Bad Credit

Adverse Credit Mortgages & Personal Debt

In today’s society, it is relatively common to come across potential borrowers who have at least some adverse credit history. Personal debt is at an all time high and students are faced with large loans which have to be paid back as soon as they start working. Couple this with the dramatic rise in house prices and it is little wonder that lenders are starting to realise that the adverse credit market is one that should be embraced rather than avoided.

Traditionally, lenders have been extremely reluctant to lend to individuals who have large outstanding debts or have who have had previous financial difficulties; however, more and more specialist lenders, as well as high street banks, are now prepared to look a little more carefully at potential borrowers and offer individual terms and conditions.

10 Percent Of Mortgage Borrowers Have Adverse Credit
It is estimated that approximately one in five mortgage applications will be refused in any given period and around ten percent of borrowers at any one time have an adverse credit mortgage or ‘sub-prime’ mortgage. This is an incredibly large percentage of a booming market and is testimony to the fact that lenders are having to be more competitive, when it comes to offering unusual products; a far cry from the market of twenty years ago where someone with a poor credit rating would have to take whatever terms they could get.

What causes adverse credit
‘Adverse credit mortgages’ is a generic term used to cover a myriad of possible circumstances and there is little or no stigma attached to looking at these products. Any form of credit problem that a borrower has on his or her record can potentially mean that an adverse credit mortgage is the most suitable. Commonly, the types of issues that are covered by these specialist mortgages include any unpaid debts or several late payments, previous mortgage defaults, a previous repossession, county court judgements, individual voluntary arrangements and a discharged bankruptcy.

Most individuals will not check their credit rating on a regular basis and may, therefore, be unaware that a missed mobile phone payment several years ago is still haunting their financial health. It is worth noting that a failed application for finance, on a mortgage or otherwise, can result in a weakening of the credit score. Therefore, borrowers who fear that their rating may not be that great should avoid the scatter gun approach of applying to several lenders in the hope that one will eventually accept them.