Are you hoping to obtain buy-to-let finance in spite of an impaired credit rating? We can help you find lenders who will consider your application.
These loans are available for borrowers who have had credit difficulties in the past, or who have been turned down by another lender.
Every lender defines bad credit in a different way. Some might refer to borrowers with bad credit as ‘sub-prime’, ‘non-prime’ or, in the case of clients with only minor impairments, ‘near-prime’.
Will a poor credit rating mean you won't get a buy-to-let mortgage?
Factors that can create blips on your credit file include:
- A history of late or missed credit repayments
- A large amount of personal debt, such as credit cards, overdrafts and unsecured loans
- Legal orders to repay debt, such as County Court judgements (CCJs)
- Historical insolvency such as bankruptcy or individual voluntary arrangements (IVAs)
- Credit defaults (debt that the creditor has written off due to the borrower’s inability to pay)
Lenders have varying attitudes to clients with bad credit. All perceive these clients as higher risk, but some are happier than others to take on that risk.
Lenders at the stricter end of the scale will consider only the most minor credit issues, and will not accept clients whose issues date within the last twelve months. But we also deal with lenders who will consider the following:
- Secured and unsecured arrears
- Historical (discharged) bankruptcy
- Debt management plans (DMPs)
If you take steps to improve your credit profile before you apply for a buy-to-let mortgage, you can increase your chances of acceptance.
You can also access your Callcredit data (under the brand name Noddle) and Equifax data (through the company ClearScore) for free. Find out more about getting a credit report at www.moneyadviceservice.org.uk.
When checking your report, keep a look out for:
- Products that you no longer use. Credit accounts that you no longer use but have not cancelled still appear on your credit file. They may even be registered at an old address. Out-of-date information such as this is a red flag to a lender and could lead to your application being declined.
- Products that you don’t recognise. If you find a credit account or application on your report that you don’t recognise, you may be a victim of fraud. Call the creditor and ask to speak to a fraud specialist to determine how and when the account was opened or the application made.
- Errors and notes that you wish to challenge. You can ask credit agencies to remove fraudulent or other erroneous information from your account. There may also be items on your file that you wish to explain further: for example, you may have gone into arrears because of theft or other circumstances outside your control. In these cases, you can ask agencies to add a ‘notice of correction’ to your file. (Make sure that you request this of all three agencies.)
General factors that can improve you prospects with an underwriter include:
- Consistency. All active accounts and products should be registered at the same address. Cancel any accounts you no longer use. Ensure that remaining accounts display the same address and personal details.
- Good financial conduct. In particular, late payments and arrears dated within the last year have the highest chance of affecting a credit application. Remember to contact your creditors if you begin to struggle with repayments, and if you have any outstanding personal debts, consider using savings to pay them off.
- Being on the electoral roll. Checking the electoral roll is often the simplest way of verifying an applicant’s identity. Not being registered to vote, or being registered with the incorrect details or at an old address, can harm your application. It can also make it difficult to get insurance, access certain private and public services and apply for certain jobs. Register to vote online at www.aboutmyvote.co.uk.
- Good timing. Every time a lender searches your credit report it leaves a mark on your file, which future lenders can see when they search it. And lenders might be wary of multiple searches in a short space of time. If you are shopping around for quotes rather than making a full application, ask the lender to conduct a ‘soft’ search that won’t leave a permanent mark.
Remember that there’s no such thing as a perfect or even a consistent score. The three agencies all produce different reports and lenders interpret them in different ways. This means that if your buy-to-let application is declined, it doesn’t mean your next application will be.
If your application is declined, your mortgage advisor will do their best to explain why this happened and work with you to find a suitable alternative product.
Having virtually no credit history can be almost as damaging as having a chequered one. Without a credit file, you are an unknown quantity to a lender. Without the information required to make a lending decision, they may elect not to lend at all.
If you have ever had a credit card, an insurance policy, a mobile phone or even an overdraft, you will have some kind of credit footprint. But your history may not be very robust. Young borrowers, non-registered voters and foreign expatriates are examples of clients who may have slim credit files.
Fortunately, a credit history can be easily built by taking small steps.
Register to vote
Getting on the electoral roll is simple. Citizens of Britain, Ireland, the EU or qualifying Commonwealth countries can all register to vote – it isn’t even always necessary to be old enough to vote.
Lenders use the electoral register to check your address and identity, so registering to vote is an important first step in building a credit profile.
Get a UK bank account
Opening and managing a UK current account is an easy way of demonstrating a responsible relationship with a financial firm. This will benefit your credit profile even if you don’t have, or don’t use, an overdraft facility.
Most current accounts have cursory overdraft facilities. Regular use of your overdraft may hinder your credit rating, and may also incur fees or interest. Simply running a current account is enough to build credit; you do not need to make use of an overdraft.
Be careful not to go beyond your arranged overdraft. Doing so could prove costly, and will also have a negative effect on your credit.
Get a mobile phone
Mobile phone contracts are another example of small credit commitments that help to build a credit history. They are also easy to get.
Bear in mind that a contract might be more expensive than a pay-as-you-go equivalent, and you may need to put down a deposit. But providing a needed boost to your credit profile can be worth the expense.
Get a credit card
You can now turn your attention to accounts and products for which you usually need a small amount of credit information. In most cases, this will be a credit card.
Many types of credit cards exist purely to help borrowers build a history. Many such ‘credit builder’ cards come with high interest rates and harsh terms. But this won’t matter if you stay within your credit limit and pay off the card in full each month.
Each payment will add another building block to your credit history and help you look increasingly attractive to lenders.
Access the best bad credit buy-to-let mortgages
If you have a poor credit rating, we may still be able to match you with a lender who will consider your case. And we can help landlords who have been turned down by other lenders.
For more information about loans that may be suitable for you, or to find out how else we may be able to help, call us for free on the number at the top of this page. Alternatively, click the button below to enquire today.