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Does Getting Rejected for a Mortgage Affect a Credit Score?

May 20, 2022 By Mortgage Light Leave a Comment

The short answer is, no, getting rejected for a mortgage will not directly affect a credit score. However, the long answer to this question isn’t quite as black and white as that. Whilst rejection of a mortgage application itself won’t harm your credit score, the lender you have approached will have conducted a ‘hard search’ on your credit file as part of their assessment process. The record of this search may then have an impact on your score. If you have numerous hard searches on your credit file in a short period, then this can affect your credit score in a negative way.

So, what can you do to try to ensure that your credit score doesn’t get negatively affected when applying for a mortgage? In this article, we offer our top tips on keeping your credit score in check.

Common reasons for a mortgage rejection

Firstly, let’s talk about some of the reasons a mortgage application might get rejected. Whilst this is by no means an exhaustive list, it does contain a few of the more common reasons:

  • A large number of credit applications in the past six months, resulting in multiple hard searches recorded on your credit report
  • Poor credit history
  • Recent missed or late credit payments
  • A County Court Judgement (CCJ) or other adverse judgement on your record
  • Large amounts of existing debt
  • Not registered to vote on the electoral roll. This is important as it allows lenders to check some of your personal information and link that in with your credit history
  • Failed the mortgage affordability assessment based on your current income and expenditure
  • Self-employed or a contract worker with insufficient proof of consistent income
  • Mistakes or inconsistencies on your application form and in supporting documentation, such as the incorrect address or spelling of names. Perhaps the payslips provided don’t match up with the claimed annual income
  • Insufficient deposit available
  • Failing to meet the income criteria for the size or type of mortgage applied for
  • You’ve lived in the UK for less than three years
  • They didn’t like the house that you were buying

dog with a denied mortgage application on an ipad

If you do get rejected for a mortgage (or any other credit), it’s a good idea to try to find out the reason why. Mortgage lenders are not obliged to give any explanation for their decision, however, most will provide feedback if requested.

Find out more – ‘What happens if a mortgage application gets rejected?’

Why is my credit score so important when getting a mortgage?

When you apply for any type of credit, but particularly a mortgage, lenders will start by looking at your credit score to help them decide if you are creditworthy enough for them to lend to. This is because your credit score is a reflection of how you’ve managed credit facilities previously and is, therefore, an indication of how you are likely to manage your finances now and in the future.

A high credit score is generally an indication that you can be considered creditworthy and therefore lower risk to lend to. Applicants with a lower credit score will generally be considered a higher risk. They may find it harder to secure credit facilities. A low score is a warning to potential lenders that you may have a history of poor personal financial management. It may suggest a risk of future missed or late payments.

Although not all lenders will reject an application based simply on a poor credit score, they are likely to restrict any offer they make to mortgages with a less desirable interest rate. This is to compensate them for the increased perceived risk that they are taking in lending to you.

Find out more – ‘How does bad credit affect a mortgage?’

Why does a hard search affect a credit score?

A hard search on your report is evidence that you’ve applied for a credit facility of some sort. A lot of hard searches over a short period of time might suggest that you have a high reliance upon credit to fund your lifestyle or perhaps that you’ve had applications for credit rejected several times and are struggling to secure the mortgage you need.

a woman checking her hard search

This is generally taken as a warning sign and will negatively affect your credit score for at least the next six months. As we know, a poor credit score is likely to reduce your ability to get approved for credit in the future.

How to avoid mortgage rejection due to a poor credit score

Of course, no one wants to see their mortgage application get rejected. Especially because of a poor credit score. Luckily, there are some things that you can do to try and keep your credit score healthy and minimise the chance of your mortgage getting rejected.

Avoid applying for credit

Applications for credit usually stay on your file for a minimum of 12 months. However, they can stick around for a maximum of two years. With that in mind, it’s a good idea to avoid applying for too much credit in the months ahead of making a mortgage application in order to minimise the number of hard searches on your report.

If you do need to apply for credit, make sure that you only apply for credit you have been pre-approved for or that you are confident that you are eligible for. Some credit lenders will allow you to do a soft search before applying for credit to see if you are likely to be accepted. A soft search will generally not affect your credit score. Additionally, try not to make more than two or three applications for credit every few months. It’s a good idea to try to space them out as this may also help to protect your credit score.

