Like many people in the UK, you might be wondering if spending so much over the recent festive period was such a great idea. Especially when the time comes of the credit card, catalogue or the buy now pay later bills hitting the welcome mat.
That’s without taking into consideration the current cost of living crisis, increase of prices in foodstuffs, fuel and energy bills.
What does this mean for mortgages?
Mortgage lenders have consistently been re-assessing their criteria for who they will and won’t be considering as lend worthy. This is a result from the rapid increase of interest rates that occurred during last year. (2022)
Along with the normal lending application considerations; such as income multipliers and the amount of deposit. A buyers (and re-mortgagers) credit profile will go a long way to determine whether or not a lender will loan the required amount.
This brings us back to what many of us might be dealing with, especially in January, credit cards and loans.
How does a lender assess a potential borrower’s credit profile?
Most of us will logically assume that a lenders assessment is just based on our credit score. After all surely a good credit score indicates that we are good with credit. Right?
Well, yes and no.
A lender will look at a credit score, but this will normally be based on how they assess your application against their own criteria and method of scoring. So, while having an Experian or Equifax profile and report is a good indication, it’s not what the lender will necessarily use.
Lenders generally tend to look more at the type of credit you might have. Including how many credit cards and loans, the amount in £’s of borrowing and the monthly payments. They will also look for any kind of negative trends, such as missed payments, defaults, or arrangement to pay. These are likely to be more damaging when trying to get approved for a loan, rather than your credit score.
There are also the bigger credit blips that can really limit a lenders appetite to lend. Such as having a debt management plan, individual voluntary arrangement (IVA) or having been bankrupt.
Does this mean I can’t get a Mortgage?
If you have previously been in a situation where this was an issue, it doesn’t mean there are zero lenders who you can turn to. Although, it may mean a higher cost in the borrowing. Resulting in needing a more specialist lender who may only be available through a broker.
In the event of where there are no one is willing to lend, it might just be a case of time, as this can be a great healer.If multiple lenders do say no, it’s normally the reasoning of not now, but once a certain period on time has passed, this could be months or longer. This will give you the time to help your credit profile to look healthier. Resulting in lenders being happier to lend to you.
The best thing to do If you’re unsure of how to proceed, is to speak to one of our friendly and professional advisers. We will advise how to improve your credit profile and seek the right mortgage deal.
Why not make a short 15-minute phone call to our freephone mortgage helpline to get started? All you need to do is phone us directly on 0333 005 0333, or text ADVICE to 82228.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Approved by The Openwork Partnership on 19/01/2023
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