the market now is much more competitive.

This enables borrowers with a less than perfect credit history to still apply for and obtain a mortgage, whilst not paying unreasonably high rates.

If your credit issues were minor, then you may even be in a position to obtain a mortgage using similar providers and having access to similar mortgage products than those with a clean slate.

Does the LTV (loan to value) have an impact on mortgage rates if I have bad credit?

Loan to value ratio is basically the size of your mortgage balanced against the value of the property you want to purchase.

This term is often explained as a percentage. For example: If your mortgage was £100,00 against a £125,000 house or property then the LTV ratio is 80%. The remaining £25,000 is made up by the deposit.

Depending on your circumstances, the LTV is changeable. In order to offset some of the risk bad credit customers pose to the lender, they may ask for a larger deposit.

If your credit history has minor issues recorded then you may find that you won’t need a larger deposit whereas if your credit history shows more severe issues such as CCJs and Bankruptcy then the lender may require you to stump up a higher deposit.

A more favourable view is taken to those customers who save a higher deposit, and this is quite simply down to the fact that you pose less of a risk to the lender.

Essentially, the more deposit you have, the better your position in the mortgage market and you should find that you will likely have more favourable mortgage rates available to you as a bad credit customer.

Make an enquiry with one of our specialist advisors today to discuss the options available to you.

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Can I get a cheap mortgage with a poor credit history?

No two lenders are the same and each one has different criteria which must be met before they will consider or accept your mortgage application when you have a poor credit history.

If the lender deems that you have scored well on your affordability check then chances are you may be eligible for better rates.

Does the date the adverse credit was recorded affect the rates that are available to me?

Quite often, the mortgage rates available to you are calculated based on how long your credit issues were recorded.

It is important to note that you can obtain good rates on your mortgage if the credit issue no longer appears on your credit report (older than 6 years).

High street lenders may be quick to turn down your application from the outset if you have a poor credit history of a more serious nature e.g. Bankruptcy.

However, some will make exceptions depending on the length of time the adverse issue has been on your report.

It is difficult to determine at which point in your credit journey that you will qualify for the best interest rates.

Our specialist advisors are on hand to work with you and connect you to the best mortgage providers on the market, with your circumstance in mind.

My credit issues are still outstanding. Does this matter?

Yes. Most lenders only consider lower mortgage rates for borrowers whose adverse credit appears as settled on their credit file.

Some lenders may expect you to wait until your credit issues have been resolved before you can proceed with your mortgage application if you want to be considered for lower rates.

As well as impacting the rates available to you, unsettled credit issues can also affect the amount you can borrow for a mortgage.

Lenders will carry out affordability tests to ensure that you can afford the repayments on any mortgage that you are considered for.

The outcome of these measures will determine how much you can apply for.

In summary, the following will likely be considered when your mortgage rates are being decided upon:

• Interest Rates available.
• Amount of credit issues you have recorded on your file.
• How long ago the credit issues were recorded.
• If the credit issues have been settled.
• The types of credit issues that were recorded on your file e.g. Bankruptcy, CCJ, defaults.
• The number of lenders available based on your current circumstances.

The key to finding the best rates available to you based on your circumstances is talking to a specialist advisor.

If you have a bad credit history, you are best speaking to an advisor whose speciality is bad credit mortgages.

Many high street lenders will turn bad credit customers away from the onset or even offer them ridiculously high mortgage rates to offset the risk they pose to the lender.

Our advisors will not turn you away. Our aim is to connect you with the best mortgage providers in the market whilst getting you the best deal available.

We will work with you to ensure that your circumstances and specific needs are catered for in the application process.

We can also help advise you on buy to let mortgages if you have poor credit.

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Getting a mortgage after an IVA can sometimes be more difficult to obtain than a regular mortgage application, however not impossible. Find out how an IVA can impact your chances of getting a mortgage and what you can do to get a mortgage after an IVA.

What is an IVA?

