Taking back control of your finances can be difficult at times especially after going through some stressful life events. When your spending goes out of hand, and you have poorly managed debts, your credit rating is bound to suffer. A poor credit rating will reduce your capability to get the lender’s approval for products like mortgages. When you are in the market for a home, you might feel discouraged and think it is impossible to get a mortgage from any lender. However, this is far from the truth. Even if you have low credit scores, it is still possible for you to get a mortgage by putting in a bit of effort. So, how to get a mortgage with a bad credit score?
To begin with, you need to understand what information lenders look for in a potential borrower. A major requirement in applying for a mortgage is your credit rating. In addition to this, the lender will also request for you to present documents attesting to your current financial situation. For individuals who are employed, you may be asked to submit payslips and your employer’s recommendation. For self-employed individuals or people in business, a year’s worth of your business accounts should be sufficient.
You may also have to disclose information regarding other existing debts and financial obligations. It helps if you pay off some of your credit as this can reflect positively on your credit score.
How to improve your credit rating
If you have a poor credit rating, it does not mean you can’t do anything about it. Aside from the obvious solution which is to pay off your existing debts, you may also consider doing the following:
- Your marital status. Unfortunately, married couples with joint finances are looked at as one entity. If your partner or spouse has a bad credit rating, it will reflect on you as well. If this is the case, you can consider disassociating your finances with that of your partner. You can do this by applying to a credit reference agency.
- Go on the electoral register. Surprisingly enough, signing up for the electoral register helps to improve credit scores. Although it may not be significant, every little bit helps.
- Prove your reliability. One way to improve your credit rating is to apply for a credit builder credit card. Because credit builder cards have strict repayment rules, paying off your debt in the recommended amount of time updates your credit history accordingly.
- Shop around for interest rates. It is always an excellent idea to compare interest rates whether you have a good or bad credit rating. Many comparison websites offer the convenience of giving customers a one-stop-shop site for checking mortgage rates.
Finally, you have to look for the right lender that specialises in working with people with a poor credit rating. If facts alone will be the basis of approving an application, then the odds are against you. However, if you find a lender that will review your application and look at the other factors affecting your eligibility, you may have a better chance of getting approved. To find the right lender, do your research online and take the time to learn more about each lender before making a final decision.