Top Tips for Getting a Negative Credit Mortgage – Property Reporter | Eurica Project

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Due to the current financial climate, mortgage lenders are beginning to tighten their criteria and become stricter when it comes to who they will and will not lend to, meaning that it is becoming increasingly difficult for those with negative credit scores to obtain a mortgage.

However, new industry insights from Revolution Brokers show that people with negative credit scores can increase their chances of being approved by lenders by taking some simple, practical steps in the right direction.

What is negative credit?

When you apply for a mortgage, lenders check your creditworthiness. If you have had good credit in the past and have paid off loans on time and in full, your credit history is good and lenders will see you as a reliable customer. But if you have a bad or unfavorable credit history, they are more reluctant because they cannot be sure that you will pay back the loan as promised.

Types of Adverse Credit

Numerous factors can contribute to a bad credit score and cause lenders to consider you high-risk. Here are some of the most common.

default values

Default or missed payments refer to failure to pay the money you owe on time. It could be that you missed paying a phone or utility bill, or missed a loan repayment deadline.

debt management plans

If someone is heavily in debt, they can be issued a debt management plan. For example, these plans allow you to pay off debt through cheaper, very long-term installments. However, such payments are often flagged as delinquent in the person’s credit history, resulting in an adverse credit score.

District Court Judgments (CCJs)

When someone gets into debt, it can go so far that a court has to order the repayment of the outstanding amount. When this happens, it affects their credit score.

bankruptcy

If someone has a bankruptcy record on their record, it’s very unlikely that a high street lender will grant them a mortgage. Some specialist lenders may still consider lending if the bankruptcy was more than six years old and the bankruptcy has been proven to be doing well financially since then.

Can I get a Negative Credit Mortgage?

In short, the answer is yes – you can get a negative credit mortgage, but it’s not easy and your options may be limited.

First, you must do whatever it takes to improve your credit score and show that any previous problems that caused your bad credit have now been improved. Make sure your household bills are paid on time for a few months to start the repair process.

If there’s a specific and reasonable explanation for your adverse credit history — particularly one that no longer applies to you — you can add an amends to your credit report to let lenders know about it. For example, if unemployment or illness has caused you to miss paying bills for a while, lenders might take a lenient stance.

You need to show you know how to spend your money responsibly. So it’s good to set a tight budget in the months leading up to a mortgage inquiry.

It is also possible that a guarantor will help you get a mortgage. This is a person with good credit who promises to protect you financially if you ever fail to repay the loan.

If you’re buying with a partner, it’s possible that their good credit is enough for the lender to overlook your bad credit.

It is possible to improve your credit score by demonstrating that you can reliably repay loans. It is a good idea to use a credit card to shop in the supermarket once a month and pay off the card immediately from your checking account. Over the months, this reliable pattern of borrowing and repayment will significantly improve your credit score.

If none of this does anything to convince lenders that you can be trusted, it might be wise to step back and wait a while. Credit failures can seem less serious over time, especially if you’ve managed to improve your financial situation in the meantime.

Most importantly, be honest with the mortgage lenders. If you try to hide adverse credit, the consequences are far worse than simply acknowledging the problem and proving you’re working hard to fix it.

Almas Uddin, Founding Director of Revolution Brokers commented: “In times of economic instability, mortgage lenders will always tighten their belts, and that means negotiating the process of securing a mortgage is likely to be much more difficult for those with negative credit ratings.

“But there is no reason to lose hope because bad credit can be repaired. It can take time, significant effort and sacrifice, but if you’re hoping to buy a property, it’s more than worth the effort.

“Mortgage lenders aren’t in the business of refusing to lend money — they want to give you a mortgage, but when the economy is struggling, they have to be more cautious than usual. So if you can show signs of improving financial health and are good at money management, you still have it good chance of securing a mortgage and getting a foot on the real estate ladder

“There’s absolutely no shame in having negative credit – it happens to a lot of people for a lot of different reasons – so the best thing you can do is face the situation you’re in and take small, practical steps to slowly but surely improve.”

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