Top Tips to Help You Get a Mortgage If You Have Credit Problems
With only a third of potential homeowners able to get a mortgage the first time, according to the latest figures, the challenges facing first-time buyers in the post-covid financial landscape can seem quite daunting.
One of the biggest concerns for first-time buyers is credit history. So, with that in mind, the experts at Aldermore have put together some of their best tips to help you out.
Get advice from a broker – No matter how early in the process you are, we encourage you to seek advice from a broker. They can give advice on all aspects of the trip and there is no better time than now to get it as they will provide a market overview specific to your individual situation.
Build your credit history – It is common among young people, such as first-time buyers, not to have a long credit history. This can impact mortgage applications as it can be difficult for businesses to assess you and therefore your credit rating may be lower. You can build a credit score slowly but steadily by taking out small forms of credit, like a mobile phone contract, (but spacing out credit applications over time) and demonstrating your ability to pay them on time and showing that you are financially responsible.
Start improving your credit score now – There are quick things you can do to help this; registering on the electoral roll, setting up levies to ensure that regular bills such as rent, streaming subscriptions and housing tax are paid on time, as well as reducing / reimbursing an overdraft or a student loan. Every little thing will make it easier to show that you can afford repayments and that you are responsible for that commitment. If this is of concern to you, contact a mortgage broker who can advise you on improving your credit rating and your mortgage options.
Credit cards can have a varying effect on credit history – Many keep the same credit card for years, so it’s often the oldest credit facility on your report, which means closing them can lower a person’s score. However, it can be helpful to close, for example, credit cards from stores that have recently been opened with high annual fees, it can help a person avoid the temptation to overspend and reduce their annual bills. When using credit cards, make sure you stay away from your credit limit to indicate that you are not overly dependent on credit and that you are responsible for its use.
Specialty lenders can help – Credit problems are not as much of a barrier to buying a home as they used to be. Specialty lenders will consider borrowers with CCJs and other past credit issues. You may have to pay a higher rate upfront, but making all of your mortgage payments on time will improve your credit rating, making it easier for you to get a better rate when you apply for a future loan.
Jon Cooper, Mortgage Distribution Manager, Aldermore said: “It’s easy to see from the research why many first-time home buyers may feel daunted by challenges when looking for their first home. They shouldn’t despair because there are so many options available to them. Specialty lenders, like Aldermore, open the market up to those with complicated income streams or past credit issues, ensuring that no borrower, regardless of background, feels left out of the possibility of stepping on the bank. housing scale.
“I would also recommend using a broker, which can be a great way to overcome the many pitfalls and confusing processes. They offer the big picture of the market and cut through the lingo to offer options specific to a new buyer’s individual circumstances.