So, you’ve got a bad credit record. Perhaps you’ve missed a few credit card payments, have had a County Court Judgment awarded against you or have previously been made bankrupt – but this doesn’t necessarily mean that you can’t get a mortgage.
If you need help at any step of the way and would prefer to speak to someone call our mortgage service which is provided by Seico Mortgages: 0800 840 6500
Interest rates on bad credit mortgages are higher than standard mortgages and you will probably need a larger deposit, but there are still options available.
What are bad credit mortgages?
Bad credit mortgages can help people with a poor credit rating get a mortgage; they are also known as sub-prime mortgages and adverse credit mortgages.
Bad credit mortgages are the same as standard mortgages, but they are available to people who would fail a standard lender credit check.
Interest rates and charges tend to be higher as people with poor credit ratings are deemed to be a higher risk.
How do I know if I have bad credit?
You will probably have bad credit if:
- you’ve been declared bankrupt, or have had a debt management plan, IVA etc;
- you have missed credit card, loan or mortgage payments or if you’ve made late payments;
- you have County Court Judgements against you.
It is always a good idea to have a look at your credit report before you apply for any kind of mortgage – bad credit or not.
How do bad credit mortgages work?
Bad credit mortgages are the same as standard mortgages, but they have higher interest rates and charges.
You will also probably need a larger deposit of around 30% or more of the value of the property.
Many types of mortgage deals are available, for example, fixed, variable, and discounted rates.
After a few years of paying a bad credit mortgage on time it should ‘repair’ your credit rating sufficiently to be able to move to a standard mortgage at a lower rate.
Where can I get a bad credit mortgage?
Before looking for any mortgage it is a good idea to check what is on your credit reference agency file to see if you have any credit problems.
It’s essential that you compare the total cost of different mortgages, taking into account fees and charges too.
You should also avoid making lots of applications for credit, as these searches will affect your credit rating.
Using a price comparison site can help you get an idea of what different rates might be available to you, without having to spend hours online or on the phone.
How can I improve my credit rating?
- Make sure you’re on the electoral roll.
- Pay your bills on time and in full.
- Close any credit accounts you don’t use.
- Check your credit report regularly to make sure that all the information is correct. If you notice any errors, contact the relevant lender and ask for them to be corrected.