Just how does your partner’s poor credit score affect your chances of getting a mortgage?

Getting a mortgage when you have bad credit can be difficult, but at least it’s an issue you feel personally responsible for. When it is your partner’s history that affects your mortgage application, it can seem particularly unfair.

Can you simply leave them completely out of the process, ignore their adverse credit history, and get the loan in your own name?

Here at The Mortgage Hut we have the answers!
Just how does your partner’s poor credit score affect your chances of getting a mortgage?

Individuals and joint mortgages – when one low credit rating affects another

Typically, mortgage lenders want a mortgage to be in the names of all adults living in a property. Joint mortgages are the standard in a marriage or other long-term partnership and unfortunately this means that the credit score of both partners influence the mortgage application.

Worse, rather than a good credit score bringing the overall quality of the application up, it is the poorer history that will bring the overall chance of acceptance down. This can be particularly jarring for someone with years of near-perfect credit history who finds themselves unable to get a high street mortgage deal because their partner hasn’t been so careful with money through their life.

However, all is not lost! Mortgage lenders do tend to look at the application as a whole and if questions regarding the bad credit can be reasonably answered, then there is every chance for a successful application.

It may also be possible for one of the partners to apply for an individual mortgage and make that low credit score an irrelevance – here it all comes down to affordability.
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Affordability – the hidden side of your credit score

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When looking at bad credit mortgage loans, the lender does not simply leave everything up to your credit score. They also look at your level of affordability.

The basics of your credit score

A credit score is built up over time by showing a good attitude and level of responsibility with credit. If you take out a loan and pay it back on-time in full, then you will generate positive points for your score; conversely, if you are frequently late on credit card repayments then your score will drop accordingly. Larger issues such as CCJs or defaults can have an additional and significant impact on your credit score.

Having a good credit score is a very positive thing, but it doesn’t mean you will automatically be accepted for a mortgage.

Understanding affordability

Affordability is a completely different calculation and looks at your income (or joint income when applying together) and regular outgoings. In simple terms, it measures your monthly spare cash. If your income is simply not strong enough (or the weight of your regular outgoings too great), then you will be considered to have poor affordability. Getting accepted for a mortgage deal is a matter of positive credit scoring and good affordability.

How to get a mortgage with bad credit but good income

The good news is that there are some lenders that will look at your circumstances outside of your credit score. They are willing to listen to you and understand your situation and through a capable bad credit mortgage broker like The Mortgage Hut, you will find yourself being able to get a deal. As long as you have the affordability. Having a good income is going to make those credit score mistakes of past years little more than a conversation – whether they are yours or your partner’s.

The quality of the deal – bad credit mortgages with The Mortgage Hut

Some bad credit mortgage brokers believe that the customer will take anything that is offered and won’t fight for the best possible deal – that’s not our take. We know that everyone deserves the best deal possible and will work hard to get you the best rate possible with a deposit you can afford.

But an adverse credit history with yourself or your partner is going to have an impact on the strength of that deal.

Mortgage lenders will be risking more by offering a bad credit mortgage, and they lower their risk by asking for higher deposits or increasing the interest rate to make it more in their interest.
The quality of the deal – bad credit mortgages with The Mortgage Hut

The options available to a lender are:

  • Refusing your application – with help from The Mortgage Hut, this is rare, and we can typically find a mortgage lender to suit your situation, but ultimately it is the lender’s right to refuse an application.
  • Offer a higher interest rate – lenders will look at your application in detail and will use their assessment to determine a rate of interest. Often called ‘credit repair’ rates, these are typically a few percentage points higher than those available to people with solid credit. Usefully, you have the option to remortgage once your credit is healthier, effectively renegotiating the rate.
  • Increase their fees – some lenders will simply increase their fees for dealing with the bad credit application, sometimes up to £3000. Typically, this can be added to the mortgage itself and you won’t have to find it in the early days.
  • Require a larger deposit – it is likely that your poor credit score will mean you are asked for more than the standard 10% deposit. Depending on your credit history, you could be asked for a few percent more, or as much as 35% - each lender will have their own criteria. Remember though, by paying a higher deposit, you are saving in the long term with less interest and a potentially lower monthly repayment.

What types of bad credit can cause issues for joint mortgages?

While occasional blips are part of your credit score, there are a few types of bad credit that can have a more significant adverse effect on your rating. The following are examples where the lender may have cause to consider your deal a bad credit mortgage.

Late payments - Late payments show a struggle to make payments which reflects on your affordability. The further back in time the late payments are, the less likely they are to cause issues on your application, but some lenders will expect no late payments in the last year or even, in extreme cases, for the last six years.

Defaults - A default is when a loan or payments have been unpaid for long enough to have the lender consider the relationship broken down and move to alternative action. It can have an effect on your mortgage eligibility, especially if the value of the default was high or it was recent. You should give your lender all information regarding the default and expect to be asked to put forward a larger deposit.

County Court Judgements (CCJs) – while the process of a CCJ can be quite unsettling, they are more common than you think, and many lenders are willing to consider applications with CCJs on the record. Like all other bad credit situations, the time since the CCJ was put in force and the size of the debt are large considerations and will affect the deal you are offered.
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...Types of bad credit continued.

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Debt Management Plan (DMP) – unlike other debts, a DMP shows a willingness to settle debt and take responsibility. If the DMP is twelve months old or more, and has been paid as arranged, then it will likely have little impact on your application – although the size of the repayments will adjust your level of affordability. 

Individual Voluntary Arrangement (IVA) – IVAs show a significant failure in the past to manage your financial responsibilities and will be considered a major stumbling stone to a mortgage application. It will be important that the IVA is historical and settled (although there are exceptions) and you can expect to be asked for a higher deposit to secure a mortgage. 

Bankruptcy – if you have a bankruptcy on your credit file then the lenders will want to talk to you about it in detail and you should be willing to be open and honest about the situation. Like an IVA, you can expect to need to find a higher deposit, often up to 35%. 

Repossessions – having had a previous house repossessed will obviously have an impact on your suitability for a new mortgage, but it won’t make it impossible. The further back in history your repossession is, the more likely you are to get a good deal today. It is, however, important that any outstanding debt or legacy payments that are owed have been cleared in full before applying for a new mortgage.

Advice from The Mortgage Hut

At The Mortgage Hut, we deal daily with customers suffering from bad credit, either themselves or with their partner – and pleasingly we usually find a deal to suit! Having bad credit does not mean you will not be able to get a mortgage – far from it. We have helped people with everything from multiple CCJs to repeated bankruptcy arrangements. The most important thing is to be open and honest with us so we can find a deal to meet your needs.

Give us a call today or fill out our contact form and a member of our expert team will get back to you at a convenient time.

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