Simply put, a bad credit score is an overall negative assessment of your finances. A credit reference agency will conduct the check, and it will look at a range of different factors. For example, they may look at your history of borrowing or the lack of borrowing you have done in your life.
If your credit score drops below a certain number/level, then you may find it more challenging to get on the property ladder, as your financial options will have been reduced. This article will go over some of the ways you can still get on the property ladder, even with bad credit, so read on.
Improving Your Credit Score
You may find that your best hope of getting on the property ladder, at least in a way that makes sense for you economically speaking, is to improve your credit score. One simple way that you can boost your credit score is to prove where you live. You could do this by registering on the electoral roll for where you currently live. You don’t need to own the place, which is a common misconception. Instead, you could be in shared accommodation or even live with your parents in your childhood home. It’s important to note that moving home a lot could impact your score. Moving is inevitable, but lenders like stability.
You will also be able to improve your credit score if you manage to make more regular payments on time. This could be to pay off any debt or just pay off your bills. You will also benefit from building up your credit history. In some cases, a creditor may not be able to assess you, which lowers your score. Instead, you can compile some credit history, or take out some credit, so that you can get started. You can start small in this regard and ensure you don’t go over your limits.
You should also go over your accounts to ensure no signs of fraudulent activity, even if It’s an old one. If fraudsters have any of your details, then it’s possible that they may be able to take out credit in your name without you even knowing. This can tank your credit score, requiring more work to repair it.
Look Into Bad Credit Mortgages
Now that you understand what a bad credit score is and how to improve it, it’s worth knowing that bad credit mortgagees exist. Many people assume that you won’t be eligible for any form of a mortgage with bad credit. However, there are options out there, providing you work with specialists who deal with bad credit mortgages.
You may not be able to go to traditional lenders and providers, as they may not have any mortgage programs available for those with bad credit. These specialists, such as Money Nest, could even provide you with a mortgage calculator to work out how eligible you are for a bad credit mortgage. Once you fill out a brief form, you will then be able to find out how eligible you could be without worrying about any impact on your credit score.
Of course, the terms of a bad credit mortgage may be slightly less favourable towards you in terms of longevity and interest rates, but it’s the best option that will be available to you. Each mortgage case and situation will be different from the next one, so you should seek specialised advice that can be more relevant to you.
Lower Your Expectations
You may be able to get yourself onto the property ladder if you lower your expectations in some way. That’s not to say you shouldn’t still try to chase down your dreams, just that your dreams should be something that is achievable. For example, you may dream of owning your private island, but that may be difficult to make a reality.
Instead, try to have smaller goals. Even if these smaller goals aren’t somewhere you want to be right now or ever, you can treat them as a stepping stone toward something greater. It is better to be on the property ladder in some way rather than renting, as that money is being burnt away rather than invested into your future.
Lowering your expectations doesn’t exactly mean lowering the standard you expect. It could mean location, as an example. You may find that certain cities in the country, or surrounding towns, are cheaper to purchase than others. In some cases, you may even be able to get bigger properties or pieces of land for the same price than you’d think just from lowering your expectations of where exactly you want to be based.
Lowering your expectations also allows you to gain fresh insight into the property market and time to analyse what you want and how you can get it. If you are working with property or financial experts, then they may be able to explain the process to you and how they view credit scores.
Work With Family
It is likely that you will want to purchase property and get onto the property ladder without any external help. While that is fair enough, you should know that you don’t have to go through the process alone.
Know that there are other types of mortgages aside from conventional and traditional ones designed for you to afford a home purchase with help. For example, there are family springboard mortgages available that allow family members to front the cost of a deposit.
There are a few different types of springboard mortgages out there. They mostly work because a family member, usually a parent, will front the initial deposit cost. This initial deposit will allow the homebuyer to purchase the mortgage without paying anything themselves, except for the monthly repayments.
This may seem like a bad concept for the parent or the family member putting money forward, but there are advantages for them. For example, the family member pays the deposit with some springboard mortgages but will receive it back after five years with added interest. So, while they have to pay the initial cost of the deposit, they will eventually get it back, assuming the homeowner hasn’t missed any repayments.
This won’t be a solution for everyone, but it’s something worth exploring. Don’t limit your options to just one type of mortgage, as more options give you more flexibility with how you could potentially purchase a new home. It’s important that you work with mortgage experts for this reason so that they can advise you on the latest mortgage schemes and plans.
Reconsider The Timing
It’s important to note that the timing could sometimes be an issue for purchasing a home, especially if you have bad credit. Certain times of the year will be more popular for purchasing a home, usually the summer. If you look during the winter, you may find a less competitive time to purchase.
When there is less demand for a home, you may find some mortgage providers more willing to take you on, especially if the individual selling is more in a rush to get the deal done. This is why you should wait until certain times of the year, especially if your current credit score is limiting you somehow.