IVA stands for an Individual Voluntary Agreement. It is a legally binding agreement between you and the lender to pay back any debts over a period of time.  Although an IVA is considered a form on insolvency, it is worth noting that it is not the same as bankruptcy.  In fact, an IVA is an alternative to bankruptcy. The length of an IVA varies but can often last up to 6 years.

How does the repayment plan work?

If you run into difficulty and are having trouble paying back your debts, then an IVA can be applied. An insolvency practitioner will manage the entire process for you. They will have to examine your current income and expenditure in order to work out your affordability.  This includes all the details surrounding your assets, creditors and current debts.

A repayment plan will then be proposed to your lender and if accepted, interest will be frozen on the money that you owe and quite often your monthly repayments are lowered to a level within your means until the debt is settled.  During this time, your monthly repayments are paid to the insolvency practitioner who will, in turn, pay your creditors for you.

Can I get a mortgage after an IVA?

As your credit history is a financial record of your credit behaviours over the past 6 years, if you have an IVA, it will be included.

As with any loan, lenders will check your credit history to ensure that if granted a mortgage, you can keep up with the repayments. However, if you have a current IVA and are still making repayments, you may find it more difficult to obtain credit until the IVA is listed on your credit file as settled.

Will the IVA be removed from my credit history when it has been settled?

Just like other credit issues, IVAs will remain on your credit file for 6 years. With that being said, once your debts have been repaid inside the agreed timeframe, you should receive a certificate of completion from your insolvency practitioner. This certificate proves that your IVA has been settled and it should now appear on your credit file as ‘satisfied’. If your credit file has not been updated accordingly then it is worth contacting the appropriate credit reference agencies to make an amendment. If there is any remaining debt once the agreed timeframe has passed, that debt is usually written off. Ideally, you should start afresh and try to rebuild your credit rating.

How to get a mortgage after an IVA

It is possible to get a mortgage after an IVA, but you may find it difficult. The outcome is very much dependant on your circumstances as each application is tested individually and there is no ‘one solution fits all’.

An IVA may hinder your chances of obtaining a mortgage as it is often a deterrent to lenders but there are qualified debt specialists often referred to as insolvency practitioners, on hand available to help you.

You may find it especially difficult if your IVA is still active. Lenders nowadays approach bad credit with caution as it is seen as high risk but there are specialist providers in the mortgage market that will accept mortgage applications after an IVA.

If you are unsure as to whether or not you may be eligible for a mortgage, please contact one of our expert mortgage advisers to discuss your options using the button below.

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Will my IVA affect the mortgage rates on offer to me?

Be prepared to pay higher mortgage rates after an IVA. It is likely that you won’t be accepted for the mortgage rates at the lower end of the scale. However, depending on your circumstances, some lenders may still be in a position to offer you a competitive rate.

Can I do anything to better my chances of getting a mortgage after an IVA?

It is not easy to get a mortgage after an IVA. In fact, many high street lenders tend to refuse bad credit mortgages from the outset.

Although there are specialist lenders available, do not be fooled into thinking that obtaining a mortgage from a specialist lender is guaranteed as this is not always the case.

The problems that you will encounter will be a result of the IVA appearing on your credit record. Your credit report is most likely the first thing that a lender will look at during its evaluation. Because of your IVA, lenders may see you as a high-risk borrower.

Note: Are you looking for commercial property but have a bad credit history? Bad credit commercial mortgages may be an option for you.

Will I need a bigger deposit for a mortgage?

As you will likely be subject to higher mortgage rates after an IVA, you can expect to pay a greater deposit also. This will depend on when your IVA was settled. If the IVA was only settled in the last 2-3 years, it will be visible on your credit file and as a result, the lender may expect you to pay a larger deposit to mitigate the risk of default, as well as offer mortgages with higher interest rates.

