Other reasons for no credit history can include someone who is perhaps 18, has come into some money for a deposit, and wants to get on the property ladder as soon as possible. In other cases, a divorcing partner has never had credit in their own name.
We can help - but let's look first at why the lenders won't give a mortgage without credit history and that will help you to formulate a plan to get past this hurdle.
Mortgage without credit - is it just "computer says no"?There is undoubtedly a bit of that. In the old days, you signed up with your local building society, saved a deposit and had a reputation that the society knew. Those days are long gone and lenders now rely on computer scoring to offer you loans. This isn't a bad thing - if every loan had to be processed via personal research and face to face interviews, the arrangement fees would be huge!
So what the mortgage companies do, is to rely on data about your past behaviour. Do you pay your bills on time? Do you pay the minimum on your credit card, or do you clear the balance? All of this data is collected and stored and when you apply for a mortgage, it is one of the factors that the lender will look at. The underlying reason for doing this is simple enough; when they lend money, they're taking on the risk that you won't pay it back.
All the scoring and analysis has one aim - to reduce that risk by factoring in any information about you that they can find. If there isn't any - the classic mortgage without credit - because you've never had credit, there's no way for them to estimate the risk of you not paying the money back. So they'll steer clear.
Note that past behaviour is not the only thing that mortgage companies go on and a good broker will be able to match several aspects of your situation to a suitable no credit history mortgage.
The credit scores from the collected data used to be a closely guarded secret until the credit data companies figured out they had a valuable asset on their hands. These days, you can check your credit score for free - do an online search and you'll find lots of companies. It's not going to tell you anything you don't know already. If you're looking for a mortgage without a credit history, your score will be low.
At this point, the whole business of getting a mortgage without a credit history can seem like trying to break into a secret society and always being left on the outside.
Don't worry, with help you can succeed. There are two approaches and we'll look at both. You can use credit responsibly to build a credit history. Or, if you don't feel this is the route for you, you can go straight to a broker who has access to lenders who will give mortgages to people without a credit history.
The building credit routeThis is a good idea provided that you don't overspend and always pay off the balance each month. Don't go anywhere near your credit limit; make sure you pay on time and don't sign up to gambling sites! Inevitably, this is going to take time and a splurge on a holiday or Christmas that you can't pay back isn't going to look good.
In addition, be careful as to which credit card you go for. Some cards are aimed at people with poor credit histories and may make a lender suspicious. If you search on the internet for first time credit cards, you'll find the interest rates are high - another reason to pay the full amount off monthly. Choose one from a mainstream bank or building society, not one that is aimed at people with poor credit.
If you really don't want to get embroiled in the world of credit cards and prefer to keep your finances simple and straightforward, you need a broker who has experience in this area and, most importantly, knows which lenders are most likely to give you a loan.
Best option - a broker who knows which lenders to approachIf you want to get a mortgage with no credit history, it's important to talk to a broker with special expertise in this market. Many large "automated" brokers won't have this, so you can waste a lot of time filling in forms only to find out the firm you're talking to can't help people in your situation.
However, if you talk to a broker such as The Mortgage Hut, who can access the whole of the market and will take a personal approach to your circumstances, you have a much higher chance of success. We know how to get a mortgage with no credit history because we've dealt with many clients in your situation before. We have up to date information as to which lenders are most likely to give you a loan, including both large and small banks and building societies. If there's a loan for you out there, we'll find it. In fact, we're very often able to provide a choice of lenders.
So don't despair - there are ways to get a mortgage. If you decide to go for a credit card and clear the balance every month, you'll build up a history but it will take a while and you are opening yourself to the temptation of spending on the card.
The safest course is probably to try the broker route first and put yourself on the path to being a homeowner. With your history and habits, you'll be a great mortgagee and will build your credit history that way. Subsequent mortgages should be far easier to obtain!