Having an imperfect credit score is much more common than you might think. This can occur in a number of ways – such as missed payments, insolvencies or CCJ’s. Sometimes people are not even aware of these issues until they come to look at financial borrowing. In the industry this is referred to as ‘adverse credit’ or a Bad Credit Mortgage.
Having a poor credit score doesn’t necessarily mean you won’t be approved for a mortgage. In fact, recently we are seeing a sharp rise in applicants with adverse credit. It just means that there will be a more specialist approach to your application.
Adverse mortgages will typically require a larger deposit and usually charge higher interest rates. This is not always the case though, with some High Street lenders sometimes offering great products to those who have had credit issues in the past. We also have access to specialist lenders who deal primarily with adverse applicants, so there are options to be looked into!
The first step in your process would be to look at and understand what the credit issue is, and the impact it is having on your credit report. We recommend that our clients get a copy of their report from Check My File, as they pull credit information from more than one credit provider. Click this link to get a free 30-day trial.
Sometimes the only solution will be time – occasionally it may be a case of straightening out your finances and waiting for your credit file to catch up. We deal with clients in these situations on a regular basis, so we are incredibly well placed to give solid, sound advice about the best route to take.
Examples of adverse credit issues include:
CCJ – County Court Judgement – created when someone takes court action against you to recoup debt that you owe.
Default – Before you get a default you will have missed a number of payments. The number varies from bank to bank, but in many cases, it will be 6 months of missed payments.
Missed Payments – this is shown in numbers on your credit report – 1,2,3,5,6… which indicate the number of payments that have been missed.
IVA – Individual Voluntary Arrangement – A legally binding arrangement between you and your creditors regarding your debt and agreed payment plan. This is a form of insolvency.
DMP – Debt Management Plan – Similar to an IVA but is not a formal arrangement and you can still be chased by creditors. Lenders do NOT have to abide by the rules of the DMP.
DRO – Debt Relief Order – In simple terms, it is a way that your debts are ‘written off’. This is a form of insolvency, which means it can affect your credit report in a major way. It will stay on your credit file for 6 years.
Bankruptcy – This is an insolvency that includes being stripped of your assets
Please be aware that we are NOT debt advisors.
If you are struggling with your debts you can seek help from different organisations, including StepChange.
Ignoring your adverse debt is never a good idea, for either your finances or your wellbeing.