Everything You Need to Know about Poor Credit before Applying for a Mortgage

Everything You Need to Know about Poor Credit before Applying for a Mortgage

Everyone who has ever borrowed money in the form of a loan or who has had a credit card or previous mortgages will have a credit record. It’s unavoidable not to have a credit record in this day and age. But your credit record can speak volumes about how you have handled your money and finances in the past and, more importantly, how you have handled debt. If you are worried that you have a poor credit rating but would like to make a mortgage application, here’s what you should know before applying.

Check it first

The first thing you have to do is check your report, so you can have a good estimate of what the lenders will see when you ask for a mortgage. You have several options for checking your credit report – you can contact credit report companies such as Equifax, Callcredit, and Experian, and they will provide you with a one-off credit report for as little as £2. Additionally, if you want regular updates on your credit report, you can opt for a service which can give you regular and continuous access to your report.

What lenders will see

Lenders will check your credit rating or report before you get a credit card, a loan, car financing, a contract with a mobile phone provider, insurance, or a mortgage. By checking your record, the lender will be able to decide if they should consent to your application or not. Mortgage experts like mortgage-wise.co.uk confirm that the credit report will usually have information about your history of credit for around 2 years, and the information the lenders see will be quite detailed.

This includes: your current debt or what you owe, repayments which you have missed or which you have settled; other applications for borrowing money which you have sent off (although this will not show if your application was accepted or not), your current as well as prior addresses, and a record of whether another company has tried to check your record or history in the past 2 years. The lender will also see if you have a shared account with anyone (also referred to as a financial association) and whether you have had any problems with debt in the past 6 years, such as CCJs or county court judgments or bankruptcies.

Your credit score

There are no set criteria or ratings when it comes to credit scores. Lenders will simply base their final decision to approve a mortgage on your credit history data and your application form data (such as your age and income).  But each lender will have their own basis for determining a good applicant; this will often depend on how sure they are that you can afford the mortgage and how much money they can make from the transaction.

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