If you have a history of financial problems, getting a mortgage might seem daunting. But don’t fret, it’s not out of the question. Specialist lenders can help people with adverse credit. This guide explains what adverse credit is, how it affects your chances of getting a mortgage, and how to improve your chances.

What is adverse credit and how does it affect your mortgage chances?

Adverse credit means you have a history of money problems. This can include missed payments, county court judgments (CCJs), or bankruptcies. These issues lower your credit score, making it harder to get a mortgage.

But don’t be discouraged – some lenders are happy to work with people who have adverse credit. They understand that everyone’s financial situation is different, and they look at more than just your credit score.

Although adverse credit may make it harder to get a mortgage, there are still options available. Specialist lenders are more likely to approve your application, even if you have a bad credit history.

Can you get a mortgage with adverse credit?

Yes, it’s possible! Specialist mortgage lenders offer products that are made for people with poor credit histories. They will look at your income, the size of your deposit, and the value of your home when deciding whether to approve your mortgage.

While it might be harder to get approved, you can still get a mortgage if you’re dealing with adverse credit. However, be prepared for higher interest rates or stricter terms. This means you may end up paying more in the long run.

What types of adverse credit do lenders accept?

Different types of adverse credit affect your mortgage chances in different ways. Lenders may be more lenient with some types of credit issues and less so with others. Here are some common types of adverse credit that lenders may accept:

  • Missed payments: If you’ve missed a payment in the past, but it’s been a while and you’ve improved since then, some lenders may still approve your application.
  • Defaults: If you’ve had a default on your credit, this may be accepted if you’ve since managed your finances responsibly. Some lenders may be able to offer a mortgage if you haven’t had a default in the last 6 months.
  • County Court Judgments (CCJs): Having a CCJ on your credit report can make things harder, but some lenders may still approve your application if you’ve paid the CCJ off or if it’s older than a certain time.
  • Bankruptcy: If you’ve been declared bankrupt, it’s harder to get a mortgage. However, some lenders will still consider your application if you’ve been discharged from bankruptcy for a few years.

Adverse credit vs low credit

Adverse credit and low credit are often confused, but they’re different. Adverse credit refers to having a history of financial problems, such as missed payments or defaults. Low credit, on the other hand, means you have a low credit score, possibly due to a lack of credit history or high usage of credit.

Lenders may be more lenient with low credit than adverse credit. Low credit usually means there’s not enough information for lenders to judge your financial behaviour. In contrast, adverse credit is a red flag for lenders, but they may still be willing to work with you depending on the type and age of the adverse credit.

Should you use a mortgage broker for an adverse credit mortgage?

Yes, using a mortgage broker is a smart idea if you have adverse credit. A broker can help you find the best lenders who are willing to work with people who have a poor credit history. They know which lenders specialise in adverse credit mortgages and can save you time by finding the right options.

A broker can also help you understand the process and guide you through the application. They can negotiate on your behalf to secure the best possible deal and help you avoid mistakes that could affect your approval chances.

Final tips for securing a mortgage with bad credit

Here are some practical tips to help you improve your chances of getting a mortgage with bad credit:

  1. Save for a bigger deposit: A larger deposit shows lenders that you are committed to the mortgage. It can also help reduce the loan-to-value (LTV) ratio, which makes you less of a risk.
  2. Demonstrate a stable income: Lenders want to see that you have a reliable income to cover the mortgage repayments. If you’ve been self-employed or had irregular income, try providing your tax returns or other proof of income.
  3. Pay down existing debt: Reducing your existing debts will improve your debt-to-income ratio, making you a more attractive candidate for a mortgage.
  4. Use a broker: A mortgage broker can help you find the best lender for your situation. They can also advise you on how to improve your credit and prepare a stronger application.

Conclusion

Getting a mortgage with adverse credit is possible, but it may take a little more work. Specialist lenders are available, and they look at more than just your credit score when making lending decisions. By saving for a larger deposit, reducing your existing debt, and working with a broker, you can improve your chances of securing a mortgage.

If you’re ready to take the next step, speak with a mortgage broker who specialises in adverse credit mortgages. They can help guide you through the process and help you find the best mortgage deal. For more information on the causes of adverse credit and how to improve your chances, speak with a qualified mortgage broker for further guidance.