Credit Repair You Can Do Yourself

For those seeking first time buyer mortgages, you might not have heard how just by searching for mortgage rates can affect your credit rating if you’re not careful. What is not commonly known is if you are searching online for a mortgage and complete an enquiry form you could be subject to a credit check, with many firms treating the enquiry as a first step application for a mortgage and burying this fact in the terms and conditions which, if you’re like most people, no one ever reads. Unfortunately credit reports do not perceive between an enquiry and a rejection. If you move on to another broker and apply for a mortgage query with them, they will see the last enquiry, but to them it will seem like a rejection, meaning they’re likely to also reject your inquiry, by this point, sod’s law kicks in and they will also reject your mortgage. It’s a vicious spiral downwards with no easy way out if you don’t tread carefully; to get around this it is advisable to speak to a mortgage broker or an independent financial adviser (IFA) to start with, as they can search on your behalf, thereby not affecting you credit rating.

The top two credit scorer’s in the UK are Equifax and Experian, a majority of the mortgage firms will use one of these companies, so doing a credit check with one or both of them yourself would be beneficial first before applying for mortgage inquiries to gain a solid idea of where you stand. Not many know that the credit rating will be based on your current address, so if you live with someone with a low credit score, it will falsely bring down your own score at the same time. Other ways your score can be wrongly low include being classed as self employed and/or have unequal streams of income will automatically weigh against you; it would take time to untangle the mess of being wrongly mislabelled from this. If your situation is worse than a simple credit miscalculation, the door is not closed; there are still options to gain a mortgage as there is an emergent sector that specialises in what are known as “Bad Credit Mortgages” or “Credit Repair Mortgages”. Of course there will be downsides to signing up for a repair mortgage over a “mainstream” mortgage that must be faced.

To start with, expect to pay higher interest rates and be asked for a larger deposit than you would need for a “mainstream” mortgage, this is why the sector is growing even though the housing market overall is still sluggish, these mortgages are attracting the high street banks as well as the long established mortgage lenders as they make more money for themselves. The Credit Repair Mortgages are exactly how they sound, over time they slowly repair a credit rating thanks to the regular mortgage repayments, depending on how deficient your credit rating is, the repair time can vary, though on average it will be approximately three years. You will have to stay on the mortgage for an agreed period of time with a break clause inserted for the end of this period. It is best to make sure the repair mortgage doesn’t last much longer than it takes to actually repair the credit rating, as it’s then possible to remortgage onto a more standard mortgage, to gain more competitive rates. Credit repair mortgages terms and conditions are incredibly strict, flexibility is not going to be an option; written into the contract will be over excessive penalty fees to ensure regular payments are met. One of the upsides people to be more disciplined with their money in the future.

As mentioned earlier in this article it’s important to talk to an IFA or Mortgage Broker who can help you shop around for the best deal, even when it comes to credit repair mortgages, though be wary not to be caught out by loan sharks or chancers. It is on the whole uncommon but has happened; the Financial Services Authority has a regulated list of qualified advisers and companies’ so checking this list isn’t the worst place to start. Like you credit rating being affected for online mortgage enquiries, some companies will charge you for simply applying for a credit repair mortgage, another reason to use an IFA as they can investigate on your behalf.

To summarise, it’s not the end of the world if you have a bad credit rating, mortgage options are still available if you are willing to take on the extra conditions that come with them, short term pain for long term gain.

Wilbur O’Chaffin works at JustMortgageAdvice.com, who specialise in first time buyer mortgages and look to find the best mortgage rates for all their customers, first time buyers or not.

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