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.

Traditionally, lenders were extremely reluctant to lend to individuals with large outstanding debts or who previously had financial difficulties. Until the mid 1990s, most brokers promoting adverse credit mortgages offered loans at high rates of interest and charged high fees for arranging them. Before the credit crunch, an increasing number of lenders became active in the adverse credit mortgage market and the interest rates for these loans became much more competitive. However, in recent times, many lenders have again become extremely reluctant to lend to individuals with financial problems.

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, previous repossession, county court judgements, individual voluntary arrangements and 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, for example, is still haunting their financial health. It is worth noting that a failed application for finance, on a mortgage or other financial transaction, 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.