Credit Problems

Are you struggling to get finance due to your poor credit history? Do you have CCJs, Defaults, Mortgage Arrears or have you had a property reposessed or been declared bankrupt?

As you will undoubtedly have heard, the market for mortgages where a poor credit history is present has been significantly tightened up in recent years. However, this is not to say that it is impossible to secure a mortgage – you just need to know where to look.

We understand the difficulties that people have endured over recent years and are very familier with lenders critera in this department. Many people can feel embarrassed to tell us about credit problems, but there really is no need – it’s far more common than you probably think and for a variety of reasons.

Please read through the useful information below and if you need any help please don’t hesitate to contact us on 01225 719043 or use the ‘Contact Us’ page and we will contact you to see if we can help.

 

WHAT IS A ‘SUB-PRIME’ MORTGAGE

‘Sub Prime’ or ‘Credit Impaired’ is simply the term used by lenders to catergorise a mortgage where there may be a poor credit history for one or both of the borrowers. The mortgage would be underwritten much along the same lines as ‘Prime’ mortgages but generally demand a larger deposit, such as 15% – 20% (see ‘First Time Buyers’ or ‘Moving House’). However, depending how severe the credit problems are you may be able to use a mainstream lender with a standard mortgage product.

 

DOES A SUB PRIME MORTGAGE COST MORE THAN A NORMAL MORTGAGE?

In short, Yes. Because the lender is taking a greater risk in lending money to a borrower that in their view may be less likely to pay them back. The interest rate and the mortgage fee’s may be higher than usual and in some instances a larger deposit can be required. Most of this does depend on the severity of the adverse credit history though.

 

HOW BAD CAN MY CREDIT BE?

Different lenders have their own catergories of ‘Sub Prime’, but they will largely fall into 2 or 3 different groups:

Near Prime / Almost Prime: This would be where the adverse credit is reasonably light. You could have a late payment in the last 12 months, but brought up to date as soon as you noticed. You may have some historic CCJ’s which have been settled a long time ago (4yrs+). Generally, mortgage arrears (current or historic) will not be acceptable in this catergory. If this sounds like your credit history then you may well be able to secure a regular mortgage.

Adverse / Medium Adverse: There may be some historic mortgage arrears, or small CCJ’s or defaults that are more than 2 years old and have not been satisfied. Also, discharged bankruptcy’s may fall into this catergory. If this sounds familiar then you may be able to secure a mortgage by putting in a larger (15-20%) deposit and paying a higher interest rate.

Heavy Adverse: The most serious of credit issues, such as current ongoing mortgage arrears or ongoing arrears on loans & credit cards, undischarged bankruptcy’s or repossession orders and larger CCJ’s / IVA’s. If you fall into this category it will be unlikely we can immediately arrange a mortgage for you but we will be able to advise you on some ways of helping to improve your credit score.

 

I’VE HEARD THAT IF I KEEP APPLYING FOR MORTGAGES, IT CAN MAKE MY CREDIT SCORE EVEN WORSE?

There is a definite element of truth to this. The more credit scores you have in a short space of time the more it can drag your credit score down. Simple. However, this point is often over exagerated by bank staff or mortgage advisors as it’s a very useful way of preventing you from talking to their competitors!

You should definitely be carefull of having unnecessary credit scores and especially if you think there may be a problem with your credit history, but this should not prevent you from exploring all the avenues available to you.

If you think you have a credit problem then be sure to make your advisor aware right at the outset and if possible obtain a copy of your credit report from Experian, Equifax or Noddle. This will give your advisor a far more detailed picture of your position and will enable them to approach the right lenders in the first place.

The overall cost for comparison is 8.7% APR for customers who may have their access to credit restricted.

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