Having credit problems in the past can make it more difficult to secure a mortgage as a contractor, but it is by no means impossible. There are a few things worth considering in order to give yourself the best chance:
Check your credit report: It’s important to understand exactly what your credit report looks like. You can obtain a free copy of your credit report from one of the three main credit reference agencies in the UK – Equifax, Experian, and TransUnion. Check your report for any errors or inaccuracies, as you may be unknowingly penalised for something that is reported in error. Top tip: don’t be blindsided by the credit agency ‘score’ – this is just their interpretation of your credit file and has no bearing on the decisions a lender will make in assessing any application.
Consider a specialist lender: There are lenders who specialise in providing mortgages for those with historical credit issues. While you may end up paying a higher rate than a ‘High Street’ lender might charge, often it can be the difference between getting a more expensive mortgage, and not getting one at all. Top tip: usually these lenders are only available via intermediaries and do not accept direct applications.
Improve your credit report: Even if you’ve had credit problems in the past, there are still things you can do to improve your credit profile. This could include paying off any outstanding debts, making sure that you’re on the electoral roll, and ensuring that you make all future repayments on time. Top tip: Credit cards are a key area to focus on, as lenders will take higher nominal rates of interest on these balances, even if you have a 0% card, to allow for future fluctuations.
Have as much deposit available as possible: With a patchy credit history, particularly if you’ve had County Court Judgements, you may be required to pay a higher deposit than you would otherwise. This is because lenders may view you as a higher risk borrower and need to mitigate the risk by lending a lower proportion of the house value as a mortgage. Top tip: do not assume that CCJ’s will ‘drop off’ your credit report after six years as they will still remain enforceable and can still be traced by lenders.
Speak to a specialist mortgage broker: A mortgage broker can help you to find the right lender for your circumstances. They’ll be able to give you advice on what kind of mortgage you’re likely to be eligible for and help you to navigate the application process. Top tip: No-fee does not always mean the best outcome. Do not be put off by a broker who is ‘fee charging’. The reality is that most brokers charge a fee nowadays, and the more unique or non-standard your circumstances are, the more work will be required.
As mentioned earlier, there are a number of lenders who may be able to help who are not open for direct applications, making the use of a broker essential. Similarly you may find that your situation is not as bad as you think it is, and that a High Street lender may be able to help.
Ultimately, the best course of action will depend on your individual circumstances. With some awareness and preparation, it may be possible for you to secure a mortgage, even if you’ve had credit problems in the past. As with most areas of concern, the key is to speak to a specialist mortgage adviser who can offer the best options available based on your own circumstances.