Adverse Credit

When you apply for a mortgage with a high street lender it will use a credit reference agency such as 'Experian' to determine your credit worthiness. If the search of your credit record reveals any problems, you may be given a poor rating or low credit score and as a consequence will have problems getting a mortgage. However all is not lost as there is an ever increasing range of what are known as ‘adverse credit mortgages’ which are designed for people who have experienced credit problems in the past or have black marks against their name.

In an ideal world, we would all have a steady job, regular income and no financial worries. In reality however, many of us will encounter some form of financial problems, often through no fault of our own. Changes in lifestyle can create major difficulties especially when it comes to arranging a mortgage. Below are some frequently asked questions to support this.

How do I find out if I have adverse credit?

You can aquire your own credit report from Experian, this will outline the exact state of your credit scoring. This is useful to do before you embark upon a mortgage application as it can save a lot of time and effort. Experian can be contacted on 0870 241 6212.

You may even discover that you have information against you on your credit record that is not true. For example, people who have become the victim of identity theft and have unknowingly had items purchased in their name and then, lack of payments have been registered. Finally, mistakes are made and it may be that something is lodged against your credit rating that isn’t even true.

I’ve heard that you can get a low credit score even if you have never borrowed anything – why is this?

Unfortunately this can be true. A potential lender wants to see that you are registered at your address via the electoral register and that you have previously had active credit e.g. had a credit card that has been successfully used. If previously, you have never borrowed a penny then this to most people shows that you carefully manage your finances, for a potential lender though, this provides a lack of evidence that you are reliable in repaying your first ‘debt’, this is why your credit scoring becomes weaker.

I am a discharged bankrupt and am considering buying my own house – what are my chances?

Poor credit includes; bankruptcy, mortgage arrears, county court judgements (CCJs), defaults and other problem debts. As a mortgage broker, we have access to specialist companies who will help people like yourself with a poor credit history. We have access to a panel of lenders who are sympathetic to people with a bad credit rating, adverse credit history or low credit score. Unfortunately, you are not going to get the best interest rates compared to the high street lenders, however, as this area of the market is competitive, then it is possible to still buy a property and have reasonable monthly payments.

[I know that my credit score will be poor as I have previously failed to make some payments. I am ashamed of this and this is preventing me from taking some much needed mortgage advice.]

This is becoming a lot more common than you think so don’t feel alone in this. It’s estimated that one in four people, or five million households in the UK, experience problems when trying to get a mortgage because they’re suffering from adverse credit (also referred to as poor credit history or bad credit history). As mortgage brokers we deal with these problems all the time and are sympathetic and discreet in the process. No-one else will need to know about your credit history except the lender.

[I know that my credit score is not great. I am self employed and find it very difficult to prove my income.]

Have I any chance of getting a reasonable mortgage?

Yes! Again, we would have to use specialist mortgage companies who would be willing to accept a weaker credit rating - you may need to consider the self cert option when you apply (see our section on self employed/self cert mortgages)