What is a “bad credit history”?
If you’ve set your heart on a house and are turned down for a mortgage because of a bad credit history, it can feel like the end of the world. But one rejection needn’t be the end of your dream of home ownership. The key is to understand what it all means.
There are a number of reasons why your credit history might raise a red flag to lenders; for example, if you have a history of missed or late payments on a credit card, or have a County Court Judgment (CCJ) against you, or even that you have previously had a house repossessed.
Most high street lenders use a scoring system to assess the risk of you not paying them back on time (or at all), and while the odd late payment might not be such a big deal, a pattern of such behaviour, or having been made bankrupt (for example), could tip the scales against you. Alternatively, you might be accepted, but charged higher fees and/or a higher rate of interest, both to mitigate the perceived additional risk and because lenders know borrowers with a poor credit rating don’t have as many options as those with no problems.