Your ability to obtain a mortgage is greatly influenced by your credit history. A mortgage applicant with a bad credit record will find their options limited.
If you are a first time home buyer with a poor credit history we would suggest you refer to our first time buyer with bad credit mortgage qualification list (below) to assess your chances of obtaining lending.
first time buyer with bad credit mortgage qualification list
If you have a bad credit history and are a first time buyer seeking a mortgage you need to get specialist help.
First time buyers with a bad credit history should note that high street lenders will not consider your case. Approaching a high street lender and allowing them to run a credit check on your record may even make your situation worse.
Use an independent mortgage broker
In certain cases there may be options available to you via specialist mortgage brokers.
If you do have bad credit and are seeking a mortgage make sure:
- You use an independent mortgage broker that is a specialist with bad credit cases for first time buyers.
- You make your mortgage broker fully aware of all of your credit history and the problems with it. Be prepared to pay a fee to cover your mortgage brokers time.
First time buyer with bad credit history mortgage qualification list
If you can answer yes to all of the following questions we should be able to assist you in obtaining a mortgage as a first time buyer with a bad credit history.
Our team will outline our full terms and fees before your incur any cost.
- You are prepared to pay £99 initially to have your mortgage options professionally assessed?
- You have been employed for at least 12 months or self-employed at least 24 months?
- Your income is provable through wage slips, accounts, or tax returns?
- You have a cash deposit of at least 10%?
- Any defaults on your credit record are at least 24 months old?
- You have not had any county court judgements registered against you in the past 24 months?
- All defaults or county court judgements against you have been settled in full?
- You have kept within your bank overdraft, and had no payments returned in the past three months?
- You have not used payday loans in the past 12 months?
- You have not been in a debt management plan in the past 24 months?
- You have not been in an IVA nor been bankrupt in the past 48 months?
- You are not seeking a right to buy or shared ownership mortgage?
If you meet all of the above criteria call us now on 020 8979 9684.
Our bandings above are intended merely as a guide.
Each individuals situation will be assessed by the respective Lender and following this mortgage terms may or may not be offered.
You credit file carries six years of your credit history and is the primary tool used by a Mortgage Lender to make a decision on whether you are a good lending risk.
If you are not sure what your credit file contains you can obtain a copy from companies such as Experian or Equifax.
More details about your credit file and how it works are set out below at the bottom of this page.
If you are struggling to handle your debt and would like to know how you can get everything in order and ease your worries visit our get debt free page.
On this page we refer to different bad credit issues such as missed payments, Defaults, County Court Judgements, Debt Management programmes, and Bankruptcy. If you are not familiar with these terms and need to understand which category you fit into, we have provided some background information at the bottom of the page to assist you.
Missed Credit Payments
Have you missed payments or made late payments on credit?
If you have this may show on your credit record. A credit file is held on you by companies such as Equifax or Experian, and each time you take or repay credit, that information is logged on your file by the credit provider.
Your credit file contains details of when you applied for credit and who to how much you have borrowed who from, and what the regular repayments are.
Most importantly from a prospective lenders point of view your credit file shows details of when payments were made and when they were missed.
A missed payment will reduce your changes or obtaining credit. Several missed payments will cause a larger problem.
Two tips to avoid missed credit payments showing on your credit file
1. Use Direct Debit Mandates where possible.
2. Make your payments early in the month so that if there is a problem you can make the payment up in the same month before your lender registers a missed payment on your credit file.
3. In our experience the most common cause of late or missed payments are mobile phone bills. To avoid this risk use pay as you go contracts.
Defaults
A default is formal notification from your Creditor that payments are not being paid on time. You will not automatically get a default if you miss a payment on your credit as they are usually issued when you are in arrears by three to six months.
Your default notice will outline all relevant information on the debt and why you are in default.
Default notices should not be ignored as they are the first sign that legal steps may be taken to recover your debt. They are therefore the stage before a CCJ.
County Court Judgements
Do you have, or have you had, a County Court Judgement against you?
You are not alone, around two thousand County Court Judgements (CCJs) are issued every day.
A County Court Judgement (CCJ) is issued by a County Court if you fail to pay money that you owe.
If you have an outstanding debt that is not being paid your Creditor can apply to the Court for a County Court Judgement. The Court assesses if there really is a debt to pay, if they decide there is, they will issue a CCJ and decide how the debt should be repaid. The average CCJ size is around £3,300.
You know this process is happening as you will be sent a CCJ Claim form prior to the judgement being made. This gives you the opportunity to state your side of the case.
When the Court date arrives you do not need to attend if you are not disputing the claim.
What if I dont pay a CCJ?
Action then may include:
1. A warrant of execution where a Court appointed bailiff takes your goods in order to sell them to help pay the debt.
2. An attachment of earnings allowing the debt to be repaid direct from your salary by your employer. This can obviously result in a difficult situation with your employer knowing about your debt issues.
