Bad Credit Remortgages
A competitive remortgage can be a great way of raising funds for a variety of purposes. Typical examples of which include home improvements and renovations, family holidays and new vehicle purposes. As an added bonus, remortgaging to a more competitive deal can also significantly reduce your immediate and long-term outgoings.
Traditionally, individuals with an imperfect credit history have been excluded from these kinds of financial products. On the UK High Street, the vast majority of major banks and lenders distance themselves from poor credit applicants. Even where the applicant is an existing customer, their application could be immediately refused on the basis of their credit score.
Even if they were to qualify, they may be offered an unfavourable deal at an elevated rate of interest due to their credit history.
Specialist Bad Credit Remortgages
Away from the High Street, there is a growing network of specialist lenders who welcome poor credit applicants. Rather than basing their decisions exclusively on credit scores, they instead take all important factors into consideration. Current financial status, equity, income and so on – all of which may be considered of greater relevance than a credit score alone.
If you are considering applying for a remortgage and have any questions or concerns regarding your credit status, speak to an independent broker before submitting your application. This will help you make sense of the available options, while ensuring you target the right lenders for your case.
Common Credit Issues and Consequences
It is natural to assume that if you have a flawed credit history, you will automatically be counted out of the running for a remortgage. With many traditional banks and lenders, this is indeed the case.
Irrespective of the nature and severity of your flawed credit, it may still be possible to qualify for a competitive remortgage elsewhere. The key to accessing a competitive deal means directing your efforts at the UK’s more flexible and accommodating lenders, particularly if there is evidence of any of the following on your credit report:
- Missed or Late Payment
- Debt Management Plan
- Discharged Bankruptcy
- Defaults (a series of missed payments)
- County Court Judgments (CCJs)
- Individual Voluntary Arrangement (IVA)
What makes the difference with specialist lenders is that all applications are judged on their individual merit. Rather than credit scores alone, decisions are made in accordance with the applicant’s overall financial status and capacity to repay the loan.
As with all major loan applications, you will be required to provide extensive proof of your financial position, your employment status, your income level, your equity and so on. In all instances, an experienced independent broker can help you complete and submit your application, while ensuring the right lenders are chosen to suit your needs.
What is a Credit Score?
Your credit score is calculated on the basis of your financial activities over the course of several years. There are three primary credit reference agencies in the United Kingdom – Experian, Equifax and Callcredit. Each of which holds a detailed record of the debts, repayment obligations and general financial behaviours of every consumer.
Used by lenders to determine eligibility (or otherwise) for financial products, credit reports feature such information as:
- How many lines of credit you have applied for
- Successful and unsuccessful applications
- Existing debts and repayment obligations
- Instances of missed or late payments
- Bankruptcy or debt management plans
- Use of high risk credit (such as payday loans)
- Management of debts like credit cards
All of this information is used to calculate a ‘score’ for the individual concerned, which will subsequently be used by banks and lenders to gauge eligibility. With most major banks and lenders, it is a simple case of exceeding the required credit score or being turned down outright.
Even if you are in an excellent financial position and can easily afford the repayments on your loan, you are unlikely to qualify with a major lender if your credit score is low.
How Do I Improve My Credit Score?
While it is perfectly possible to improve your credit score, there is not a great deal that can be done short-term. It is important to remember that the vast majority of ‘entries’ on your credit history will remain visible for up to six years. In the meantime, the only thing you can do is to manage your finances responsibly and gradually improve your credit score.
Some of the most effective ways of building a better credit report include the following:
- Ensuring your name appears on the electoral roll
- Paying off as many unnecessary debts as possible
- Minimising the number of debts you apply for
- Paying more than the minimum monthly amount each month
- Reducing your credit card and overdraft balances
- Ensuring you never miss a monthly payment or pay late
- Avoiding ‘risky’ lines of credit like payday loans
- Checking your credit history for discrepancies
- Cancelling any lines of credit you do not use or need
- Avoiding application refusals at all costs
Organise a consultation with an independent broker to discuss the process of rebuilding your credit history in more detail.
Can I Afford to Remortgage?
Affordability varies significantly from one lender to the next. Not to mention, the requirements and budget of the individual applicant.
Depending on your intentions for the remortgage, it is perfectly possible to save a small fortune on the balance of your existing mortgage by switching to a more competitive deal. If you intend to extend your mortgage to raise funds for any purpose, you will need to think carefully about your capacity to meet the subsequent repayments.
This means conducting the same ‘stress tests’ as would be the case with any traditional mortgage. Make a detailed list of all your monthly bills and outgoings, along with the general expenses that sustain your lifestyle. Subtract these from your total monthly income and determine how comfortably you can cover your existing outgoings and your remortgage payments.
Again, it can be helpful to consult with an independent broker to gain impartial insights into your situation and the most appropriate course of action. Particularly if you have imperfect credit, you will find the import of an objective expert invaluable.
Can I Remortgage With Bad Credit?
The short answer is yes, but you need to target your applications strategically. You will find that with poor credit, a striking majority of major lenders are unwilling to even consider your application. Even if applying with your existing mortgage provider, they may count you out of the running entirely on the basis of your credit score.
This is why it is important to apply for a remortgage via an independent broker, who can help you find the best available lender to suit your requirements. Rather than running the risk of multiple failed applications inflicting further harm on your credit history, it simply makes sense to get things right first time.