When it comes to applying for any sort of finance, you will be asked to provide an up-to-date credit report. A credit report is essentially a summary of your finances and how you manage your money. It will be summarised by a score out of 1000 – your credit score.
As a mortgage broker in Manchester, we see different credit scores every day; some averaging low, some averaging high. Depending on an applicant’s financial situation, credit scores can differ from person to person. In a room of ten people, it would be very unlikely to find two people with the exact same credit score.
Credit scores range from 0-1000. Sites such as Experian, Equifax and TransUnion will give you a general guide as to what is classed as a poor, fair, good, very good and excellent credit score. These are based on averages over a period of time however, therefore, one lender’s impression of a “good” credit score could be completely different to another.
Reliability is the key to getting a mortgage, and having a good credit score can massively help in showing that you are reliable and someone who manages their finances sensibly.
Despite appearing as a reliable applicant, you should know that having an excellent credit score will never guarantee you a mortgage. As a mortgage broker in Manchester, we have seen that some lenders offer products that can only be accessed to customers with a credit score greater than 900.
We would recommend speaking with a professional mortgage advisor in Manchester like us before applying for these high-end products. If you do not match the product and you get declined, you could negatively impact your credit score.
If you have a low credit score, you still may be able to take out a mortgage. Yes, you could be limited to specialist deals that come with high-interest rates, however, at least you are still may be able to take out a mortgage!
Remember that everyone’s situation is different and that it is also down to people’s personal circumstances too. So one applicant with low credit may get a mortgage whilst another applicant with a similar credit score may not due to their complex personal situation.
If you are a younger mortgage applicant with a low credit score, you may still be able to find success in your journey. As a first time buyer in Manchester, you may simply not have built up a sufficient credit score yet. Most of the time, this isn’t a problem, even more so if you are using a government-led scheme such as the Help to Buy Equity Loan or Shared Ownership.
If a first time buyer has low credit, it does not necessarily mean that they are bad with their money they just probably haven’t had the chance to increase it. If there is a record of missed payments and defaults, this will harm the chances of getting a mortgage.
Some lenders may only want buyers with good credit, no matter whether they are a first time buyer or not, it depends on the lender. Before applying to lots of different deals, it can be best to first get mortgage advice in Manchester and get the answer to all of your questions.
If you have missed your loan repayments on anything, for a particular length of time, a creditor may issue you a default notice. A default can severely impact your credit score, and even more so if you already have a low score. If your score declines to “poor”, you may be refused a mortgage altogether and may struggle to take out any loans in the near future.
You can pay back a default straight away, but it will still have already impacted your credit score. If you don’t pay it straight away, you will likely be issued with a County Court Judgement. This is the last resort for creditors; first trying to chase the debt and if this doesn’t work then work on an agreement to pay the debt back over time.
Having a CCJ on your credit file is very unappealing. Lenders may be completely put off if they see one in your name. Not to mention that they will also cause damage to your credit score. You could even find it difficult to get a new credit card or open a bank account.
CCJs remain on your credit file for 6 years, even if you settle the amount owed. You can protest a CCJ if you feel that it shouldn’t have been issued, however, you will need to have sufficient evidence to fight your claim.
You can “satisfy” your CCJ by paying it off. It will still appear on your file, although it will say “satisfied” next to the payment. Lenders will be able to see that your debt has been repaid in full. They will also be able to see when the CCJ was originally issued and how long it took you to pay it off.
Typically, the longer a CCJ has been on your file, the more likely you are to get a mortgage. If the CCJ has only been on your record for a year, you’ll be lucky to get your application moving.
This all again depends on the circumstance and the mortgage lender’s criteria. We would always recommend speaking with a mortgage broker in Manchester prior to submitting a mortgage application with a CCJ in your name.
If you already own property and were looking to remortgage your process should be straightforward enough. But, if you have bad credit and are trying to remortgage, you may slightly struggle depending on your situation.
Even though it is your own home, when you remortgage, you are taking out another mortgage product. When you take out a new product, you still have to undergo affordability assessments and credit score checks, therefore, if you have bad credit, you may struggle to remortgage. You may have to accept the fact that you are going to fall onto your lender’s standard variable rate of interest (SVR).
Speak to a specialist mortgage advisor in Manchester prior to remortgaging with bad credit. An expert can answer all of your remortgage questions and see whether you could qualify for any specialist deals.
If you have a lower credit score, you may find it more difficult to access the lower rates of interest. The lower rate products usually come with a “very good”-“excellent” credit score requirement.
As mentioned earlier, you still may be able to access these better rates of interest if you are a first time buyer. This is because you may not have had the chance to increase your credit score yet.
On the other hand, if you have adverse credit, such as a default or CCJ, you will likely be incurring higher interest rates.
Usually, you are able to put down a higher deposit to gain a better rate of interest, however, if you have bad credit, you may already be asked to put down a higher deposit to show your reliability. In this scenario, you will still likely be on a higher rate.
Last edited 10/08/2022