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Five top tips to get a mortgage if you have credit problems

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13/12/2021
One in five say their credit rating has got worse since the Covid-19 outbreak
Five top tips to get a mortgage if you have credit problems

Two in three aspiring first-time buyers have been rejected for a mortgage, said Aldermore.

The bank found that just one third (35%) were able to get a mortgage on the first attempt, a sharp fall from nearly half (48%) pre-Covid-19.

The main reason for a rejected mortgage application was a poor credit history (21%), followed by an administrative error (21%) and not having a large enough deposit (20%).

Concerned about credit

Over a quarter (26%) of prospective first time buyers say credit history is a big concern, with two in five (36%) looking to actively improve their credit score to increase their chances of securing a mortgage.

One in five (19%) now worry that their credit rating has gotten worse since the Covid-19 outbreak.

Following the findings, Aldermore has published its top tips to help secure a mortgage if you have credit issues:

1. Get advice from a broker

No matter how early in the process you are, seek advice from a broker. They can give guidance on all aspects of the journey and there is no better time than now to get it, as they will give a whole of market view specific to your individual circumstances.

2. Build your credit history

It is common among younger people, like first time buyers, to not have long histories of credit. This can affect mortgage applications as it can be difficult for companies to assess you, and your credit score may be lower as a result. You can build a credit score slowly but surely by taking out small forms of credit, like a mobile phone contract, (but space out credit applications over time) and to demonstrate your ability to pay them on time and show you’re financially responsible.

3. Work on improving your credit score now

There are quick things you can do to help this; registering on the electoral roll, setting up direct debits to ensure regular bills such as rent, streaming subscriptions and council tax are paid on time, alongside reducing/ paying off an overdraft or student loan. Every little thing will make it easier to show you can afford repayments and that you’re responsible in that commitment. If this is a concern, reach out to a mortgage broker who can provide advice on improving your credit score and what mortgage options are available for you.

4. Credit cards affect credit history

Many retain the same credit card for years, so they are often the oldest credit facility on your report, which means closing them down can reduce a person’s score. However, it may be useful to close down for example store credit cards that have been opened recently with high annual fees, this may help a person avoid temptation of overspending and help in reducing annual bills. When using credit cards, ensure you do not go near your credit limit to convey you’re not overly-reliant on credit and are responsible in using it.

5. Specialist lenders can help

Credit issues are no longer as much a barrier to buying a home as they used to be. Specialist lenders will consider borrowers with CCJs and other credit issues from their past. You may need to pay a higher rate initially but making all your mortgage payments on time will improve your credit rating making it easier to get a better rate when you apply for a future loan.

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