How Does Credit History Impact a Mortgage Application?

No matter your circumstances, mortgage lenders will look at your credit history when you submit a mortgage application. The major reason for this is that they are assessing how “risky” it is to lend to you and essentially how likely it is that you will default on your payments.

That does not mean having a poor credit history will necessarily destroy all chance of you securing a mortgage or a remortgage but there is no doubt it can make the process more difficult. For example, most poor credit mortgage providers will have additional eligibility criteria for those with poor credit history.

Why do you have a poor credit score?

First things first, it is important to consider the types of events that may show up on your credit report, for instance, a missed bill payment or other financial arrears.

These negative “events” are what will show up on your report and what a lender will consider when assessing your application. The more you have, the more hesitant the mortgage provider will be to approve your application.

Often, the best way to determine your path to repairing your credit is to determine what caused it in the first place. No matter your credit history, it is still possible to secure a mortgage, you may just have more hurdles to overcome.

Often approaching a mortgage advisor that specialises in bad credit is a great place to start, since they have the experience of dealing with these often-complex applications.

Believe it or not, mortgages and remortgages are possible in all of these common “adverse credit” scenarios:

  • No credit history
  • Low credit score
  • Late payments or missed mortgage payments
  • County Court Judgments (CCJs)
  • Individual Voluntary Arrangements (IVAs)
  • Debt Management Schemes
  • Repossessions
  • Bankruptcy

What are the chances of getting a mortgage with bad credit?

If you have “blemishes” on your credit report, then you can still potentially be approved for a mortgage. It is important to bear in mind that different types of “blemishes” will be considered worse than others. For example, one late payment on a bill a long time ago is not likely to have a huge impact.

However, if you have continually missed repayments on a loan or mortgage, this will shine a poor light on your application, since lenders are more likely to see you as an individual with a history of not being able to maintain your financial commitments.

As previously mentioned, the good news is that there are mortgage lenders who specialise in lending to individuals with poor credit and some do not even use credit reports when assessing applications.

Negative Aspects of a Poor Credit Mortgage

As you may have guessed, there are some downsides to securing a mortgage with a poor credit history. Since the report is used by lenders to assess your financial trustworthiness, if it is poor, they will look for other means to close this gap.

This primarily involves paying a larger deposit, sometimes as much as 30%, and the interest rates on poor credit mortgages or remortgages are usually substantially higher than with a normal application.

Repair Your Credit Score  

If you discover you do have a bad credit record and want to apply for a mortgage or a remortgage, you will probably experience hurdles during the application journey. But if you make the effort and take the steps to repair your credit rating, many applicants find this helps.

How can you start repairing your credit history?

It is simpler than you probably guessed. You can start by asking for incorrect entries to be removed from your history report, pay off any remaining debts and ensure you are up to date with any repayments.

Some people even find taking out a credit card can help too, as it allows you to demonstrate your ability to take financial commitments seriously by making regular, on-time repayments.

Still, taking these extra measures might not satisfy conventional high street mortgage providers, as they usually have extremely precise criteria.

In these situations, many individuals with blemishes on their credit record have more success with specialist lenders that deal only with poor credit mortgage applications. Not only that but they can provide advice on credit repair and even help you access lenders offering the best interest rates.



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