There are a few different reasons why you might decide to remortgage. It’s a great way to release some capital from your home and put some cash towards let’s say a new car, a wedding, a holiday or perhaps even to consolidate your debts. You can often also find yourself a better mortgage deal at the same time, so it’s a win-win.
But what about if you have bad credit?
Your credit score is the result of an assessment of financial and other information gathered about you from both public records and lending companies that have agreed to share data about their customers. This data includes how much a customer might be in debt to that particular company, how promptly they pay their bills, if they are meeting the terms of the repayment, and whether they are maximizing and using all the credit that is available to them.
When dealing with a bad credit history, it’s a good idea to start with understanding why you are in the position that you’re in. A bad credit history can be a result of a few different factors that get reported to a credit agency. These include:
- Late payments
- Mortgage arrears
- Address history jumping
- Not being on the electoral roll
- Payday loans
- Gambling online
- CCJs (County Court Judgements)
- Debt management plans
- IVA (Individual Voluntary Arrangement)
All of these factors have different levels of seriousness. For instance, missed and late payments are not the end of the world. Defaults and recent CCJs may mean that you can’t go with high street lenders, but there may be other options for you. A lender will also take into account when these issues were registered, along with how much equity you have sitting in your property. Your credit history is important because if you’ve had problems in the past, lenders are likely to assume that you’ll have them in the future, which can be a tricky cycle to get stuck in.
Can I improve my bad credit?
There’s plenty of things you can do to improve your bad credit and increase your chances of getting approved now, and in the future. Firstly, make sure you are on the electoral roll. Lenders use information from the electoral roll to confirm things like your name, address and residential history. They need to check that the information about you is up to date before they think about offering you a mortgage or loan. With some lenders, it can actually hurt your credit score if they can’t find your details. Some might choose to simply refuse the application as they’d have to find an alternative way to confirm your identity.
It goes without saying, but make sure you pay your bills on time and adhere to the conditions you’ve agreed to, and close any credit accounts that you no longer use. Keep an eye on your credit report regularly to make sure that all the information on there is correct. You can access your credit report for free using Clear Score. Errors do happen and if you spot any, you can contact the relevant company and ask for them to be corrected.
Most of all though, time is the best remedy for a bad credit score – so long as you’re keeping on top of everything in the interim. It takes a little while but eventually your credit score will improve and recover. Focus on your money management, regardless of whether you manage to remortgage with bad credit or not.
Where should I turn if I have bad credit?
Although a lot of lenders might be reluctant to lend you money or only offer a subprime rate, the UK mortgage market is vast and there are deals out there for all kinds of borrowers – from those with clean credit to those whose record is less than perfect. Lots of lenders understand that for many people, having bad credit doesn’t mean that they shouldn’t be able to remortgage or purchase a home.
You might have heard of a bad credit mortgage. Bad credit mortgages follow the same principle as any other mortgage, however they are designed specifically to help people with a history of poor credit. With these types of mortgages, it usually means that you may have to pay a slightly higher interest rate than you would get with some of the other high street lenders, as the lenders who specialise in these mortgages will deem you to be a higher risk.
As we mentioned previously, time is the most important thing when it comes to improving your credit rating. If you keep up repayments on a poor credit mortgage, your credit rating should improve, and this might mean you can move to a preferential high-street mortgage at a lower rate after a few years.
Ultimately, lenders will have different rules and criteria around applicants with bad credit, so don’t let one experience or lender put you off. It’s a good idea to turn to a mortgage broker, who will do the research to find the right mortgage to suit your situation. This also means you’ll avoid being turned down by multiple lenders in a short space of time, which can further damage your credit score.
At Mortgage Light, we’ve helped so many people with bad credit either purchase their first home, or remortgage, and also make their first purchase with bad debt. Let us put in the time and energy to find you a deal you’re happy with. Pick up the phone and contact us, or come in and meet us for a free consultation and we can talk through the options available to you.