Does the thought of applying for a mortgage make you downhearted because you have a low credit score?
Well, raise that head, turn the corners of your mouth up into a smile and read on.
Whilst a low credit score makes obtaining a mortgage more complicated – it is not impossible.
Poor credit history can occur from you having missed payments such as your phone bill and credit cards. Court judgements and bankruptcy affect your credit score still more. Lenders perceive that the you are a higher risk when your credit ratings is low – the lower the rating, the higher the risk and so they are less likely to approve your mortgage.
Some will accept you, however the lender will want to be compensated for the risk that they feel you pose. Your offers will be limited and your interest rates are likely to be higher than of those with good credit scores.
One of the main reasons it has become so tricky for a person with bad credit to be approved for a mortgage is because lending criteria has tightened up substantially since the credit crunch – where mortgage lending to people with low credit was widely blamed. Whilst low credit ratings are not viewed favourably, neither is having no credit rating at all. So take heart. Lenders like to be able to see that the borrower can handle credit. If you have a less-than-perfect credit history, how negatively it affects your application will depend on the scale of the issue. For example something that was a small blip a long time ago is likely to have less impact than a more significant problem yet to be fully rectified.
There are a number of things that you can do to improve your likelihood of acceptance:
Save a bigger deposit – this means you are borrowing less money from the lender – and therefore you become less of a risk.
Find a guarantor – if you have a family member who is willing to be named as a guarantor, many lenders will look favourably on this as their risk is minimised.
Fix your finances – postpone buying a home until you are in a stronger financial position. Build your credit rating back up, making yourself safer to lenders – this will also mean access to more competitive rates.
Speak to a financial advisor – they have a greater understanding of the mortgage market and experience of helping people in similar positions. They will be able to give you advice on the right product for your needs and how best to apply for it.
If you have a low credit score and considering buying a home, why not talk to us here at First Financial Solutions ? We can give you advice and find you the right mortgage for you at the best price. Click here to contact us or call us on: 01639 262222