Keep on top of your financial commitments

It may seem obvious – and we know that it’s easier said than done – but try and keep on top of your financial commitments at all times, but especially before applying for a mortgage. Make sure that all repayments on any loans, credit and utility bills are made on time and in full.

a man paying off credit card debts

Ensure that credit card payments are also made on time. If possible, pay off outstanding balances each month. If you have any credit cards that aren’t in use, then it may be a good idea to close these down. Ironically, it can help your score to maintain and use at least one credit card. However, only if you keep well within the approved limit and clear the outstanding balance in full each month.

Ensure you are on the electoral roll

Lenders use information from the electoral roll to confirm details such as your full name, address and residential history. These details must match up to what you have put on your mortgage application. If they don’t match or you cannot be found on the electoral roll, then some lenders may choose to decline your application at this point.

If you are not on the electoral roll, try to get this rectified before applying for a mortgage. Check that all your details are recorded correctly, including spellings etc.

Check your credit file regularly

Obtain a copy of your personal credit file to make sure that the information recorded is accurate and up-to-date. Mistakes can and do occur. If you spot any errors then contact the lender concerned to get this corrected as soon as possible.

a woman checking her credit file

It is important to do this regularly to try and spot possible identity theft. This is where fraudsters use your personal details to fraudulently obtain credit. They then default on this credit, leaving you with adverse history on your credit file. This is becoming increasingly common. It can have a devastating impact and take a huge amount of time and effort to get corrected. You can obtain a free copy of your credit file from companies such as ClearScore.

Speak to a mortgage advisor

Lastly, speak to a mortgage advisor before you actually make any mortgage applications, particularly if you have concerns. No one will be better placed to help you than a professional.

A mortgage advisor, such as us here at Mortgage Light, will be able to help pinpoint any potential issues and put you on the path to success when applying for a mortgage. We’ll match you with the most suitable lenders for your situation and contact them on your behalf when we are confident that you are in a good position.

We’re here to give you the best possible chance. Need our help? We’re available to chat on 01908 597655 or you can contact us via our website.

Filed Under: Getting a mortgage Tagged With: bad credit, credit file, credit history, credit rating, credit score, getting a mortgage, hard search, mortgage application, mortgage application rejection, mortgage rejection, poor credit

Can I Remortgage With Credit Card Debt?

April 8, 2022 By Mortgage Light Leave a Comment

It is possible to remortgage with credit card debt, so long as you are generally able to prove that you can afford your monthly repayments. Assuming you are able to do this, you may still face some restrictions on the amount lenders are willing to offer you. You could also find that any mortgages offered will be subject to a slightly higher interest rate than you might otherwise have been given.

In this article, we discuss how credit card debt and other debts can affect the remortgaging process and what to do if you are struggling to find a lender who will accept your remortgage application.

How does credit card debt affect a remortgage?

This all depends on the level of your credit card or other debts. Of course, the larger the debt, the larger the warning signs are likely to be to any lender. Lenders will want to understand the nature of any debts you may have. They may ask questions such as:

  • How long have your debts been outstanding?
  • Are you struggling to repay them?
  • Has the overall level of debt been increasing?
  • Are your debts properly structured?
  • Have you met all the repayments on time?
  • If your debt has occurred recently, what was the reason for this?

The answers to these questions could potentially present some ‘red flags’ to a lender. This might cause them to view your application as being a higher risk. This may cause them to decline your remortgage application outright. This could then adversely impact your credit score or it may restrict what they are willing to offer you.

credit cards

If you are meeting your regular payments on time and managing to reduce the outstanding credit, then a lender may be willing to look upon your application more sympathetically. Remember, all lenders approach applications on a case-by-case basis. Some lenders will have very strict policies on personal debt. Other lenders are more willing to consider lending to applicants with higher levels of credit card borrowing. You might find that you may be a little more limited in choice, but the mortgage market is vast and there are deals out there for all kinds of borrowers, including bad credit mortgages.

It’s a good idea to enlist the help of a mortgage advisor and broker, such as us here at Mortgage Light. We know which lenders to turn to in order to have the best chance of getting approval on the first attempt. We have access to the whole mortgage market, including lenders that only we can access as mortgage professionals.

Find out more – ‘How does bad credit affect a mortgage?’

How much credit card debt is too much?

There is no cut and dry answer to the question of how much credit card debt is too much. It depends on your personal circumstances and your debt to income ratio. For instance, you might have £3,000 worth of recent credit card debt outstanding. However, maybe you are about to sell your car or due a bonus from work that will repay or substantially reduce this. A lender may then accept this and consider you a sound applicant for a remortgage.

On the other hand, if you have had this level of outstanding credit card debt for some time and there is no evidence of you being able to reduce it, then this could be a sign of poor financial management and therefore a warning sign.

a woman looking at her credit card debt

Some lenders may automatically reject your application in these same circumstances, simply as a result of the level of your credit card debt. Each lender will have its own assessment criteria. It’s important to understand which lenders are likely to be more sympathetic to your situation.

