Mortgages for People with Low Credit History
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Written by:
Alison Gibson
Ascot Mortgage Expert
Last Updated:
23.07.2024
Written by:
Alison Gibson
Ascot Mortgage Expert
Last Updated:
23.07.2024
Some mortgage lenders recognise that there is a big difference between people with low credit scores due to adverse credit history (missed payments, CCJ’s, bankruptcy, etc.) and those who have a low credit score because they have had little need for credit in the past. This can make it possible to get a low credit score mortgage.
A low credit score, and a bad credit score, whilst not the same, are often perceived to be synonymous by mortgage lenders. The reason for this is that credit scoring systems simply work off a scoring list, rather than considering the application on the basis of a credit check, which would consider defaults on existing credit, rather than effectively penalising an applicant for having no credit. Therefore, a low credit score can really limit your lending potential- especially for a large loan, such as a mortgage.
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Why does a low credit score penalise me like a bad credit score would?
The problem for lenders is that they are nervous about lending to potential customers who have no proven ability to pay back previous loans or existing credit. But, just as customers might default on their credit, they may also prove to be good borrowers: therefore some credit check agencies, such as Aldermore, look beyond the fact that people do not have a credit history, or have a low credit history.
Aldermore was something of an innovation when it was launched in 2009, in the middle of a credit crunch: it is committed to lending to people who can afford to repay their loans.
The difference between a credit scoring system and a credit check
Most lenders use the well-known credit scoring system, which takes a wide range of financial factors and history in to account to produce an overall score. These lenders will have a minimum score in order to pass the decision in principle. The score is automatically produced by searching credit referencing agency databases, and searches a wide range of factors such as past loans, address changes and adverse credit. People with little credit in the past will be at a disadvantage because there score will be low.
However a credit check is basically a manual review the applications file, which will look for any adverse credit – if there’s none (no missed payments, CCJ’s, etc.), then it should pass to the next stage regardless of the actual low initial credit score and then the applicant may still be accepted.
Ascot Mortgages is very aware of this issue that many people face, especially first time buyers, but their experience and expertise ensures they have access to a small selection of mortgage lenders that will “credit check” rather than “credit score”, as these are the lenders who will consider low credit scoring applicants.
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What if I want a mortgage, but have no / low credit history?
- One way that people can improve their credit rating is by ensuring that they are registered on the electoral roll.
- A steady term in an address can help; those who frequently change addresses can often be considered to have a low credit.
- Closing any unused store cards with credit on them can also be a way to improve a low credit rating.
- Consider getting a credit card, to spend a small amount on each month: but only if you can repay it in full!
- A stable relationship with your bank can help: lenders are likely to look favourably on an applicant who has built up a reputation and a history with one bank over a period of time. But do not rush to take out multiple forms of credit quickly: it may read as desperation amongst your creditors!
- Do not keep applying for credit if you have had one application turned down.
- It is possible to ask a relative or close friend to co-sign an application for a smaller loan or credit card, in order to boost your own credit history.
When you are considering applying for a mortgage, make sure that you ask the lender if you fit the profile of the person to whom they would consider lending to. By doing this, it means that you can make sure you have a fair chance of getting accepted, and it also means that you are not having credit searches done on your file unnecessarily.
How can Ascot Mortgages help me get a mortgage?
Bad credit and low credit are not the same things: but, unfortunately, traditional credit referencing using the same criteria for both, and generates a low credit score. There are ways to improve your credit score, if you have low credit, but it is also a good idea to speak to a mortgage broker, like Ascot Mortgages, who may be able to suggest lenders whose criteria you fit, before applying. Ascot can also manage the application process for you, and bring their expertise to the process, increasing the chances of acceptance.
Alison Gibson
Ascot Mortgage Expert
Remortgage
Remortgaging is applied when you keep
living in your present property while applying for another mortgage deal with a new lender. Before finding out how to remortgage and get the best offers from experts like Ascot Mortgages, you have to check meeting what parameters of the deal that can help you succeed the most. The range of background factors varies a lot — from the recently changed loan-to-value ratio or your existing agreement coming to an end.
Whether you are trying to get a more beneficial deal or searching for funding to improve your home conditions, remortgaging is one of the most advantageous scenarios to consider.
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FAQ
The loan to value (LTV) rate determines how much you can borrow. A lower LTV typically results in better interest rates and more choice of lenders for remortgaging, as it represents lower risk to lenders.
Yes, you can choose to remortgage with a different lender. However, this should be based on factors such as interest rates, fees, and the terms and conditions of the potential new mortgage. Contact us today and we can help you to find the best option to suit your needs.
Most lenders will require a valuation of your property when you remortgage to ascertain its current market value. Some lenders may use an automated valuation model instead of a physical appraisal. Need help navigating this? Reach us today to discuss your mortgage needs.
Yes, when remortgaging a solicitor is required for both the mortgage lender and the applicant. Some mortgage lenders offer mortgage products that have a free legal facility. They handle the legal paperwork and advise on potential issues.
The amount you can borrow with a remortgage depends on multiple factors including your income, outgoings, credit score, the value of your property, and the lender’s criteria. Easy contact us to discuss your remortgage borrowing capacity.
The remortgaging process typically takes between 4 to 8 weeks, but can be quicker or slower depending on your circumstances and the lender’s processes. For help in understanding what you can expect, contact us today!
To improve your chances of being accepted for a remortgage, maintain a good credit history, ensure your income is stable, and reduce your overall debt. It can also help to have a clear purpose for remortgaging. Need advice? Reach us today.
It is possible to remortgage with bad credit, but options may be limited and interest rates may be higher. Some specialist lenders provide services for people with poor credit histories.
Applying for a remortgage will likely require a credit check, which can leave a footprint on your credit file. However, the impact on your credit score is usually minimal and temporary.
If your remortgage application is rejected, seek to understand why. It could be related to your income, property value, or credit score. You may need to consider alternative lenders or improve your financial situation. Contact us today for a free consultation and guidance on your options.
Yes, self-employed individuals can remortgage. However, you’ll need to provide more evidence of your income, usually in the form of HMRC documents for the last two or three years. If you’re self-employed and considering remortgaging, feel free to reach out to us whenever you’re ready to discuss this further.
Seeking advice on remortgaging can be beneficial to understand the costs, benefits, and potential risks. Professional mortgage advisors can guide you to make the best decision based on your circumstances. Need professional advice? Easy reach us and we always here to help!
Yes, there are fees involved in remortgaging. These can include exit fees from your current lender, arrangement fees for your new mortgage, valuation fees, legal fees, and broker fees. It’s important to factor these in when considering a remortgage.
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Legal
Ascot Mortgages authorised and regulated by the Financial Conduct Authority and can be found on the FCA register (www.fca.org.uk) under reference 776062. The FCA do not regulate some forms of mortgages. The guidance and advice contained in this website is subject to UK regulatory regime and is therefore restricted to consumers based in the UK. There may be a fee for mortgage advice. The precise amount will depend upon your circumstances but we estimate it will be £599 per mortgage account. Ascot Mortgages Ltd give you the option to pay a non-refundable fee of £1299 payable with the application. If this option is taken, Ascot Mortgages Ltd will refund any procuration fee received by the lender.
Ascot Mortgages Limited is registered in England and Wales and have their registered office at 8 Webster Court, Westbrook, Warrington, WA5 8WD. The company’s registration number is 06764971.
We are a credit broker, not a lender. We work with the whole of the lending market. We may receive commissions that will vary depending on the lender, product, or other permissible factors. The nature any commissions model will be confirmed to you before you proceed.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY DEBT SECURED ON IT
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