Tips for Remortgaging with a Bad Credit Score

Adverse credit is a broad term that refers to multiple different scenarios, including:

• A low credit score.
• Late payments or mortgage arrears on your file.
• Having defaults or CCJs registered against you.
• Being in a Debt Management Plan or IVA.
• Repossessions or bankruptcy, at the more severe end of the scale.

Now, a lot will depend on which of those bad credit circumstances you've experienced.

Bad credit lenders will tend to assess each remortgage application on a case-by-case basis. They look at when the situation occurred, why it happened, what sort of money was involved, and if you've since made good on your debts.

However, things get trickier the further down the list you get.

A remortgage application currently in an IVA or with a property repossession in the last 18 months will undoubtedly require tailored support from a specialist broker to find their required borrowing.

Other considerations include:

• The deposit you have available - with the higher, the better.
• Your loan to income ratio, which shows how much you want to borrow against how much you earn. Most lenders will lend 3.5 to four times your annual earnings.

Possibly - although it depends on why you have a low credit score.

If you already have a mortgage, it's unlikely that you have never used credit borrowing, and therefore haven't ever built up a credit history. If you are younger, this could be the cause - in which case, the lender will need to assess affordability to be confident you can afford the remortgage payments.

However, suppose you have a very poor credit history. In that case, you will need to apply to a remortgage provider who is less interested in credit scores as they are in demonstrating your ability to keep up with the mortgage costs.

Again, maybe - but lenders will need to know what other credit issues you may have. Missing mortgage payments and falling into arrears is a red flag that you won't make your repayments on time, so you will almost certainly need an independent broker to negotiate terms on your behalf.

If the arrears were several years ago, you're more likely to be approved for a remortgage if you can explain what happened.

You will usually need at least a 15% to 25% deposit for a remortgage after arrears.

Suppose you have a higher deposit (in a remortgage scenario, that would be the equity remaining in the property to leverage as security). In that case, the lender's risk drops a little further, and you'll instantly improve the offered interest rates.

Defaults are more serious than a late payment but aren't always a deal-breaker for remortgaging.

It is common for high street banks to reject any applicant with defaults, so a specialist lender is usually your best bet.

Lenders will consider when the defaults happened, why, and how serious the amounts involved were.

Again, it all comes down to when the CCJ was registered and whether you have now satisfied the debt. Some bad credit lenders will consider a mortgage within a couple of years of a CCJ, although mainstream lenders will typically need several years to have passed.

CCJ remortgage applicants will need a high deposit to offset the lender's risk - usually at least 25% of the purchase value.

The longer ago the CCJ was registered, the more likely you would be approved for a remortgage.

If you have an IVA and can show that you have made repayments on time for at least a year or two, you may be eligible for a remortgage.

Lenders all have different policies about IVA lending, so it is essential to be upfront about why you are in or have had an IVA and show that you are now managing your finances responsibly.

Potentially, you can consider a second charge mortgage to raise funds needed to settle the remaining debt on your IVA. Specialist lenders will look at your recent credit history to determine whether they can offer to lend.

Secured loans are more flexible than mortgages, and you can usually borrow up to ten times your annual income. In contrast, a mortgage is typically limited to four or five times your yearly earnings.

Remortgaging can be an option if you are in a DMP and want to raise funds to pay back your debts. You can also refinance when the DMP has been paid, provided you meet the lender's criteria.

Most remortgage lenders will offer a loan with a 15-20% deposit if you have a DMP on your credit file. The higher your equity and the lower the LTV you are applying for, the greater your remortgage prospects.

Bankruptcy is a serious credit issue, and most high street mortgage lenders won't offer a loan to anybody with bankruptcy on their credit file - no matter how long ago it happened!

Specialist bad credit lenders will consider a remortgage following bankruptcy and can even offer to lend within a year or two of the bankruptcy being discharged.

Repossessions can happen for a broad number of reasons. We often work with clients who lost their home during the credit crunch and are now in a position to look at remortgaging or buying a new property.

As with bankruptcies, repossessions are serious, so you will almost certainly be rejected if you apply directly to a mainstream lender. The key is to assess your repossession history, explain what and why it happened, and apply to a bad credit lender who will be able to consider your remortgage requirements.

The best way to ensure you get the best remortgage rates is to work with a whole-of-market broker. We have access to every mortgage product, offer, interest rate and lender on the market, so we can make an independent assessment about which home loan is best suited for you.

Tips for Getting a Remortgage With Bad Credit

• Avoid applying to your bank - they will nearly always reject a bad credit remortgage application, and you'll have another hard credit check on your file to boot.
• Access your credit reports, and make sure they are entirely up to date and accurate.
• Calculate your Loan to Value - how much you want to borrow vs your equity - before applying for an unrealistic remortgage amount.
• Work on improving your credit score. You can register to vote, avoid borrowing up to the limit on your credit cards or overdraft or consider an adverse-credit borrowing card designed to help you build up a history of responsible borrowing.