3. A charging order where a charge is placed against your property to deduct your debt from sale proceeds. This will make it difficult for you to mortgage or remortgage your property.
4. A third party debt order that freezes your bank account until you pay the debt due.
Mortgage Arrears
Mortgage arrears are a serious problem and may lead to you losing your home. However, no Mortgage Lender likes to repossess and they will take steps to assist you through difficult financial periods and get you back on track.
The worst thing you can do if you do not have the funds to make your mortgage payment is not to inform the Lender. The sooner the Lender knows, the sooner they can help you.
If you ignore mortgage arrears and do not contact your Lender they will have to assume the worst and act accordingly.
If you have had mortgage arrears in the past you will be aware that the normal route is for the Lender to arrange a slightly higher monthly payment with you once things have settled down to repay the arrears.
Of course mortgage arrears on your record are not attractive to prospective mortgage lenders when you seek to remortgage of purchase a new property.
1 in 12, 0 in 3
When dealing with mortgage arrears you may hear terms like 1 in 12 and 0 in 3. This simply means the lender is looking for a maximum of one missed payment in the last 12 months and none in the last three months. The more recent your missed mortgage payments, the more difficult it will be to arrange a mortgage.
Payday Loans
Payday loans are short term cash loans arranged by a number of providers in the UK. Since 2008 payday loans have started to become big business and the companies operating in this area have the financial resources for major sponsorship of football teams and a number of TV advertising campaigns. Why can they do this? because the business is so profitable for them, interest rates on these loans can run into the 000s% range.Payday loans and Mortgages
The current position is that bad credit lenders do not have defined criteria for applicants with pay day loans on their record. As a result, we cannot predict how a lender will react to pay day loans on your credit report. The pattern appears to be that one or two recent pay day loans can be tolerated, as can historical pay day loans. Applicants with numerous recent pay day loans are likely to be declined by mortgage lenders.
Debt Management Programmes
Under a debt management programme a third party becomes involved in your situation. This person negotiates with your creditors to reduce your monthly payments to a level you can afford within your income, or perhaps even to write off some of your debt.Under a debt management programme you will set out your essential monthly outgoings such as food, mortgage or rent, rates, bills, travel etc, and a calculation will be made as to how much you can afford to repay your creditors.
A debt management programme can be advantageous as it will stop your creditors chasing you by phone and post, taking much of the stress away.
There are a number of private companies offering debt management services but you should be aware that they will charge a fee to assist you.
There are Government and Charitable bodies who will assist you for free.
A good starting point is to visit your local Citizens Advice Bureau.
Mortgage lenders are not keen on debt management plans and your chances or arranging a mortgage or re-mortgage if you have one in place are slim.
Bankruptcy
Bankruptcy is the final step if you cannot pay your debts. It gives you the opportunity to wipe the slate clean and start again. It does however, seriously affect your chances of obtaining future credit and will impact on your lifestyle in the short term.A Bankruptcy order may be requested by yourself or by your creditors (provided you owe the petitioning creditor as least £750). Under the order your assets are turned to cash and your creditors paid as much as possible from the proceeds.
After a Bankruptcy order you need to stop using your bank account(s). You also need to declare you are bankrupt if applying for any credit above £500.
A trustee will be appointed to handle your bankruptcy and the repayment of your debt.
Bankruptcy and your home
If your husband, wife or children are living with you, it may be possible for the sale of the property to be put off until after the end of the first year of your bankruptcy.
Your husband, wife, partner, a relative or friend may be able to buy your interest in your home from the trustee. Such a purchase would prevent a sale of the property by the trustee at a future date.
Your spouse or any other interested party should take legal advice about the home as soon as possible
Bankruptcy and the Self Employed
If you are made bankrupt your business is shut down and your staff dismissed. There is no restriction on a bankrupt being self- employed so you may start trading again.
How long will you be bankrupt
The bankruptcy period lasts for up to 12 months (it can finish earlier). The impact of the bankruptcy on your financial situation can last much longer.
Alternatives to Bankruptcy
You can consider an Individual Voluntary Arrangement (IVA), this gives you more say as to how you pay your creditors and it may be easier to keep your home that under bankruptcy. You will avoid the restrictions of bankruptcy and the overall costs to you may be less.
Individual Voluntary Arrangement
An IVA is a type of debt relief order and in order to arrange one you will need to appoint an insolvency practitioner to handle your case or appoint the official receiver.
Under an IVA agreed payments are made with your Creditors over a set period of time in order to your avoiding bankruptcy. Whilst you are in an IVA your options for further financial arrangements are severely limited.
Larger or recent CCJs or Defaults and mortgage arrears. You have a bad credit record with defaults and CCJs totalling up to £5,000 © 2015 amortgagenow
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