What is classified as 'bad credit'?
Any history of poor credit can be regarded as bad credit. This includes previous mortgage arrears, non-payment (or late payment) of bills or credit cards, county court judgments (CCJs) and even bankruptcy.
Even though you may not have realised it at the time, there's a chance you that may have a bad credit rating, which means a lender will need to take a fresh look at your credit status before proceeding with your mortgage application.
In the current market, lenders may accept potential borrowers with the following in their credit history: Lenders currently accept bad credit as being someone with one of the following:
A CCJ or default that is registered as £500 or below and preferably satisfied
- Someone who generally has a good credit score but has recently
made a late payment to their credit card company or unsecured loan provider
- Someone who may have missed one or two mortgage payments
within the past two years, but never in successive months
- Someone who may have previously been party of an IVA or be a
discharged bankrupt, provided the agreement/discharge was at least 3 years ago
Will my mortgage be any different as a result?
The mortgage you are likely to be offered if you have a history of bad credit is sometimes known as a sub-prime or non-standard mortgage. It is no different to a standard mortgage, except that it may be offered at a slightly higher interest rate.
Once you have been successful in obtaining your mortgage, your credit history immediately improves. As long as you keep up the repayments for a period of time, you will eventually be entitled to re-mortgage to a fully standard mortgage and therefore enjoy a wider range of options.
Related links.
Bad credit mortgages
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IVA mortgages
Repossession mortgages
Credit explained
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