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Get Mortgage Ready; Credit Report.

So many new mortgage applicants are unaware of the importance and relevance of their credit report when it comes to mortgages, with many applying without even knowing the current state of their report.

It's vital that you know exactly where you stand with your credit report as there are a few scenarios that could affect your eligibility with some mortgage lenders which could easily result in a mortgage decline if you attempt an application with them.

What credit score do I need to be approved for a mortgage?

There isn't a minimum credit score needed to qualify for a mortgage - that's just another mortgage myth. However, your score and the reasoning behind your score does certainly have an impact on what mortgage options will be available to you.

Your score is usually a good indication of how reliable you have been with past and current financial commitments. If you have a high score, it is likely that your credit report evidences that you're a responsible borrower who consistently makes payments on time and in full. This of course is favourable to mortgage lenders.

A low score doesn't necessarily mean that you won't qualify for a mortgage. There are certainly lenders out there that are willing to lend to applicants that have a poor score however, options will be limited and the rates are likely to be higher.

Applying for a mortgage with poor credit

First things first, you need to get a copy of your report to know what you're working with. A multi-agency report is advisable as you'll get the bigger picture, you can get a copy of your report here with a free trial (£14.99 per month after, cancel anytime). We will need to see a copy of your report to be able to advise you properly and match you with a lender right for your unique circumstances.

A mortgage is still achievable with poor credit

The good news is that it is still possible to get a mortgage with adverse credit. We've helped many others find a lender and get approved - so try not to worry, let's have a look at your situation in detail and properly explore your options.

What a 'poor score' means to mortgage lenders

The reason a poor score isn't ideal is because lenders view your score as an indication as to how well you've managed financial commitments in the past. So a poor score to a lender could mean that they view you as a risk to lend to.

Improving your credit score for mortgage purposes

If you do have missed payments and a view blips on your report, there are a few things that you can do yourself to help improve your overall 'credit-worthiness';

  • Make sure you're on the electoral roll (you can do so here)
  • Manage existing commitments reliably i.e. set up direct debits to avoid accidental missed payments
  • Close inactive accounts
  • Remove financial links to ex-partners or old flatmates with poor credit scores that appear on your report.
  • Fix any errors on your credit report as soon as possible by contacting the relevant provider/ credit agency.
  • Avoid applying for any other credit immediately prior to your mortgage application.

You can also improve your mortgage affordability by;

  • Saving a larger deposit
  • Increasing your income
  • Lower your debt-to-income ratio

We fully appreciate that the above are far easier said than done. However, it's always useful to know exactly what factors can influence a mortgage journey.

It is important to note that every time you try to apply for a mortgage and get declined, it will be noted on your file for future lenders to see. Recent and multiple rejections can cause issues when other lenders begin to query why previous lenders have rejected you. Please ask a broker for help before you start applying. Let them assess your situation and source viable options unique to your circumstances.

Deposit expectations with a poor credit score

The size of your deposit will affect what mortgage products you're eligible for regardless of credit score.

With a poor score, you may be expected to raise a larger percentage of the property value as a deposit to limit the risk to the lender but that doesn't necessarily put larger loans out of reach. Some of our specialist lenders are happier to loan higher percentages, though it may be the case that a higher interest rate is charged.

As an example, let's say you are interested in a property valued at £250,000. As a minimum you will need a 5% deposit (£12,500), but a bigger deposit of say 10-15% (£25,000 - £37,500) might help you to access better deals.

Every lender and every situation is unique, which is why speaking to an experienced broker can be hugely beneficial.

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