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Bad Credit Mortgages

If you have had problems with your credit in the past, for example, you may have missed a credit card payment or you have a County Court Judgment against your name, you may have even been made bankrupt all these factors will have had an adverse effect on your credit.

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Bad Credit Mortgages

Most people will experience financial difficulties at one stage or another, and Revolution Brokers deal with many applications where credit issues have impacted a clients ability to secure mortgage financing through a mainstream lender.

This can be because of:

  • Missed payments
  • Defaults on a mortgage
  • An adverse credit score

There are lots of things you can do to help your credit score recover, so if you have ever defaulted on your mortgage payments this does not mean you won't be able to secure future lending!

 Being late on a mortgage payment

If you are already late with a mortgage payment or know that you are going to be late, the first thing to do is talk to your lender.

It is best if you do this at the very latest within 30 days of missing a payment.

Should you be able to repay the missed payment quickly, this might avoid the late payment appearing on your credit file at all. Your lender might be able to help you ensure this does not happen.

Depending on how you pay your mortgage provider, it can take around three weekdays to clear, so if you have sent a payment be sure to let your lender know. If they have proof of payment and understand that the missing funds are en route, this might encourage them to decide not to note the incident on your credit file.

Above all, - communicate with your lender.

The impact on your credit file of missing a bill

The impact on your credit file depends on the circumstances, and usually, if you miss a bill payment, you will receive a payment demand that gives you two weeks to reply.

If you ignore the demand and do not communicate with your lender, there is a risk that they will remove the credit facility altogether and demand full repayment. Should the scenario escalate to this level, you will have an adverse report on your credit file for the next six years.

  • If you pay a bill, but it is late, your credit file shows a late payment.
  • If you fail to pay a bill at all, your credit file shows a missed payment.
  • If you miss several payments, usually 3-6, your credit file shows a default.

Late payments mean that you were late paying a bill, but brought your account back into proper order within 30 days. Arrears are the amounts that you owe over and above 30 days.

If your late payments were recent, these are more lightly to be taken into consideration. A late payment several years ago may not have much impact.

How long late payments show in your credit file

The length of time that late payment, missed payment or default shows on your account depends on how late you were, and the circumstances.

Most adverse transactions will remain on your credit file for six years, although they are shown differently to prospective new lenders.

Your credit file shows a figure next to each late payment, which indicates how many months late you were. A small late amount that was repaid fairly quickly is unlikely to have much impact on your ability to secure credit, particularly if it was several years ago.

A large missed payment, multiple late payments, or serious defaults will have a more severe impact on your credit file. This can mean that some mortgage lenders are not able to extend lending to you.

Can I get a mortgage if I have an adverse payment history on my credit file?

You can, but it is likely to be more challenging. If you have a good deposit, then some lenders will still be able to extend lending to you - this is because their risk is lower than if you had a smaller deposit available.

If your late payments were against unsecured lending, such as a mobile bill or a utility bill, this is typically not as serious. For example, if you were late on one or two mobile bills in the last few years, most mortgage lenders won't consider this significant enough to impact their decision about whether to lend.

However, late payments against secured borrowing, such as a mortgage payment or a car repayment are more serious.

If your credit file shows multiple late payments against secured borrowing, lenders may be very reluctant to extend credit to you. Alongside this, if you are looking for a high mortgage LTV, and have a deposit of, sy, less than 15% of the value you wish to borrow, it may be challenging to secure a mortgage.

This happens because if the value of the property drops and you have secured a high proportion of lending against the value of the home, this could put you into a negative equity situation where you owe more than your property is worth.

How serious are my late bill payments to a mortgage lender

Missed payments and defaults on secured lending are considered the most serious - these indicate a higher likelihood that you will miss amounts owing to your mortgage lender.

Late payments considered less severe are those against unsecured lending, such as phone bills and utilities.

Late payments on lending such as overdrafts and credit cards may be adverse depending on how late they were, and how long ago the issues occurred.

Missing payments to secured loan and mortgage providers are much more severe and might impact your future ability to secure lending. Particularly if you have missed a payment on your existing mortgage, it may be tough to secure a new mortgage or a remortgage.

In this scenario, it is essential to work with an experienced finance broker who can help negotiate on your behalf with lenders who are willing to consider applications based on your personal circumstances

Can late payments be taken off of my credit file?

Potentially, yes, but it depends on whether the company you paid late are willing to consider this. If an incorrect late payment or default shows on your file, you can request this be removed as an inaccurate report.

You will be asked to prove that the report is incorrect, and can negotiate with a lender - for example, if they failed to take a direct debit and therefore marked a late payment, you may be able to ask them to remove this.

A goodwill adjustment is where a lender agrees to remove a late payment or other transaction for you. This is most likely if you are an ongoing customer, have been with the company for some time, and have never before experienced late payments or defaults.

If you are looking for mortgage lending and have been rejected by mainstream mortgage providers, or are concerned that you might be, give Revolution Brokers a call on 0330 304 3040 - we work with clients in all scenarios. We can help you successfully secure the mortgage lending you need.

For more information and help with improving your credit score, Which? has a guide with tips you can access HERE.

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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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