It’s possible to remortgage when you have bad credit. However, it will depend how severe the credit issues are – the more complex your credit history, the fewer lenders generally available to you.
Approaching the right lender for your circumstances is more vital in these situations, as it can be the difference between being accepted or declined.
Every lender analyses credit scores and looks at your borrowing history in a different way, so there is no ideal credit score that guarantees your acceptance, and no universally bad credit score that means you definitely won’t be able to remortgage.
If you’re looking to remortgage with a less than perfect credit history, specialist mortgage lenders, also sometimes referred to as subprime lenders, are likely to be your best bet. They take a more flexible approach to credit issues than most of the big high street banks.
A mortgage broker, especially those with experience in helping to source bad credit mortgages, might be able to help you access deals from specialist lenders, as many won’t be available online or on the high street.
If you have poor credit, the major difference you are going to see compared to others remortgaging is higher interest rates.
Specialist lenders don’t tend to publish the rates that are available to bad credit borrowers, as each set of circumstances will be entirely unique. So rates are typically offered on a case-by-case basis.
For example, never having used credit may give you a low score, but this wouldn’t affect the interest rates offered to you as much as if you had a County Court Judgement (CCJ) or Individual Voluntary Agreement (IVA).
As interest rates are usually set based upon the risk that lending to you poses, the level of equity that you have in your current home can also affect the deals available to you.
If you have both adverse credit and low equity in your home, it may be very difficult to find a suitable remortgage deal.
A bad credit score refers to the numerical value held by each of the credit reference agencies, which they base mostly on your credit performance, i.e, how well you’ve repaid your borrowed finance over the years.
The actual number of your score is not something to get hung up on, however, as each credit reference agency uses a different scoring system. So what’s considered high by one may be medium or low by another.
When mortgage lenders assess your credit, they aren’t really looking at numbers, but more at a wider credit picture. How responsible you are as a borrower is what really matters, as they want to be certain that you will repay your mortgage.
They will also be looking at:
The level of debt you have
How many repayments you’ve missed or made late
Whether you’ve satisfied (repaid) any credit issue and how long ago they occurred
As with most questions related to getting a mortgage or remortgaging, it really depends on your circumstances. Generally speaking, the more severe and more recent your credit issues are, the more difficult it will be. The level of equity you have will also play a role in this.
If you had a CCJ three years ago that is now satisfied, however, there’s a high chance that you will find it just as easy as someone with a perfect credit history to remortgage.
There are a few specialist lenders that use other methods of assessing your creditworthiness than the standard credit record checks, however, you will need to access them through a mortgage broker as they are not always directly accessible to the public.
The other option is to see if your current lender will offer you a product transfer, as they may not need to check your credit history in order to do so.
Yes, absolutely. If you have bad credit, it’s likely to be much easier to remortgage simply to tie in a better deal than you currently have, rather than to borrow more for home improvements, for example.
It’s also worth bearing in mind that some lenders will consider why you have poor credit. Many are more sympathetic to debt that’s being acquired through negative life events, such as ill health, than someone who has simply been careless with credit card borrowing.
As with most questions related to getting a mortgage or remortgaging, it really depends on your circumstances. Generally speaking, the more severe and more recent your credit issues are, the more difficult it will be. The level of equity you have will also play a role in this.
If you had a CCJ three years ago that is now satisfied, however, there’s a high chance that you will find it just as easy as someone with a perfect credit history to remortgage.
There are a few specialist lenders that use other methods of assessing your creditworthiness than the standard credit record checks, however, you will need to access them through a mortgage broker as they are not always directly accessible to the public.
The other option is to see if your current lender will offer you a product transfer, as they may not need to check your credit history in order to do so.
Yes, absolutely. If you have bad credit, it’s likely to be much easier to remortgage simply to tie in a better deal than you currently have, rather than to borrow more for home improvements, for example.
It’s also worth bearing in mind that some lenders will consider why you have poor credit. Many are more sympathetic to debt that’s being acquired through negative life events, such as ill health, than someone who has simply been careless with credit card borrowing.
Whilst there are bad credit lenders available for the majority of circumstances, the more severe your credit and the more recent it is, the fewer lenders that will be available to you.
One way to maximise your chance of being accepted is to work towards improving your credit score. You can easily check your credit record for free online, which will help you see what might be holding you back.
The vast majority of mortgage lenders will look at one or more credit reports from the various credit referencing agencies, so it’s helpful to know where you stand before you approach a mortgage broker.
