Although it can be a challenge to gain approval for a mortgage application if you have a bad credit rating, it’s not ‘Mission Impossible.’ If your mind is set on applying for a mortgage even with bad credit, it can be done with the right know-how and strategy. Here are the most important facts you need to know on getting mortgage approval even with bad credit.
What constitutes a ‘bad’ credit score?
Whilst there may be many different reasons why you can have a bad credit score or rating, there are some common causes. One obvious cause is missing loan, credit card, or mortgage repayments. Another cause for a bad credit score would be the declaration of bankruptcy, whilst another reason would be if you have a judgment from a County Court. But there’s also a simple, lesser-known reason for having a ‘bad’ credit score – that is if you have never had any credit and don’t have an existing credit history, so you don’t have a record of prompt repayments.
Nowadays, more lenders have become pickier and warier of people who apply for mortgages with a bad credit history or rating. But the good news is that you may still be able to get approval for a mortgage – if you are willing, that is, to pay a higher interest rate and advance a larger deposit than most. The main reason for this is because most lenders who are willing to lend to those with a bad credit score or rating will restrict the mortgage amount or the amount they will let you borrow. For instance, you may be able to get a mortgage that is capped at about 80% of the property’s value, but most lenders will be willing to cap mortgages only up to 60% of the property’s value.
How to know your credit rating
Before you take out an application for a mortgage, you should first know your credit rating. There are three major organisations where you can receive a credit report, and these are Experian, Equifax, and Callcredit. To get all the information you may want, you can get credit reports from all these three firms as they all have slightly different scoring.
If your credit rating or history is bad
If you have received your credit report/s and have a less-than-savoury credit rating, don’t worry just yet. You may still be able to improve on this. For example, if you don’t have a credit history, then get a credit card and make purchases (just make sure, though, that you pay off these purchases in full each month). Although this takes time to develop, it’s worth the effort if it means you pay a lower interest rate. For more financial and mortgage advice, you can always turn to independent firms such as Open Vision Finance to get invaluable help from a financial advisor Bristol.