Benefits of an IVA

1. An IVA allows you to consolidate your debts into one monthly affordable repayment
2. Interest is frozen on your unsecured debts
3. Any remaining debt at the end of the IVA term is written off
4. With an IVA you retain more control over your assets than you would if you filed for bankruptcy
5. You will be debt-free within the agreed timeframe
6. You get to keep your home although re-mortgaging may be necessary

Mortgage After IVA Key Points to Remember:

• Obtaining a mortgage after an IVA is possible but depends on your circumstances
• Choosing the correct specialist lender is essential
• You may find it easier to get a mortgage if your IVA has been settled
• Expect to pay higher mortgage rates and front a larger deposit after an IVA
• Always choose a broker that specialises in this field of mortgage after IVAs
• If you do not keep up the repayments on your IVA, the insolvency practitioner can cancel your IVA and make you bankrupt
• Help is always available. Contact our expert mortgage advisors today.

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Whilst the thought of having a bad credit mortgage can be unnerving for many, it is important to consider the amount of deposit you will need before you apply, otherwise, your mortgage application may be declined.

If you have adverse credit, then be prepared to put down a more substantial deposit in order to secure your mortgage.

The positive factor to take away from this is that the more money you have to put down as a deposit, the better access you will have to things like mortgage rates.

Luckily, there are plenty of specialist lenders in the mortgage market that will lend to customers with a less-than-perfect credit history.

Can I get a bad credit mortgage with no deposit?

Obtaining a mortgage without a deposit can prove quite difficult in normal circumstances.

In recent years, mortgage lenders have revised their lending criteria by way of protecting themselves from high-risk borrowing.

Nowadays, lenders look at many factors when considering the amount of deposit, you will need to put down.

These factors include:

• How long ago the debt was accrued?
• How much debt was accumulated?
• Whether the debt has been satisfied or settled?
• Your current income/expenditure.

If you don’t have a deposit and have bad credit, then you will find it very difficult to obtain a mortgage.

How will my credit score affect the amount of deposit I will need?

The first thing lenders usually look at in any mortgage application is the prospective borrower’s credit history.

This is used to determine your ability to make your monthly repayments on time and in full.  Quite often, people with bad credit are considered a risk to lenders.

However, there are providers in the market who specialise in mortgages with bad credit.

It is worth noting that if you are rejected for a mortgage, this may have a detrimental effect on your credit score, so it is recommended that you get the best advice before you apply.

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What types of bad credit are considered when applying for a mortgage?

Lenders will look at your credit file and consider the following as bad credit:

• History of late payments on previous or current debt.
• Missed payments on secured credit (mortgages).
• Defaulted payments.
• IVA’s (can you get a mortgage with an IVA?)
• CCJ’s (can you get a mortgage with a CCJ?)
• Bankruptcy (can you get a mortgage with bankruptcy?)
• Repossession (can you get a mortgage after a repossession?)
• Debt Management Schemes.

Realistically, lenders aim to offset the risk to themselves when considering applicants for a bad credit mortgage.

A large deposit is seen as a positive in the application process and may open more options to you than if you had a low or zero deposit.

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There are lenders in the market however that do specialise in bad credit mortgages with lower deposits, but you can expect to pay much higher interest rates for that type of mortgage.

I have a substantial deposit already. Can I still get a mortgage with bad credit?

Put quite simply, the more deposit you have, the less mortgage you will need.

Prospective customers who approach the lender with a large deposit to put down on a bad credit mortgage are seen as less risky.

This is due to the fact that you will require a smaller mortgage.

The good news for the borrower is that if you pay a larger deposit, then you will have a higher equity in your property and your mortgage will likely be more affordable.

If you have a large deposit and bad credit, make an enquiry to one of our expert advisors who can help you locate a specialist lender.

Note: Are you looking for commercial property but have a bad credit history? Bad credit commercial mortgages may be an option for you.

Related reading? 

• Repayments on £80,000 mortgage. 
• Interest-only mortgages.
• Zero deposit mortgage.
• The first mortgage explained.
• What stops you getting a mortgage in the UK?

My partner has bad credit but mine is good. Does this affect the application?

Whether you apply for a mortgage as an individual or as part of a couple, the lender will look at the credit history/scores of all persons named on the mortgage application.

