Bad Credit Mortgages

You can get a copy of your credit report from the three main UK credit reference agencies. These are Experian, Equifax, and TransUnion.

You can get your report online from each agency by providing some personal information.

Each agency scores it in a different way, so it’s advisable to get a copy from all three.

Getting your credit report should be a simple process. Reports are usually available for immediate viewing, or after a short delay if additional security checks are required.  For those that do not have access to online facilities, reports can still be requested in the post. See our Checkmyfile page for an in-depth guide.

• If you’re not on the electoral roll, make sure to register.
• Request copies of your credit report from the three main UK agencies.
• Close any accounts you don’t use, such as store or credit cards.

• When you get your credit reports, check that the information they contain is accurate. If anything is wrong, get in touch to get it corrected.
• Make a list of all your sources of income and outgoings, so you understand how money flows in and out of your household. Use this to work out a realistic budget and stick to it.
• Begin to settle any debts you may have or consolidate them into a manageable loan.

• If you’re struggling with your budget, look at the figures again. Maybe you haven’t allocated enough for groceries (for example), or you forgot about something.
• Open a savings account and put something into it every month – no matter how small a sum. When you have a little bit extra, such as your ‘free’ council tax months, put that money into your savings account.

Late payments

Mortgage Arrears

Defaults

CCJs

Debt Management Plans

IVAs

Bankruptcy

Repossessions

Due to the high bad credit mortgage rates on these products, eventually, you would want to move to a mainstream lender. With the correct planning, this can be achieved.

To do so, you will need to continually improve your credit rating. However, you cannot solely rely on repaying your mortgage to improve this. Make sure you keep up with things such as credit card payments and phone bills.

Lenders focus mostly on the last three years of your history. Nevertheless, all information on your credit file is considered. The details on your file are retained for seven years. The more severe the event, the more relevant the time scale of when it occurred.

Sometimes, lenders will not agree on a mortgage application regardless of when an event happened or if it still shows on your credit file. Events such as repossessions are one example.

We strongly recommend you try to have any records that are registered in error removed. Try to do this before you apply for a mortgage where possible.

There are a range of documents a lender will require when you apply for a bad credit mortgage. Below we have listed the most common documents required by lenders:

• Identification – usually a driving licence or passport to show who you are.
• Bank statements – recent bank statements are required in order to help a lender assess your income and expenses. They can also be used as proof of deposit.
• Payslips – these will show a lender your income and help them determine how much you can borrow.
• Proof of identification – this will usually need to be something like a utility bill or council tax bill that is dated within the past 3 months. Remember the address of the bill will need to match the one on your licence or passport.

If you are self-employed then you will likely need the following as well:

• SA302 tax calculation – this provides evidence of your earnings, which are directly taken from HMRC^[1].
• Business accounts – lenders will require your business accounts to be prepared by a chartered accountant.
• Any previous, ongoing or future contracts – contracts can be used to prove that you have work available, giving lenders peace of mind that you have a steady source of income.

Most mortgage brokers for bad credit will likely discuss the following with you:

• What the events in question are – i.e., the amounts and time/date of any issues on your credit file.
• Your loan-to-value ratio (LTV) – the lower this is, the better chances of success you have, and possibly an improved interest rate. The amount of deposit or equity you possess will determine this.
• Your income and expenditure – different lenders accept different forms of income. For example, some will accept benefits whereas others won’t. It will also vary on how one lender assesses self-employed income to another.
• Whether the property is of standard construction – not all properties are seen as suitable for a mortgage. Some bad credit lenders may decline properties, including concrete, timber-framed, or high-rise flats, among others.

Not all brokers charge, however, typically a specialist bad credit mortgage broker will charge for their services. This can be a flat fee, a percentage of the loan amount, or on occasion, a combination of the two. A good bad credit mortgage broker in the UK can be the difference between you being accepted or declined. If you want to know more about our costs, read our regulatory statement or get in touch.