Adverse Credit Frequently Asked Questions

Bad Credit, also known as Adverse Credit, refers to someone’s poor credit history. If someone has bad credit, one or more of the following will be registered on their credit report:

• Late Payments
• Defaults
• County Court Judgements (CCJs)
• Individual Voluntary Arrangements (IVAs)
• Debt Relief Orders (DROs)

Many mortgage lenders decline applications with Bad Credit due to the perceived risk that the applicants may miss their mortgage payments. Even though Bankruptcies are not registered on Credit Reports, lenders will still treat them as Bad Credit. Lenders access Bankruptcy information from the Government Bankruptcy Register.

Some mortgage brokers may charge a higher client fee for processing Bad Credit cases. This is because there is additional work involved in sourcing for lenders and processing the application. However, at Boon Brokers, our advisers do not charge client fees at any stage of the process (from start to finish). We receive a commission from the lender once your case completes, which has no impact on you. If your case does not complete, we do not receive a commission and you will not be charged. Other brokers may charge a client fee in addition to receiving commission from the lender.

All lenders will process at least a Soft Credit Search of your Credit Reports at the Agreement in Principle stage. Lenders will then typically process a Hard Credit Search of your Credit Reports at the Full Mortgage Application stage. Credit reference agencies are legally allowed to divulge your credit information to banks during the mortgage application process.

You can check your Credit Report via Check My File. Check My File reports will showcase how your credit report is recorded by Experian, Equifax and Transunion. This means that you can see your file from all three credit report agencies on one report. To view your full report with Check My File, you will need to start a free trial which will then roll on to a monthly subscription unless it is cancelled.

You may still be able to access market-leading interest rates with Bad Credit. It depends on how significant the Bad Credit is on your Credit Report. For example, there are some high street lenders (who tend to offer the most competitive mortgage products) that may consider one late payment registered over 3 years ago. If your Credit Report is still acceptable to those high street lenders, you may be able to access the same products as applicants with an Excellent Credit Report. However, if your Credit Report has significant Bad Credit, such as many recent mortgage arrears, defaults, etc, it is unlikely that you will be able to access competitive interest rates offered by high street lenders. It is likely that you will need to discuss your case with a whole-of-market broker, like Boon Brokers, who can source most suitable Adverse lender for your situation.

If your Credit Report is suitable for high-street lenders, but perhaps the Credit Score is low, they are unlikely to request different documentation compared to other lenders. However, if you must proceed with a lender that specialises in Bad Credit, that lender may request more documentation than a High Street lender. They may request additional bank statements, credit statements, etc.

Lenders may impose Loan-To-Value restrictions on your borrowing if you fail their credit checks. This means that you may need to increase your deposit/equity to proceed with an application. For example, if you have a 5% deposit of the purchase price, a lender may insist that you deposit 15% before they can accept an application from you. It’s worth bearing in mind that many lenders have debt-to-income ratios which differ from lender to lender. Even if you do not necessarily have Bad Credit, large amounts of debt can negatively impact the maximum mortgage amount available.

Each lender views Bad Credit differently. For example, some lenders will decline applications from applicants that have had a Bankruptcy registered in the past. Whereas other lenders can accept Bankruptcies if they have been satisfied and registered over 6 years ago. Lenders are generally more accepting of late payments compared to CCJs, Defaults, IVAs or DROs, which are deemed as more significant forms of Bad Credit.

Lenders are not sympathetic to any circumstances. They enforce their lending criteria and view cases objectively. If your case does not meet a lender’s criteria, it will be declined. However, there are likely to be far more lenders that can accept one bad credit (such as one late payment) in their criteria than cases with multiple bad credit registrations. However, the time that the Bad Credit was registered and the amount will play a significant role in determining the success of your application.

Mortgage lenders do not view Credit Scores from Credit Agencies like Experian, Equifax or Transunion. Instead, they view the full contents of your Credit Report and assign a Credit Score themselves based on their criteria.

Yes, there are lenders that specialise in Bad Credit cases. Those lenders tend to offer far higher interest rates than High Street lenders and costs like booking fees, arrangement fees and valuation fees may be higher with Bad Credit lenders. Many specialist Bad Credit lenders are intermediary-only, meaning that you must use an intermediary, like Boon Brokers, to access their mortgage products.

If you apply with a specialist Bad Credit lender, you should expect longer underwriting timescales compared to the timescales from High Street lenders. This is because specialist Bad Credit lenders are likely to request more documentation and have fewer underwriting resources at their disposal to process your case. However, if your Bad Credit is acceptable to a High Street lender, your Credit Report should not impact their underwriting timescales.

From the registration date, Bad Credit will remain on your Credit Report for 6 years regardless of whether you pay off the debt.

No. However, lenders will still access Bankruptcy information from the Government’s Bankruptcy Register.

No. Your Credit Report reflects your credit obligations and payment history.

A Soft Credit Search occurs when a company conducts a partial search of a Credit Report. Mortgage lenders generally use Soft Credit Searches to assess whether a case is suitable in principle before a Full Mortgage Application can be submitted. Soft Credit Searches are not visible to credit reference agencies, they are not recorded on Credit Reports. Whereas Hard Credit Searches are visible to credit reference agencies, and they are recorded on Credit Reports. Too many Hard Credit Searches in a short time can negatively impact a Credit Score. A Hard Credit Search occurs when a company conducts a complete search of a Credit Report. Mortgage lenders use Hard Credit Searches when the Full Mortgage Application has been submitted.

Your Credit Report should update between 30-45 working days. This means that if you clear a Bad Credit to fit a lender’s criteria, you may need to wait for at least a month before the mortgage application can be submitted.

Unfortunately, if your partner has Bad Credit, lenders will treat the application as a Bad Credit case. If your partner has a significant amount of recent Bad Credit, your application is unlikely to pass credit checks with High Street lenders. Read our blog article, Joint Mortgage with One Bad Credit Applicant, for further information.