How To Get Credit With Mortgage Arrears

Once you have mortgage arrears, this fact will appear on your credit report. Your credit report is simply a file maintained by one of three credit reference agencies (Experian, Equifax or Callcredit), which contains details of your credit applications and payment history. It shows where you have applied for credit, whether a credit application was granted or turned down, and whether you made all payments promptly or not. Lenders use the information in this report to see whether you meet their lending criteria.

Getting Credit Is Not Impossible
In general, arrears do not help your credit report and they can make it difficult for you to get credit. However, even with mortgage arrears, getting credit is not impossible. Whether you want to apply for credit cards, loans or mortgages, there are lenders who will lend to you. If you are in financial difficulty, you may decide to remortgage your home to repay your debts and start afresh. The good news is that there are dozens of specialist lenders who cater for borrowers with mortgage arrears and other adverse financial circumstances. You may hear them referred to as bad credit mortgage lenders or adverse credit mortgage lenders.

Getting A Mortgage
Getting a mortgage from an adverse credit mortgage lender is like getting a standard mortgage. You shop around for the best deals, and make an application as normal. One thing to be aware of is that if you have mortgage arrears on your credit file, you won't qualify for the typical rate. Instead, there will be another rate tailored to your circumstances. This rate will be slightly higher. For example, if you missed one mortgage payment a year ago, the rate you pay will be different from someone who missed two mortgage payments six months ago.

The Cost Of Adverse Credit
In general, mortgage lenders like to see that you have repaid the mortgage arrears before they lend to you, otherwise how will they know that you will pay them? However, depending on the lender you choose, the qualifying period can be very short. Expect to pay a premium of between one and five per cent on a standard interest rate when you go to an adverse credit mortgage lender. The rate you pay will also depend on whether you have County Court Judgements or other adverse credit circumstances.

When it comes to getting a loan, one option for someone with adverse credit is to get a secured loan. This is a loan secured on your home, where the lender has a second charge on your property (after your mortgage lender). The advantage of a secured loan is that the interest rate is usually lower than the rate on an unsecured loan. That's because your property provides adequate security for the loan. The disadvantage of a secured loan is that your home is at risk if you do not repay the loan as agreed. Plus, these loans can be costly over the term of the loan.

Finally, if you need a credit card but do not qualify for credit, you can get a secured credit card. This is a prepaid card, where you put a sum of money onto the card in advance and then use it like an ordinary credit card. This product has been popular in the US for several years, and is now becoming popular in the UK. With a secured credit card, you pay a small fee each time you use it, but you may think this a small price to pay for having a working credit card.