Once you’re familiar with your credit report, the following steps will help you to improve your credit more quickly, which should open more lender doors:
Make sure you’re on the electoral roll at your current address
If you have a low score due to lack of credit used, then a credit building card could help you, if used responsibly
Try to resolve any existing bad credit issues before you apply, where possible
Repay all bills on time, including loans, mortgages credit cards and utilities
Stay within your credit card and overdraft limits, and don’t use more than 50% of all of your available credit
Make sure your addresses are up to date on all accounts mentioned on your credit report, and that you close any unused accounts
Make corrections to your credit file, double check what information each credit referencing agency holds about you
Break ties with any people that you have been financially linked to in the past, by contacting the credit reference agencies and asking them to remove your association and/or closing down old joint accounts. For example, this might be a former partner, and if they have bad credit, their credit rating will be affecting yours
Even if you have adverse credit, so long as you’ve never missed or been late with a mortgage payment, your existing lender may let you switch to a better deal from their range.
Most lenders won’t do an additional credit search for a product transfer, so your credit history won’t necessarily hold you back here.
Bad credit won’t follow you forever, so long as you change the behaviours that caused it. Your credit history is only held for six years, so even a bankruptcy that happened in more distant history shouldn’t be visible to lenders once six years has passed since it was discharged.
The less severe the credit issue, the sooner lenders may be willing to overlook it, or adjust their interest rates to accommodate you. For example, there are even some high street lenders that will begin to look at borrowers with CCJs older than two years.
Even if you have adverse credit, so long as you’ve never missed or been late with a mortgage payment, your existing lender may let you switch to a better deal from their range.
Most lenders won’t do an additional credit search for a product transfer, so your credit history won’t necessarily hold you back here.
Bad credit won’t follow you forever, so long as you change the behaviours that caused it. Your credit history is only held for six years, so even a bankruptcy that happened in more distant history shouldn’t be visible to lenders once six years has passed since it was discharged.
The less severe the credit issue, the sooner lenders may be willing to overlook it, or adjust their interest rates to accommodate you. For example, there are even some high street lenders that will begin to look at borrowers with CCJs older than two years.
The simplest way to find out is to check your credit record. Find out how to improve your credit.
There are a wide range of reasons that you may have adverse credit, some of which are fairly minor, and others that will have a more negative affect on your ability to get a mortgage.
In order of how severely they will factor into your mortgageability, these circumstances can all lead to your having a bad credit history:
Never having used credit
Making late bill payments
Missing bill payments
Having a Default recorded against you
Having a CCJ (County Court Judgement)
Having a DMP (Debt Management Plan) or IVA (Individual Voluntary Agreement) in place
Mortgage arrears, especially currently
Bankruptcy
Repossession
No, you can’t, as the lender will consider you a more risky borrower on account of that bad credit.
The significance of the increase in mortgage rates won’t always be huge, however, especially if your bad credit is fairly minor. It’s always worth speaking to a mortgage broker for further advice.
It depends on your circumstances, such as how bad your credit is, and how much equity you have in your home.
It’s also important to seek advice about which lenders to choose, as multiple rejections from applying with the wrong type of lender for your circumstances will reduce your score even further.
As each credit reference agency uses a different scoring system, mortgage lenders are not looking for any particular baseline score for mortgage or remortgage acceptance.
Unless you have a very severe credit history, you will typically be able to remortgage with poor credit, it just means you will have less choice of lender and pay higher rates of interest.
If you have a joint mortgage and only one of you has poor credit, it will typically affect both of you, as people that own a home together are financially linked on their credit records.
That said, every lender has a different set of criteria to the next, so it won’t necessarily mean that you can’t find a remortgage deal to suit your needs. If either, or especially both of you have poor credit, it’s important to speak to a broker before selecting a lender.
It depends on how much equity you have, and how severe your bad credit is. It also depends how much you want to borrow, and why, as the purpose of the equity release can influence the lenders’ decision.
It will certainly be more difficult to find a lender willing to extend your borrowing than simply put you onto a more competitive deal, however, if you have substantial equity, it’s not out of the question.
This will depend on both the level of equity you have and how recent or severe your CCJ is. All lenders assess the risk of having a CCJ differently. Some will only consider you if they have been satisfied, some will only consider you after a certain amount of time has passed, and some will expect both a certain number of months or years to have passed and for the debt to be satisfied (repaid).
Generally speaking, the more equity you have and the further in the past your CCJ occurred, the less of an issue it will be to find a willing lender.
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