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Being turned down by a major bank for a mortgage is always disheartening. This can be particularly true if your application was rejected on the grounds of bad credit, which is something that cannot be addressed within a short period of time.
If you are concerned about your eligibility for a mortgage due to poor credit, you may need to set your sights beyond the High Street. Consult with an independent broker to explore the options available, ensuring you target only the most flexible and accommodating lenders with your applications.
What is a “Poor Credit History”?
The term ‘poor credit’ applies when a consumer has a credit score considered too low to qualify for any specific financial product or service. As you would expect, credit histories are viewed with extensive scrutiny where mortgages and similar high-value loans are concerned.
For most major High Street lenders, credit history checks are a ‘binary’ consideration. This means that your eligibility or otherwise will be determined exclusively by whether or not you have a high enough credit score.
Away from the High Street, specialist lenders are more interested in their applicants’ wider financial positions. If you are clearly able to meet your repayments comfortably and for the duration of the loan, there is every chance you will qualify for a mortgage.
As every unsuccessful mortgage application can inflict further credit score damage, it is inadvisable to apply without first consulting with a broker.
How Does the Credit Rating System Work?
The credit rating system exists to provide lenders with an extremely basic insight into your recent and historical financial activities. Primarily, your credit score will be determined by five main factors:
- Payment History. A comprehensive record of your debt repayments, including loan payments, mortgage payments, credit card payments and so on.
- Outstanding Debts. This provides an overview of your total combined debts at the time of your current application.
- Credit History Length. Lenders naturally prefer good credit scores that have been maintained long-term, rather than those only recently achieved.
- Types of Credit. Some types of credit are scrutinised more heavily than others, such as payday loans and consolidation loans.
- Application Record. Every application you submit is recorded on your credit file, ultimately affecting your eligibility for future financial products.
Each of the three major credit reference agencies in the United Kingdom maintains detailed records of every consumer’s financial undertakings. It is these credit reference agencies major banks and lenders use to measure the eligibility or otherwise of their applicants.
All consumers have the right to check their credit reports directly with these three credit reference agencies – information for which can be found online. If you are in any way concerned about your eligibility for a mortgage due to your credit history, consulting with an independent broker before applying is essential.