Speak to a specialist lender
If you are struggling to get a mortgage via the traditional methods you could speak to a specialist lender. They can provide the expertise on a particular area of lending where you’re looking for assistance.
If you’re taking out a joint mortgage with your partner and they’ve had problems paying back loans or other types of credit in the past, they will be seen as a higher risk, and that will affect your application as a whole. This could mean being turned down for a mortgage.
But all is not lost. Different lenders have different approaches to credit problems and with the right advice you’ll be able to find the deal for you.
The types of bad credit that can affect your mortgage application
If you or your partner has missed mortgage, loan or credit card payments in the past, experienced bankruptcy, had county court judgements (CCJs) against you for non-payment of debt, entered into an individual voluntary arrangement (IVA) – a payment plan to make paying back debt more affordable – or entered into a debt management plan, you may have trouble getting a mortgage since these will all count against you.
All this is recorded on your credit report for six years so anything that happened more than six years ago won’t affect your mortgage application. How seriously lenders take these things depends on how long ago they happened, the reasons why they happened and whether you’ve paid the debts in full.
Mortgage options if your partner has bad credit
As a result of the financial crisis, the mortgage market was tightened up in 2014, making it harder to borrow with bad credit. Lenders must now always verify your income and take a detailed look at your spending to make sure you can afford the repayments both now and if interest rates go up.
A spokesman from trade body UK Finance said: “The overwhelming majority of new loans are sold under an advised process, during which customers take part in a lengthy interview with the onus being on the lender or adviser to ensure that the mortgage is suitable for the borrower’s needs.”
Lenders have different credit scores they will lend at though, and many are still prepared to accept credit problems. For example, some lenders will accept people with CCJs up to £500 or that occurred at least three to six months ago or more, and some will accept an IVA if it was paid off more than three to six years ago or a bankruptcy if it was discharged more than three to six years ago.
So taking out a mortgage with someone with credit problems in the past doesn’t have to mean you can’t take out a mainstream mortgage – Barclays is just one of the well-known lenders that will consider people with previous credit issues like CCJs and bankruptcy. Your options are just more limited.
Bad credit mortgages
There are also mortgages specifically designed for people with bad credit, although these are more expensive than standard mortgages and you may need to put down a bigger deposit.
According to data from Moneyfacts, over two-thirds of fixed-rate credit-impaired mortgages charge interest rates of 4% or more and over a third charge more than 5%. As a comparison, you can find standard fixed-rate mortgages at well below 3% and there are longer deals of 10 years available.
The best way to find a lender that may be prepared to lend to you is to speak to an independent mortgage adviser who can look at the whole market. They will be able to help you apply to a lender that is more likely to grant you a mortgage, as being turned down can damage your future chances further.
Applying for the mortgage in your name only
If your partner’s credit problems are making it difficult to find a mortgage, it might be possible to apply in your name only.
However, the majority of lenders want married couples to take out a mortgage jointly and if you apply by yourself only your income will be taken into account, limiting the amount you can borrow. You will also be solely responsible for paying it back, which could be particularly problematic if you split up.
If you’re not married, you may find more lenders that are willing to let you apply in your name only, but if you are financially associated in any way – for example if you have a joint account or have taken out a loan together – your partner’s credit history will still affect your application.
Some lenders may accept your partner contributing money towards the deposit, but they would have to “gift” it to you on the basis that they don’t want it paid back and waive their rights to the property.
If you already have a mortgage in your name and want to add your partner to it to transfer the ownership of the property into your joint names, your lender may not allow this if your partner has bad credit.
Five tips to improve bad credit
If getting a mortgage proves too tricky, your partner should try to improve their credit score before you apply:
- Get your credit report from the three credit reference agencies – Callcredit, Equifax and Experian – to check that there are no mistakes or financial associations listed that no longer exist.
- Clear as much debt as possible – get debt advice if you’re struggling.
- Make sure all your future bill payments are on time.
- Register to vote if you haven’t already so you are on the electoral role.
- Avoid applying for lots of credit in a short space of time.
Start your mortgage application
Ask an Expert