Just how does your partner’s poor credit score affect your chances of getting a mortgage?
Can you simply leave them completely out of the process, ignore their adverse credit history, and get the loan in your own name?
Here at The Mortgage Hut we have the answers!
Individuals and joint mortgages – when one low credit rating affects another
Worse, rather than a good credit score bringing the overall quality of the application up, it is the poorer history that will bring the overall chance of acceptance down. This can be particularly jarring for someone with years of near-perfect credit history who finds themselves unable to get a high street mortgage deal because their partner hasn’t been so careful with money through their life.
However, all is not lost! Mortgage lenders do tend to look at the application as a whole and if questions regarding the bad credit can be reasonably answered, then there is every chance for a successful application.
It may also be possible for one of the partners to apply for an individual mortgage and make that low credit score an irrelevance – here it all comes down to affordability.
Affordability – the hidden side of your credit score
The basics of your credit scoreA credit score is built up over time by showing a good attitude and level of responsibility with credit. If you take out a loan and pay it back on-time in full, then you will generate positive points for your score; conversely, if you are frequently late on credit card repayments then your score will drop accordingly. Larger issues such as CCJs or defaults can have an additional and significant impact on your credit score.
Having a good credit score is a very positive thing, but it doesn’t mean you will automatically be accepted for a mortgage.
Understanding affordabilityAffordability is a completely different calculation and looks at your income (or joint income when applying together) and regular outgoings. In simple terms, it measures your monthly spare cash. If your income is simply not strong enough (or the weight of your regular outgoings too great), then you will be considered to have poor affordability. Getting accepted for a mortgage deal is a matter of positive credit scoring and good affordability.
How to get a mortgage with bad credit but good income
The quality of the deal – bad credit mortgages with The Mortgage Hut
But an adverse credit history with yourself or your partner is going to have an impact on the strength of that deal.
Mortgage lenders will be risking more by offering a bad credit mortgage, and they lower their risk by asking for higher deposits or increasing the interest rate to make it more in their interest.
The options available to a lender are:
What types of bad credit can cause issues for joint mortgages?
Late payments - Late payments show a struggle to make payments which reflects on your affordability. The further back in time the late payments are, the less likely they are to cause issues on your application, but some lenders will expect no late payments in the last year or even, in extreme cases, for the last six years.
Defaults - A default is when a loan or payments have been unpaid for long enough to have the lender consider the relationship broken down and move to alternative action. It can have an effect on your mortgage eligibility, especially if the value of the default was high or it was recent. You should give your lender all information regarding the default and expect to be asked to put forward a larger deposit.
County Court Judgements (CCJs) – while the process of a CCJ can be quite unsettling, they are more common than you think, and many lenders are willing to consider applications with CCJs on the record. Like all other bad credit situations, the time since the CCJ was put in force and the size of the debt are large considerations and will affect the deal you are offered.
...Types of bad credit continued.
Individual Voluntary Arrangement (IVA) – IVAs show a significant failure in the past to manage your financial responsibilities and will be considered a major stumbling stone to a mortgage application. It will be important that the IVA is historical and settled (although there are exceptions) and you can expect to be asked for a higher deposit to secure a mortgage.
Bankruptcy – if you have a bankruptcy on your credit file then the lenders will want to talk to you about it in detail and you should be willing to be open and honest about the situation. Like an IVA, you can expect to need to find a higher deposit, often up to 35%.
Repossessions – having had a previous house repossessed will obviously have an impact on your suitability for a new mortgage, but it won’t make it impossible. The further back in history your repossession is, the more likely you are to get a good deal today. It is, however, important that any outstanding debt or legacy payments that are owed have been cleared in full before applying for a new mortgage.
Advice from The Mortgage Hut
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