Life isn’t perfect. Very few people are fortunate enough to breeze through life unburdened by some sort of financial glitch. Unfortunately, even a small credit blip can have a negative impact on your ability to get a mortgage, Right to Buy or otherwise, and that’s why it’s so important to find the right lender for you.
If you find that you can’t get a mortgage because of a poor credit score, it’s usually down to one of three reasons:
You can find out your credit score before applying for your mortgage via one of the three UK credit reference agencies: Experian, Equifax, or Callcredit. You have the legal right to see a copy of your credit report and this should help you to determine where your bad credit rating comes from, or if there are any administrative errors (such as an old address, for example), that need to be ironed out. To find out more about how to check your credit report, which is free, click here.
Contrary to popular belief, it is possible to get a mortgage with a less-than-perfect credit score. However, you’re going to have to put in extra legwork to convince the banks that you’re a worthy borrower.
Read on for some top tips to help you on your way to home ownership.
Some mortgage brokers specialise in getting people with poor credit ratings onto the property ladder. These consultants will go out on a limb to understand your circumstances, before scouring the market for lenders and mortgage deals that suit you.
There are some banks and building societies that strive to assess loan applications on an individual basis rather than through automatic testing systems. What this means is that, if your score comes out quite low or there are glitches in your history, they’ll try to understand exactly why these occurred. If they’re satisfied with your reasoning and present financial situation, then despite the rating, they may decide that you’re creditworthy and agree to lend the money anyway.
However, the cost of these deals tends to be somewhat higher than the average, as lenders need to cover any potential risk. Before you commit to anything, you will need to think carefully about whether a mortgage is actually right for you at this point in time.
Being on the electoral register goes some way to strengthen credit history because lenders use this to conduct certain checks in fraud prevention. Basically, it allows them to determine that you are who you say you are.
Getting onto the electoral roll is easy, just head over to the About My Vote website, enter your postcode to find your local council, complete the form and return it to your local electoral registration office.
First of all, let’s preface this section by saying that if you have current, unresolved problems on your credit file, you shouldn’t consider applying for more credit. However, if you’ve got a less-than-desirable or non-existent credit history and are in a strong enough financial position to turn it round, then there are ways to claw back some credibility – but these are not quick-fix solutions.
A credit builder pre-paid card works on the premise that a lender will ‘loan’ you an amount of money, usually in the region of £60. Over the course of 12 months, you will agree to pay back the amount borrowed (for example, £60 divided by 12 equals £5 per month), and providing you meet those repayments for the year, this will go on your record as 12 months of successful repayments.
Similarly, a credit-builder credit card will allow you to build a strong credit history if you are new to credit, or rebuild it with good account management. Basically, the credit limit on these cards is set lower than a standard credit card (usually around £500), making it easier for you to manage repayments.
However, you should be aware than the interest rates on these cards tends to be higher (typically around 30%), so you must make sure that the balance is paid off in full each month.
If you are in any doubt about whether you will be able to manage these repayments then it’s advisable to steer clear. You run the risk of getting into debt and this will harm your credit score even further.
If you’re no longer using any of your accounts, then you should go into the bank and close these. As well as looking at what you currently owe, lenders also take into account how much credit is available to you, so the lower this figure is, the better.
According to recent research, more than one in five wannabe homeowners in the UK have been negatively impacted by their partner’s credit score. Basically, when people share major financial responsibilities, such as a joint bank account or mortgage, their credit scores become inextricably linked.
This means that when you apply for any sort of credit, from a small loan to a full-blown mortgage, it’s not only your financial welfare that’s taken into consideration. Instead, the lender will take into account how well your partner has managed their finances over the last six years too, and make a judgement based on that.
The scary thing is that this can still apply even if you’re no longer together. Fortunately, financial disassociation – or a ‘credit divorce’, if you like – allows you to report incorrect financial connections. You can do this by applying to one of the credit reference agencies mentioned above, who will automatically share your new circumstances with the other two.
Here at Righttobuy.coop, we make it our mission to help Right to Buy or Right to Acquire applicants through every step of the house-buying process. For any further help or information relating to your specific case, don’t hesitate to get in touch – our advisors are on hand to help you.