It’s safe to assume that if you have maxed out your credit card/s and you have used up the majority of your available credit, lenders are less likely to look upon your application favourably. Even if you have never missed a credit card payment, high levels of credit card debt can be an indication that you are reliant on credit cards. Even if a lender is willing to accept a remortgage application from you, they will probably have a number of questions for you to try and fully understand the story behind your credit card and general borrowing history.

Find out more – ‘What happens if a mortgage application gets rejected?’

Will missed or late credit card payments affect a remortgage?

If you have missed any credit card payments, this is likely to be a red flag to any mortgage lender. They may think carefully before accepting or processing an application from you. If you have a missed payment that has been outstanding for more than one month (therefore meaning you owe more than any current month’s repayment), you will be in arrears. This is considered a more major red flag.

Late payments are generally considered less severe and as long as the payment is caught up within the same month that it is due, most lenders won’t report it as a missed payment to the credit agencies. If not though, reported late and missed payments will inevitably lower your credit score. And a low credit score can make getting a mortgage a little more of a challenge.

late payment

There are, however, a number of specialist lenders who are willing to lend to applicants with lower credit scores. The remortgage market needn’t be closed to you if you have been impacted in this way.

Find out more – ‘Can I remortgage with bad credit?’

Can I remortgage to pay off credit card debt?

You may be considering a remortgage as a way to pay off some or all of your credit card or other debts. You could potentially do this by remortgaging. Remortgaging could allow you to release some cash from the equity that has built up in your home since you purchased it. You to pay off your outstanding personal credit.

This would effectively consolidate your personal borrowing with your mortgage into a single loan secured against your house. By doing this, you are transferring unsecured short term debt into secured long term borrowing. This will generally reduce the interest burden on the short term debt and also your monthly repayment costs. These will now be spread over a much longer term.

paying off credit card debt

The overall cost of this might ultimately be higher in the long run. You will be repaying your borrowing over a much longer period. However, it should provide some relief to your monthly budget. A good financial advisor, such as us here at Mortgage Light, will be able to guide you on the value of your options if this is something you are considering.

Let’s say for example that you currently own a property worth £300,000. You have a £200,000 mortgage outstanding. You want to release £15,000 of equity from your home in order to pay off your credit card debts (or any other debts). You’d therefore need to take out a new mortgage for £215,000. This will refinance your existing mortgage and provide the additional cash to pay off your credit cards.

This is called debt consolidation. It’s important to note that this simply moves your debt onto your mortgage, rather than actually paying it off. Consolidating your loans doesn’t reduce the amount you owe. It instead restructures it in what might be an efficient way of borrowing.

Find out more – ‘Can you remortgage to pay off debt?’

What should I do if I can’t get a remortgage accepted because of credit card debt?

Struggling to know where to turn when remortgaging with credit card debt? Speak to an experienced mortgage advisor and broker. They should be able to provide guidance and help you to secure the deal you need. At Mortgage Light, we have helped many people just like you achieve what they need from their remortgage – even with credit card debt or adverse credit history.

Our experts know the mortgage market like the back of their hands, including which lenders are more accepting of credit card debt and other financial issues such as low credit scores. We will always do our best to find a suitable lender that will accept your remortgage application.

Let’s start your remortgaging process together. Get in touch with us via our website or call 01908 597655 today.

Filed Under: Remortgaging Tagged With: bad credit, bad credit mortgage, credit card debt, credit score, debt, interest, interest rate, interest rates, low credit score, mortgage advisor, mortgage advisor and broker, mortgage broker, mortgage light, poor credit, poor credit history, remortgage, remortgaging

How Does Bad Credit Affect a Mortgage?

February 8, 2022 By Mortgage Light Leave a Comment

When it comes to getting a mortgage, your credit history is a pretty important factor. It plays a big part in how a lender will assess your affordability. Looking into your credit history is one of the ways in which a lender will gain information on how reliable you have been at paying back debts and loans in the past. After all, a mortgage is likely to be the biggest loan you’ll ever have! A lender needs to be confident that you’ll be able to keep up with your repayments across the whole lifetime of the loan.

