A Guide to Adverse Credit Mortgages

Sometimes it is necessary to ride the waves to reach the calm sea.

Solutions to CCJs, Defaults, Arrears, Agreements to Pay,
Bankruptcy & IVA.

Life happens and you may have ended up with a poor credit profile. Sometimes it is our fault, like when we live beyond our means and sometimes it is things out of our control, such as illness, redundancy or a downturn in economy.  However, you may have ended up with a poor credit score that exclude you from a mortgage with mainstream lenders.

There are however lenders who specialise in lending to people with credit problems.  The group generally called the credit impaired lenders will lend to both residential and Buy to Let property. There will be a premium on the rate based on three factors.

  • how far in time the credit problem was
  • how much is the default
  • the type of default registered in your name.
  • CCJs and Defaults
  • Bankruptcy and IVA
  • Credit repair service
  • Higher the deposit lower the rate
  • Buy to Let available
  • Fixed and tracker rates
  • Exclusive products

Even if you are having credit problems you may be able obtain a mortgage. 
Call us on 0750 7895365 to discuss your options.
Download our adverse credit matrix to find where you fit with a lender here: Axess Adverse matrix
Use our Lender comparison service to find the best deal.

Why Impaired Credit Lenders?

  • No automated credit scoring but credit search only.
  • Bespoke human underwriting.
  • Understand the risk. 
  • Cascading rates based on level of adverse rather than automatic decline
  • Complex income
  • Immature credit histories.

Why use a specialist lender for poor credit?

Advantages

  • No automated credit scoring but credit search only.
  • Bespoke human underwriting.
  • Understand the risk. 
  • Cascading rates based on level of adverse rather than automatic decline
  • Complex income
  • Immature credit histories.
Disadvantages
  • Higher rate – however, rate can vary with severity, i.e. minor blemishes get better rate.
  • Higher fees
  • Lower loan amount or reduced income multiples.
  • Lower loan to value or need higher deposit.

What can negatively affect credit scores

(Guide from Equifax)

The following can have a negative impact on a credit score:

  • Making late payments or missing payments can indicate poor financial responsibility
  • Opening a number of new credit accounts in a short space of time could indicate to a lender that you are struggling financially and lead them to conclude that you may not be able to afford repayments
  • Filing for bankruptcy or being declared bankrupt is a drastic step for those who have overwhelming debt, and can be one of the most damagingly influential factors on a credit score
  • County court judgements show that you have missed debt repayments and the lender has taken the issue to court
  • Being financially associated with others who have a poor credit history can reflect negatively upon your own as a lender may view their credit report when you apply for credit. Financial associations are created when you establish a joint credit commitment (e.g. a joint mortgage or current account with overdraft facility)
Client categories based on credit faults.
Things that affect your credit score.
How to obtain your credit file for only £2.
How time and level of adverse credit affect the rate.

"Obstacles don’t have to stop you. If you run into a wall, don’t turn around and give up. Figure out how to climb it, go through it, or work around it." Michael Jordan

Impaired credit lenders categorise clients based on the level of blips.

Once you map the closest category you fall to call contact us to discuss further.

Prime with minor errors.

Unsecured non-credit: CCJs & Defaults less than £250 & satisfied (for communication, utilities, parking)
Defaults: 0 in 36 months
CCJ: 0 in 36 months
Missed mortgage/secured loan arrears: 0 in 36 months (worst status)
Debt Management Plans: No
IVA: None
Bankruptcy: None
Repossessions: None

Applicant must not have any defaults, CCJs or secured arrears recorded in the three months before application.

Adverse Prime

Defaults: 0 in 24 months
CCJ: 0 in 24 months
Missed mortgage/secured loan arrears: 0 in 12 months, 1 in 24 months (worst status)
Unsecured arrears: Not counted but may affect customer’s credit score
Debt Management Plans: Allowed if satisfied over 36 months ago
IVA: None
Bankruptcy: None
Repossessions: None

Applicant must not have any defaults, CCJs or secured arrears recorded in the three months before application.

