Getting a Mortgage After a Credit Problem

A difficult credit history doesn't automatically mean you can't get a mortgage. It does mean your options are more limited, the process requires more thought, and working with a broker who understands the specialist market becomes considerably more valuable than it might be for someone with a straightforward credit file. Understanding how lenders view credit problems, and how long those problems continue to affect you, is the starting point for working out where you actually stand.

How Long Credit Issues Stay on Your File

Most credit problems remain on your credit file for six years from the date they were recorded, regardless of whether you've subsequently resolved them. This includes defaults, County Court Judgements, Individual Voluntary Arrangements and bankruptcy. Missed payments also remain on your file, though their impact diminishes over time as they move further into the past.

After six years, these entries are removed from your file entirely, which is why timing matters. Someone who had a CCJ registered five years ago is in a meaningfully different position from someone whose CCJ was registered six months ago, even if the circumstances that led to it were similar.

What Lenders Are Looking For

Different lenders assess credit history in different ways, and this is one of the reasons a broker's knowledge of the market is particularly useful in this situation. High street lenders typically have strict automated criteria and will decline applications that include certain entries on the credit file, regardless of context. Specialist or adverse credit lenders, on the other hand, take a more manual approach and will often want to understand the story behind the credit issue: what caused it, what has changed since, and what the borrower's current financial position looks like.

The severity of the issue matters too. A single missed payment from four years ago is viewed very differently from a bankruptcy discharged eighteen months ago. Lenders in the specialist market will typically have tiered criteria depending on the nature and recency of the problem.

Deposit and Loan to Value

A larger deposit generally improves your position when applying with a credit issue, because it reduces the lender's risk. Where a standard borrower might be able to buy with a 5% or 10% deposit, someone with adverse credit will often find that lenders in the specialist market require a minimum of 15% or 25%, with better rates available at higher deposit levels.

If you're in the process of rebuilding your credit and saving a larger deposit at the same time, it's worth understanding how those two timelines interact, because reaching a higher deposit threshold while your credit history is also further in the past can make a significant difference to what's available to you.

Steps Worth Taking

Checking your credit file before applying for a mortgage is always sensible, and particularly important if you have a history of credit problems. All three main credit reference agencies in the UK, Experian, Equifax and TransUnion, provide access to your credit report, and it's worth checking all three because they don't all hold identical information. Any errors should be corrected before you apply, as they could affect the outcome unnecessarily.

Registering on the electoral roll at your current address, if you haven't already, is a straightforward step that can make a positive difference to how lenders assess your application.

Getting Proper Advice

The specialist mortgage market is not something that's easy to access through a standard comparison website, because many of the lenders who operate in this space don't list their products publicly. If you've had credit problems and want to understand your realistic options, speaking to a broker who can search a broad range of lenders is the most reliable way to find out where you actually stand rather than making assumptions based on what a single lender has told you.

I'm happy to look at your situation and give you an honest picture of what's available. Get in touch and we'll work through it together.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Barry, The Mortgage Network - Helping you make confident decisions and plan a mortgage that works for you.