So, how does bad credit affect a mortgage application? Is it still possible to get a mortgage with a bad credit history? In this article, we explain all you need to know. [Read more…]

Filed Under: Getting a mortgage Tagged With: bad credit, bad credit mortgage, credit, credit history, credit score, getting a mortgage, guarantor mortgage, interest rates, joint mortgage, mortgage application, mortgage guarantor

How to Get The Best Rate on a Mortgage

December 24, 2021 By Mortgage Light Leave a Comment

The UK finance market offers a broad range of mortgage products to borrowers. The interest rate charged on those products can vary quite widely for different borrowers. Generally, the interest rate charged by a lender is a reflection of their view of the risk the borrower poses and the scale of loss the lender might run into should that happen.

As a result of these different risk profiles, some of the preferential deals that may be available to one borrower may not be available to another – and vice versa. So, what are some of the factors that affect the interest rate that you may be offered on your mortgage and how can you get the best rate for your personal circumstances? [Read more…]

Filed Under: Getting a mortgage, Managing your mortgage, Remortgaging Tagged With: bad credit, Bank of England, bank of england base rate, base rate, credit score, deposit, employment, getting a mortgage, help to buy, help to buy equity loan, help to buy equity loan scheme, help to buy scheme, house deposit, interest, interest rates, joint mortgage, joint mortgage application, loan to value, LTV, managing your mortgage, mortgage deposit, mortgage guarantor, rates, remortgage, unemployment

What Happens if I Can’t Pay my Mortgage?

January 8, 2021 By Mortgage Light Leave a Comment

As a homeowner, it’s generally your mortgage that helps to keep the roof over your head. If, however, you are unfortunate enough to miss a repayment on your mortgage, your lender will initially report this to a credit reference agency as a ‘delinquency’.
[Read more…]

Filed Under: Managing your mortgage Tagged With: bad credit, credit check, credit score, income protection, mortgage arrears, mortgage protection payment insurance, repossession

What is a Mortgage Guarantor?

December 10, 2020 By Mortgage Light Leave a Comment

The basic requirements for getting a mortgage are generally a good credit history, a steady and reliable income, plus a cash deposit of a minimum 5% of the value of the property being purchased. Once you have those in order, lenders can assess your suitability as a mortgage borrower, taking into account your employment record, credit history, and general finances. [Read more…]

Filed Under: Getting a mortgage Tagged With: bad credit, credit check, credit score, first-time buyer, getting a mortgage, guarantor mortgage, mortgage guarantor

What do I Need for a Mortgage Application?

December 2, 2020 By Mortgage Light Leave a Comment

If you are planning on applying for a mortgage, then it is important to prepare for this as much as you can in advance of submitting an application. You should also start collecting the supporting documentation that will be needed as part of the lender’s assessment process, and in addition, speak to a mortgage advisor for advice and to help you with your budget. [Read more…]

Filed Under: Getting a mortgage Tagged With: applying for a mortgage, credit check, credit score, deposit, first-time buyer, mortgage agreement in principle, mortgage application, mortgage deposit, mortgage in principle, self-employed

Can I Remortgage With Bad Credit?

May 7, 2020 By Mortgage Light Leave a Comment

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.

[Read more…]

Filed Under: Remortgaging Tagged With: bad credit, bad credit mortgage, credit score, mortgage arrears, remortgage, remortgaging

Related Pages

Below is a list of our related pages on this subject.

Categories

  • Case Study
  • Getting a mortgage
  • Help to Buy
  • Here to help
  • Managing your mortgage
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Recent Posts

  • Does Getting Rejected for a Mortgage Affect a Credit Score?
  • How do Joint Mortgages Work?
  • Can I Remortgage With Credit Card Debt?
  • What Does LTV Mean?
  • What Happens if a Mortgage Application Gets Rejected?
  • Do Shared Ownership Properties Increase in Value?
  • Difference Between Fixed and Tracker Mortgages
  • How do Shared Ownership Mortgages Work?
  • How Does Bad Credit Affect a Mortgage?
  • How to Save For a House Deposit

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All of our brokers deal with the whole of the mortgage market. It doesn’t matter what the question or when you want to speak to us, we have brokers available on the phone or face to face seven days a week. Whether you are just thinking of buying a home and have no idea where to start, a seasoned investor or someone looking to better your current mortgage product, we are happy to help andchat over ideas free of charge.

So we can give you plain and simple advice we will run through some basic questions to help us tailor products to suit your needs. Upon us taking your application forward we will write to inform you that we have given you advice and give you a Key Facts Illustration breaking down the important elements of the product and the fees involved.

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A fee of £349 is payable on application of the mortgage. We will receive commission from the lender in addition to the fees you pay. Your home may be repossessed if you do not keep up repayments on your mortgage. You may have to pay an early repayment charge to your existing lender if you remortgage. As with all insurance policies, conditions and exclusions will apply.
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