Adverse Tier 2

Defaults: 0 in 24 months
CCJ: 0 in 24 months
Missed mortgage/secured loan arrears: 0 in 12 months, 1 in 36 months (worst status)
Unsecured arrears: Not counted but may affect customer’s credit score
Debt Management Plans: Allowed if satisfied over 36 months ago
IVA: None
Bankruptcy: None
Repossessions: None

Almost Prime – Tier 3

Defaults: 2 in 24 months (max £1,500 in 12 months,unlimited thereafter)
CCJ: 1 in 24 months (max £1,000 in 12 months, or £2,500 in 24 months)
Missed mortgage/secured loan arrears: 1 in 12 months, 3 in 36 months (worst status)
Unsecured arrears: Not counted but may affect customer’s credit score
Debt Management Plans: Allowed if satisfied over 36 months ago
IVA: None
Bankruptcy: None
Repossessions: None

Applicant must not have any defaults, CCJs or secured arrears recorded in the three months before application.

Adverse medium – Tier 4

Defaults: 2 in 24 months (max £1,500 in 12 months,unlimited thereafter)
CCJ: 1 in 24 months (max £1,000 in 12 months or £2,500 in 24 months)
Missed mortgage/secured loan arrears: 1 in 12 months, 3 in 36 months (worst status)
IVA: Satisfactorily conducted 24 months.
Bankruptcy: Discharged 24 months.
Unsecured arrears: Not counted but may affect customer’s credit score
Debt Management Plans: Allowed if satisfied over 36 months ago
IVA: None
Bankruptcy: None
Repossessions: None

Applicant must not have any defaults, CCJs or secured arrears recorded in the three months before application.

Adverse Heavy  – Tier 5

Defaults: 0 in 12 months.
CCJ: 0 in 12 months – but Maximum 5 CCJs
Missed mortgage/secured loan arrears: 0 in 12 months.
IVA: Satisfactorily conducted 12 months.
Bankruptcy: Discharged 12 months.
Repossessions: None
Unsecured arrears: Not counted but may affect customer’s credit score
Debt Management Plans: Allowed if satisfied over 36 months ago(DMPs)

Applicant must not have any defaults, CCJs or secured arrears recorded in the three months before application.

Debt Management Plan Prime

Defaults: 0 in 24 months
CCJ: 0 in 24 months
Missed mortgage/secured loan/rent arrears: 0 in 12 months, 1 in 36 months(worst status)
Unsecured arrears: Not counted

Applicant must not have any defaults, CCJs or secured arrears recorded in the three months before application.

Debt Management Plan Near Prime

Defaults: 2 in 24 months (max £1,500 in 12 months, unlimited thereafter)
CCJ: 1 in 24 months (max £1,000 in 12 months, or £2,500 in 24 months)
Missed mortgage/secured loan/rent arrears: 1 in 12 months, 3 in 36 months(worst status)
Unsecured arrears: Not counted but may affect customer’s credit score

Applicant must not have any defaults, CCJs or secured arrears recorded in the three months before application.

Debt Management Plan Adverse

Defaults: 5 in 24 months
CCJ: 3 in 24 months
Missed mortgage/secured loan/rent arrears: 1 in 12 months, 3 in 36 months (worst status)
Unsecured arrears: Not counted but may affect customer’s credit score

Applicant must not have any defaults, CCJs or secured arrears recorded in the three months before application.

How to obtain your credit file for £2.

You have a statutory right to obtain your credit file for a minimum fee of £2.  Although all credit agencies will try to entice you to enrol in their subscription service; you do not need to do this.  The Statutory Credit Report is exactly the same as the subscription paid credit report.

Under the Data Protection Act 2018 you have a right to:

  • request a copy of your credit report
  • dispute inaccurate information on your credit file
  • have errors corrected within 28 days

There are 3 main credit reference agencies lenders use.  So it is better to obtain the credit file from one of these.  The free credit score the agencies offer is not the full credit report.  The credit score is just an indication of the possibility of credit but is not always  directly related.  Debt to income ratio also affects credit and borrowing. Only the full report will show the conduct of all the accounts and will give a better understanding of the credit profile. 

Use links below to obtain the statutory report.  Most lenders use Equifax for the primary search.  So Equifax is the best report to obtain.  Others however, should provide similar details.  There are occasions when differences in account information is found in different reports. 

  1. Equifax : www.equifax.co.uk
  2. Experian: www.experian.co.uk
  3. Call credit.