On one hand, the benefit of two applicants is that two incomes will be considered, meaning that you may be eligible for a bigger mortgage but in contrast, one applicant’s bad credit score can have a negative impact and lower the chances of your application being successful.

If your partner has bad credit you may opt to apply solely in your name if the lender allows.

That way your partner and their financial records will not be taken into consideration during the application process.

If you are applying solely it is worth noting that depending on your income, you may not be eligible for a mortgage on your own.

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How can I save for a deposit for a bad credit mortgage?

First things first, it is never too early to start saving for your deposit. In fact, the sooner the better.

We have compiled a list of helpful tips that can increase your chances of obtaining a bad credit mortgage by saving for a deposit.

1. Get an idea of the amount of deposit you will need. This will give you the goal to work towards first and foremost.

2. Organise your finances. A great starting point when trying to save some money is taking a look at your overall current financial position in the form of a personal budget. Make note of all your monthly outgoings and set that against your income. From here you can see where you need to make cutbacks, whether it be from unnecessary spending or just simply switching utility providers to make an extra saving. You will quickly learn just how much you can afford to save towards your deposit each month.

3. Be realistic. Make sure that you allow enough money to cover the basic cost of living e.g. food, water, heating etc before you start to make cutbacks. The length of time it takes you to save will be dependent on how much you can afford to set aside. Be realistic about this figure and don’t be tempted to cut corners on the basics.

4. Open a savings account. Once you start saving money, you will need somewhere to store it safely. A savings account is the best option. Money can easily be transferred between current accounts and savings accounts in the form of standing orders. Depending on the type of savings account you go for, you can gain interest on the money deposited into your account. Shop around for the best interest deal so you can capitalise on your savings. There are many saving accounts available on the market, but you want to ensure you get the most out of your money so shop around using price comparison sites before settling on one.

5. Consider a help to buy ISA. The UK government will help you by topping up your savings to put towards a deposit on a house. It can certainly give you a push up the ladder, but you need to be absolutely clear on the terms and conditions of the account before you apply.

Our experts are on hand to help you with any questions you might have surrounding deposits and bad credit mortgages. Contact one of our expert advisors today to learn more.

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Even if your property has been repossessed, you can still get a poor credit mortgage.

It’s all down to knowing where to look and making sure you meet the conditions.

People often make the mistake of thinking that obtaining a mortgage after repossession is impossible.

Whilst it is true that some high street lenders will frequently decline mortgage applications that show evidence of adverse credit, it is important to note that not all lenders are the same.

The key is knowing which lenders to apply to, meet those lenders’ criteria, and maintain good credit conduct after the repossession.

In short, if you have had a home repossessed in the past that doesn’t mean you cannot obtain a mortgage in the future.

You simply need to look at speciality lenders based on your circumstances and show that you can meet the criteria in terms of deposit and affordability – that’s what our expert mortgage advisors are for.

Can I get a mortgage after a repossession?

Most lenders consider the following when reviewing your mortgage application:

Date of Repossession

Probably the first and most important factor that lenders consider before your application is the date of your repossession.

The more time that has passed since your repossession, the more likely lenders are to consider offering you a mortgage. I

If your property has been repossessed within the last 3 years for example, then you will find it very difficult to get a mortgage without making a substantial deposit.

If the repossession was over 3 years ago, you may be able to apply for a mortgage up to 85%  loan-to-value (LTV) whereas if your repossession was over 6 years ago, you may be able to apply for a mortgage up to 95% LTV.

It’s pretty simple: the more recent the repossession, the more deposit you will need.

What interest rates will I be eligible for after a repossession?

The time elapsed since the repossession also has a significant impact on the rate at which you can acquire a mortgage.

If the repossession occurred in the last 3 years, the rate will be higher.

There is more chance of being offered a competitive rate if the repossession occurred over 3 years ago.

However, for repossessions that occurred over 4 years ago, better rates may be available offered.

These rates will often be comparable to those of the market leaders.

It is worth noting that the amount of deposit you have available will impact rates, as will other credit behaviours.

Repossessing mortgage lender

 It is quite common for your mortgage application to be affected by the lender who repossessed the property.

