Bad Credit & Mortgages – Whats the Score?

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By Prospect Mortgage Services
30/05/2023

If you’ve had financial difficulties in the past, you may have a poor credit rating. Defaults, missed payments, and late payments all add up to marks on your credit record, and this can cause lenders to worry when you apply for a loan, credit card or mortgage.

In the UK, bad credit will remain on your file for a minimum of six years. Sometimes, bad credit marks may be removed from your report within a specific timeframe if the debt is settled or was marked incorrectly on your file, but in most cases, you can expect any markers on your report to remain there for six years.

Do Different Types Of Debt Stay On File For Different Lengths Of Time?

Most types of debt remain on your file for six years. These include:

  • Late payments
  • CCJs (County Court Judgements)
  • Defaults
  • Debt relief orders
  • IVAs (Individual voluntary arrangements)
  • Bankruptcies

Every hard credit search carried out on your account will also be seen on your credit report. This means that every time you apply for credit, such as a credit card or loan, a footprint will appear on your file. This will remain for one year after the date of the search. Although prospective lenders can’t see outcomes of other application or searches they can see these search marks. This matters as if there are too many of them, they may think that you’re a credit risk as you may appear to be struggling to manage your finances or carrying out multiple applications.

Can I Get Credit If I Have A Poor Score?

It is more challenging to secure credit if you have a low credit score, but that doesn’t mean it’s impossible! Whether a lender will consider extending credit to you depends on the type of bad credit you’ve got, as well as how long ago the problem occurred and if it is now under control.

Some lenders offer manual underwriting, which allows you to support your application with documents to explain how the bad credit was incurred, a personal touch. This enables you to establish a strong case showing that you can be relied upon to repay your debts, especially if you only experienced financial problems due to an unusual reason such as unexpected redundancy or an unusual life event.

Can I Get A Mortgage If I Have Bad Credit?

Many people firmly believe that they’ll be rejected outright for a mortgage if they have a poor credit score. A quality mortgage advisor should tell you this isn’t always the case. It is true that some lenders will reject you, but there are specialist lenders who might not. Some specific lenders specialise in the poor credit market, and even mainstream lenders may lend to you if you have a large enough deposit to put down on your own home and a good explanation for any arrears. You can expect the interest rate on your mortgage to be higher, though, if a lender accepts your application.

Can I Improve My Credit Score?

There are several things you can do to improve your credit score in an ideal world. Some of these don’t fix your credit score instantly, so it’s best to prepare and start getting on it straight away:

  • Get a credit account and bank account.
  • Make sure you have household bills in your name, pay on time, in full.
  • Keep your credit usage rate under 30%.
  • Try to pay off as much of your credit card and loan balances as possible.
  • Pay more than the minimum payment on your credit card each month.
  • Make sure that you always make all your payments on time.
  • Register to vote.
  • Avoid closing any credit account that you’ve had for a long time.
  • Avoid taking out a payday loans.
  • Don’t make multiple credit applications.
  • Regularly check your credit score and correct any errors immediately.
  • Get rid of any adverse financial associations.

We can give you help and information about getting a mortgage with a poor score, so get in touch today at info@prospectmortgage.co.uk or by calling us on 01983 616666 .