In the past, if you had bad credit, a shady broker was the only one who would give you a mortgage. This mortgage would have very high interest rates.
Now, there are more lenders who will give you a mortgage even if you have bad credit and won't charge you sky-high interest rates. Since there are now more lenders who offer these non-standard mortgages, the interest rates have gone down, which is good news.
"Bad credit" can mean anything from having County Court Judgements (CCJs) on your credit file to missing a mobile phone payment or being late on a few mortgage payments.
People are getting more and more "bad" credit files. Since inflation is going up and credit companies are making it easier for people to borrow, having a bad credit file does not mean you are bad with money.
So, how can you get a mortgage without being taken advantage of by greedy lenders?
First of all, if you're thinking about using a mortgage to pay off debt, keep in mind that you'll probably end up paying more in interest. And your home will be used to back up the debt, so you really need to make sure you can pay it.
And don't apply for the first mortgage you see when you're looking for one. Advertisements on TV that say they can help people with bad credit are fine, but many of them charge up to 3% to set up a sub-prime mortgage. So, on a mortgage of GBP150,000, they get GBP4,500.
As well as doing your own research, talk to a mortgage expert who is not tied to any one company. "Bad credit" isn't as much of a financial stigma as it used to be, so wait for the best deal.
How the Internet can help you find a mortgage if you have bad credit
If you have bad credit, it can be hard to find a mortgage that is made for people with bad credit. And even if you do find a mortgage, how do you know it's the right one for you?
The Internet can be helpful. There's a lot of information about bad credit mortgages, like free guides and links to people who offer bad credit mortgages.
When you go online, you can also compare different providers so you can see all the features and benefits of a product and decide if it's right for you.
There are also websites that let you apply for a mortgage online, and hundreds of them offer free online quotes right away. This means that you can see how much of a mortgage payment you can really afford.
How to raise your credit score
If you recently tried to get credit and were turned down or given credit at a higher interest rate than advertised, this is probably because of your credit rating.
Even if you never miss a payment and don't have any loans or credit cards, your credit score could still be low.
This is because you can get in trouble if you don't have a credit record. Creditors like to see good things on your credit file, and if you don't have any, they can't tell how well you handle your finances.
The solution is to build up your credit record by putting good things on it. Paying your cell phone bill on time and keeping track of your bank and savings accounts are good places to start. So are credit card and store card accounts that are well-run.
If you don't have any credit accounts, apply for them one at a time. Don't try to get a lot of credit all at once, or it will look like you're having trouble paying your bills. Instead, get one card at a time with a low credit limit and pay off the balance in full every month. Start a checking account and a savings account. And make sure you pay all your bills on time, even the small ones.
Start building a credit history slowly, and over time it will be easier for you to get credit and you'll also get a better rate.
