It used to be that mortgages were fairly easily obtained – especially when ‘self-certification’ meant you could declare a mortgage affordable and lenders would essentially take your word for it.
One global financial crash and a couple of bank bailouts later – and the mortgage and remortgage process is now very different.
Now, upon applying, the finer points of your finances will be considered by a highly trained mortgage advisor. That person will do everything in their power to make sure lending you money isn’t going to be a risk for anyone involved.
So, what happens if you’ve got bad credit? Does this automatically mean you’re going to have your remortgage application rejected? Will you be paying an enormous interest rate? Or are remortgages possible, even if your credit rating could be better?
Thanks to The Loans Department we can look at these questions in a little more detail – and explain a few things you can do to help boost your chances of getting a good remortgage deal.
Remortgaging with poor credit
Put simply, you can remortgage your home if you have bad credit.
The remortgage application might involve a little more explaining around what’s happening financially, but there are very few automatic ‘no’ answers to be hand from lenders.
That said, rightly or wrongly, a lender will take your credit score as a general indication of whether or not you represent an increased risk, therefore, there’s every chance you could be paying more than their advertised best rates. It’s worth remembering though, this doesn’t just apply to you if you’ve got bad credit – many people find they’re not eligible for the very best interest rates, as exceptional credit ratings are quite hard to obtain.
So, remortgaging is possible if your credit rating isn’t at it’s very best – and the good news is, there are a few things you can do to nudge your credit score up even more…
Improving your credit rating before remortgaging
It’s not uncommon for people to feel disconnected from their credit file – after all, it’s not something that many of us keep a track of on a daily basis.
The thing is, no matter how disconnected you might feel, there things you can do to boost it – and many of them don’t take a great deal of time.
Register to vote
As a current homeowner, it’s unlikely that you’re not registered to vote at your property – but if for any reason you’ve missed this fine detail, now’s the time to get registered. This is a must for a lender – and it only takes a few minutes to do online.
Request your credit file and check it over
You’re entitled to a copy of your ‘statutory credit file’ at any time. This is a paper report that’s very similar to the reports a lender sees when they perform a credit check against you. It only costs a small amount and can give you a world of insight.
Request your credit file then have a good look at the information it contains. Check for any credit that still shows that is now paid off, check for credit that you don’t recognise, look for any streams of credit you don’t use any more – and so on.
Mistakes do happen – as does identify theft. There’s no guarantee either of these things have happened to you, but for the small amount of money it will cost to check, it’s better to be safe than sorry.
What else can boost your remortgage chances?
The mortgage application process has changed considerably – and that’s not all for the worse when it comes to applying with poor credit.
Thankfully, there’s a lot fewer computer generated decisions now – and much more emphasis on companies talking to you to work out if your new mortgage is affordable. When you talk to a person, you’re able to explain a lot more than your black and white bank statements can.
With this in mind, it’s worth making sure you’re on top of a few other things before you make your application:
Stay out of your overdraft
A lender is going to want to see that your new monthly payment can be comfortably met. If you’re in an overdraft consistently, this might be a sign that you can’t manage your money quite as well as you think.
Don’t miss any payments
Missed payment to creditors is a big red flag for a lender. Try your very best to keep up with all your credit agreements – and you’ll look like a better prospect for a remortgage product.
If possible, avoiding credit approaching your remortgage application is a good step. It tells a lender than your outgoings are unlikely to increase any time soon.
Stay on top of current credit
It’s easy to slip behind on a payment here or there – but if you can avoid this, you’ll also be avoiding awkward conversations about money management with a remortgage advisor. Lenders understand that most people have credit – but they don’t want to be added to a list of people you forget to pay…
Adjust your life accordingly
A mortgage advisor often looks at your spending and gets a good idea of your lifestyle based on how your bank statements look. Whether you’re planning on cutting back on lifestyle spending or not, they can only base a decision on current information – so if you’re planning on promising to stop smoking, reduce spending or cut back on eating out, your intentions (and money situation) will be much clearer if you’ve already put these plans into motion – before applying.
Choose the right lender
There’s no such thing as a ‘typical’ lender – they all have different lending criteria and suit different types of people, incomes, job roles – and so on. Doing some research around who you’re most likely to be accepted with before starting any mortgage applications is a very good plan.
As part of the application process, lenders will perform a credit check, essentially getting a quick view of your finances. If you’re not selective with the lenders you choose, you might find you end up with a number of credit searches and a handful of declined applications. Lenders can be slightly nervous about these things, so choose your remortgage company strategically, and you’ll stand a better chance of getting a quick ‘yes’.
Don’t keep applying
If you’ve had one ‘no’ (or an offer at a rate you just don’t like) – you might think it’s a good time to immediately try again elsewhere. Again, avoid this wherever possible. Aim to allow a few months to pass before you apply again elsewhere – this helps you to avoid looking like you’re a poor prospect that’s been declined a number of places previously…