If your property was repossessed by a lender belonging to a financial group or institution, then it is more likely that your mortgage will be rejected if you apply to one of the companies within that financial group.

It is important that you do your homework before seeking out a lender. It is vital that you choose a lender that is most appropriate for your mortgage needs.

For example, if you have a poor credit profile, then it may be best to seek out a lender that specialises in obtaining mortgages for those with an unbalanced credit history.

Our expert mortgage advisors are on hand to do the hard work for you and find you the best deal available on the market.

 Reason for Repossession

The reason for repossession ranks high on the checklist of many lenders as they will take into consideration the reason for your repossession. This is all part of the application process.

If you have a genuine reason for repossession, i.e. if you were the victim of fraudulent activity or other factors beyond your control, then many lenders will relinquish these factors in order to offer you the best deal available.

It is important to investigate this before applying and attempt to gain some understanding of which lenders operate this policy.

Size and Cost of Repossession

Lenders will explore the amount of capital involved in the repossession. If this figure is high, then it can have an adverse impact on your mortgage application.

For example, if the repossession runs into the millions, or if the repossession was taken against multiple mortgages, it could be harder and more costly for you to obtain a mortgage.

In a nutshell, the lower the amount of money involved in the repossession, the more likely lenders are to readily accept your application and offer you a more competitive rate.

Please note that this is based solely on our vast experience working with all types of lenders and that every application is different. The success of your application coupled with the mortgage rates offered will highly depend on the quality of your application.

Want a mortgage for a rental property? They work slightly differently to regular residential mortgages, learn all about them in our buy to let mortgages with bad credit.

So, in summary, lenders will usually assess your eligibility for a mortgage after repossession based on:

• Your current financial position.
• The time elapsed since the repossession.
• Your credit profile since the repossession.

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What if I have a poor credit history?

Don’t be put off applying for a mortgage if you have a less than colourful credit history. There are plenty of lenders out there who can help.

We specialise in poor credit applications but please be aware that if you’ve had past or present blemishes on your credit file after your repossession, then you may find it difficult to secure a good rate.

The more cracks you have on your credit file, the higher rates you’ll be offered.

If there are other credit issues on your credit file such as arrears, defaults, late payments, bankruptcy or CCJ it can often make a lender question your creditworthiness, especially if these have occurred since the repossession.

This quite often indicates that you have not fully recovered financially from the repossession and can have a detrimental impact on the number of lenders likely accept your application.

Note: Are you looking for commercial property but have a bad credit history? Bad credit commercial mortgages may be an option for you.

Credit behaviour since the repossession

Lenders want to lend their money to customers who have proved that they can recover from an unstable financial past and have repaired their bad credit.

Those who can show that they are less likely to default on another mortgage are more attractive to lenders.

Make sure you keep up to date with payments for unsecured debts (such as credit cards, loans etc.) so that lenders can see that you’re able to keep up with credit commitments.

 Affordability assessment

In order to obtain another mortgage after repossession, you will be subject to the same eligibility criteria as any other mortgage application.

You will need to supply significant evidence of affordability to the lender. As a customer with a past repossession, you are more likely to be under heavier scrutiny though.

The key is to provide enough evidence to prove to the lender that you are at low risk of defaulting on future mortgage payments or running into similar trouble as in the past.

Looking for a commercial mortgage with bad credit? You may be interested in the possibility of shared ownership.

 Legacy Payments

 In cases where the money is still owed to a lender after a repossession, you will often find that the list of lenders available to you will be significantly lower than if you had no outstanding financial obligations to the previous lender.

This can also have an adverse effect on the amount of money you will need for a deposit. In brief, the more money owed after repossession will have a greater impact on the success of your application

Key points to remember:

• Not all lenders are the same.
• The date of your repossession will determine the interest rates available to you and impact the amount of deposit you will need to secure a mortgage.
• The more evidence you can supply to prove your affordability and credit stability, the more chance you have of obtaining a better deal.
• Contact us today to speak to our mortgage experts.

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