How to get a mortgage with a low credit score
WHether you are a first time buyer, home mover or looking to remortgage for a better deal, getting a new mortgage when you have a low credit score can be worrying.
Mainstream mortgage lenders may be less willing to lend to people who have a poor credit history (or those with no credit history at all), but it doesn’t mean it's impossible to find a lender and mortgage to suit your circumstances.
Discover what the credit reference agencies know about you
The first thing you should do is find out exactly where you stand by requesting a copy of your credit report from a credit reference agency. You may also want to check out our useful guide to improving your credit score.
There are three main credit reference agencies in the UK, and these hold information about any credit arrangements you have had in the prior six years, including amounts borrowed and – most importantly – whether the credit agreement was adhered to.
If you missed payments and fell into arrears, or exceeded your overdraft or credit card limit, this will be recorded on your credit record and adversely affect your overall credit score.
On viewing their credit rating, some people are surprised at the types of credit transactions reported. In addition to the obvious overdrafts, credit and store cards, personal loans and mortgages, you may also find that late payments to a mobile phone company or electricity supplier are recorded.
By getting a copy of your credit report before you actually apply for a mortgage, you can find out about these sorts of issues in advance and be prepared for the impact it may have on your mortgage application.
Getting your credit report from the credit reference agencies is easy. There’s a statutory fee of £2 per report. However you can often get the report for free by signing up for a free trial of their services. The three main agencies are: Experian Credit Expert, Equifax and Call Credit.
Many lenders only check with one of the agencies before making a decision about your mortgage application so you want to ensure they all have the same, correct information on file about you.
What to check for in your credit reports
Check each report thoroughly to determine whether everything contained in it is entirely accurate. Mistakes are uncommon, but they do happen. It's always possible your adverse credit rating may in fact have resulted from a reporting error on the part of one of your creditors, rather than due to any fault of yours.
Take time to check not only loan amounts and payment records, but also your date of birth, address, and any “financial associations” listed. Your file should only link you financially to people with whom you have held a joint account, loan or mortgage. If someone else is listed such as a former flat mate in a rented property, seek redress.
Dispute Errors Or Inaccuracies
Incorrect information can be disputed with the credit company that reported it. For example, if a bank’s own error caused payments not to be collected. Another option is to contact the credit reference agency directly to arrange for a notice of correction to be added to your credit record. This doesn’t delete the disputed record, but adds an explanatory note to the report.
This can significantly improve your creditworthiness in the eyes of lenders.
Your next Step...
Once you are satisfied that the information on your credit report is correct, it’s time to start looking for a mortgage. If you have a low credit score, our advisors may be able to help. They source mortgages for clients with bad credit on a daily basis anc can often provide access to exclusive mortgages from sympathetic lenders who specialise in poor credit applications.
Simply complete our 60 second application form here and receive a free no-obligation quote from one of our experienced advisors.Get A Quote >>