Getting a mortgage application accepted after an IVA

How could it affect your chances of getting a mortgage and what can you do about it?

Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

Getting a mortgage application approved while you still have an IVA on file is likely to be difficult. Some lenders will reject your application if you’re in an IVA. However, there are some specialist lenders who may be more open to offering a mortgage.

Will an IVA affect my chances of getting a mortgage?

It is still possible to be approved for a mortgage after an IVA, but you may need to wait until the IVA drops off your credit file.

Once this is the case, your mortgage application is more likely to be approved. However, lenders are still permitted to ask whether you have ever been subject to an IVA, which may affect their decision to lend to you and on what terms.

All of this means that once your IVA has finished, it’s a good idea to focus your attention on improving your credit rating.

How long after an IVA will it affect my credit?

It may take six years after your IVA was agreed or completed for it to drop off your credit file. Once it has been removed, your chances of getting a mortgage will increase.

How can you improve your credit score?

Credit history is built up slowly over time as you increase the number of on-time payments you make.

Most negative marks will remain on your file for at least six years. After that time, everything is deleted from your file, including missed payments, defaults and bankruptcy.

This is the ideal time to start building up your credit score again.

Register on the electoral roll

If your name’s not on the electoral role, you’ll find it much harder to get credit. You can register to vote online or by post easily.

Check for mistakes on your file

Even a misspelt address can have an impact on your score. Make sure you check all the details and report any incorrect information immediately.

Pay your bills on time

Paying a phone landline or Internet contract on time each month is a great way to prove to lenders that you’re capable of managing finances effectively.

Eliminate existing debt

Try to eliminate any outstanding debt before applying for new credit. Banks, building societies and credit card companies might be hesitant about lending you more if you already have a lot of existing debt.

Stay in the same home for a while

Just like a spotty CV looks suspicious to a prospective employer, lenders feel more comfortable if they see evidence that you have lived at one address for a considerable period.

Consider getting a credit-building card

If you have a poor credit history, you might want to consider a credit-builder credit card, designed for people with little or bad credit history.

The credit limits are often low and the interest rates high. This reflects the level of trust your credit file gives lenders.

By using these cards and paying off the bills each month, you can prove you’re creditworthy, increase your credit score, and apply for other cards and loans when your credit rating improves.

How can a mortgage broker help?

Getting a mortgage with bad credit is tricky, but not impossible, depending on what type of credit issues you have.

There used to be a number of lenders who specialised in offering “bad” credit mortgages, also called “subprime” or “adverse credit” mortgages. But many were largely blamed for the 2008 financial crisis, which resulted in them disappearing.

Whilst lenders these days tend to be much more rigorous with their mortgage application processes, it’s still possible to get approved for a mortgage, even if you have bad credit.

Most bad credit mortgages are only available via mortgage brokers, which means sitting down and discussing your options with them should be a priority.

An experienced broker who can advise on the whole market, and who will know which lenders are more likely to accept someone with your particular circumstances, will be able to boost your chances of getting approved.

Finder survey: Do you know what can harm your chances of getting a mortgage?

Source: Finder survey by Censuswide of Brits, December 2023

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.

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