Adverse Credit

Here at Prospect Mortgage Services we want to help all our clients to find the very best mortgage deals. We understand that it can be difficult to find a lender willing to provide a mortgage if you have some form of history of poor credit. Our advisers, who are independent and work with lenders from the whole of the market, can help you to find the best lender who will potentially be willing to help you to meet your aims and objectives.

What can cause poor credit history?

A combination of factors contribute toward your overall credit rating, including:

  • Electoral roll information (If you are not registered to vote)
  • Previous court records (such as CCJs, IVAs, Bankruptcies)
  • Previous history of missed payments or defaults
  • Your history of applying for credit (e.g. little history or too much history of applying for credit cards or loans)
  • Your address history (e.g. being linked to several addreses due to moving around a lot).
  • Declined credit applications
  • The level of your debt and the amount that you are currently repaying
  • Payday loan information

You can take steps to repair your credit rating, which will make getting a mortgage easier (such as registering on the electoral roll), however, lenders will use your credit history in different ways. As such, our advisers can help you find the best mortgage depending on your individual circumstances.

How do you know if you have bad credit?

Often, the first real sign that borrowers have that they may have a poor credit rating is when they are declined by a high street lender after trying to apply for a mortgage.

This may be a surprise if you have not had a long period of a credit history (or no credit history at all), but for others it may be less of a shock, simply because they may be aware of missed payments or any court actions in the past. The best way to identify what might cause a poor credit history is to obtain a copy of your credit report.

How do you get your credit report?

Being able to obtain your own credit report has never been easier, and we would always strongly advise people to take a pro-active approach to this, especially when they are looking to get a mortgage and are concerned they may struggle to gain credit. Usually it is free to obtain your credit report and most lenders use one of the four following companies when assessing someone’s credit score:

  • Equifax
  • Experian
  • Noddle
  • Clear Score

Once you have a credit report one of our advisors will review this to determine any potential issues and in considering who might be the best lender for your current circumstances.

What Loan to Value can I get for a Bad Credit Mortgage?

The loan to value (LTV) is a common way for lenders to show how much of a mortgage you can obtain against the value of the property. This then enables you to consider the level of deposit you will need to buy a property.

For many with a history of poor or adverse credit a larger deposit will typically be required than the usual industry minimum. The average minimum requirement is 15% or a maximum of 85% loan to value but this will very much be dependent on the overall assessment of your individual circumstances and a higher LTV mortgage might be possible.

Example

Property price£150,000
LTV available85%
Minimum deposit required (@15%)£22,500
Maximum mortgage amount (@85%)£127,500

How much can I borrow if I have a poor credit rating?

Many lenders now approach the question of how much someone can borrow based on affordability. This will take into consideration your income(s) and in turn any outgoings (including your ongoing credit commitments). The lender may also work on a maximum income multiple. This can vary from lender to lender with these typically ranging from four times to potentially five times your income(s).

Example

Income 1: Mr Jones£22,000
Income 2: Mrs Jones£16,000
Income multiple from lender4 x income
Maximum mortgage amount£152,000*

*Other factors will also determine your maximum borrowing amount including a lenders affordability calculations

What else can I do to secure a mortgage?

The best thing you can do is help to show you are less of a risk to lenders. Having existing debts is not necessarily a bad thing, providing you are able to demonstrate your ability to continue to pay the monthly payments in the future.

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