Been turned down for credit
Have you ever been turned down for a credit or mortgage application? Ever wondered why your application failed?
The UK finance market uses sophisticated credit searching and credit scoring procedures to determine each applicant’s credit worthiness. Vast databases are maintained by credit reference agencies listing current and past misdemeanours. How you have conducted your previous borrowing arrangements will affect future applications for finance such as loans, mortgages and credit cards. Any late payments, missed payments or arrears will lower your credit score, particularly if they are recent.
Additionally, each time you apply for credit the lender will search your credit file and this leaves a ‘footprint’ behind. This trail can be followed by subsequent lenders to see who you have applied to and for how much. This can also damage your credit rating as you go from lender to lender looking for one to say Yes.
Most high street mortgage lenders do not want customers who have a chequered financial past. Their computer systems are set to reject applications from people who have credit problems listed as they pose a higher risk. But there are more specialist mortgage lenders who are happy to take on borrowers who have a less than perfect financial record. These are typically referred to as non-conforming or adverse credit lenders.
In the past these lenders have offered mortgages
with high fees and interest rates to borrowers who had few other options. But
recently new lenders have come into an expanding non-conforming market with much
better interest rates and terms and they are being closely followed by some of
the larger lending institutions. The mortgage options available for a
non-conforming borrower are now actually very good with a reasonable ‘risk’
margin being charged through slightly higher interest rates.
Due to their complex nature, non-conforming mortgages are rarely available from
lenders found on the high street. Your best option would be to approach an
Independent Mortgage Broker such as extrememortgages.co.uk which specialises in
these types of loans before you make any mortgage applications. However, some
brokers do charge fees as high as 3-5% of the mortgage amount so be very careful
who you deal with.
An experienced Independent Mortgage Broker will probe extensively into your financial affairs and question you on past credit problems. Gaining a copy of your credit report from a credit agency such as Experian will enable your broker to more accurately assess any problems. Once all of the facts have been established your broker can begin to search for the best lender and the best interest rate package. They will then also continually liaise with the new lender to ensure your application progresses as smoothly as possible.
If all goes well, in a few years time your credit profile will have improved
and you should be able to re-mortgage
onto a ‘normal’ mortgage rate, which will almost certainly be cheaper.
Sean Horton is a Director of Enhanced Wealth Limited
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