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Not all credit report baggage should stop someone getting a mortgage

When it comes to deciding whether to grant a potential borrower a mortgage, many lenders – particularly the big high street names – are very much guided by that person’s credit report. If this shows signs of past financial trouble, it can effectively rule a person out, but that should not always be the case.

It is not hard to see why these lenders are unwilling to take a chance on someone with previous credit history baggage, but the problem is that many big mortgage lenders do not distinguish between occasional blips in a credit history and long-term patterns of income fluctuations and poor money management. The latter should certainly make any lender wary of agreeing to a long-term commitment like a mortgage, but more slack needs to be cut to those who fall into the former category.

At the moment, the only options such borrowers have are specialist residential mortgage lenders, but data suggests that these lenders are right to be more willing to take a chance. UK Finance recently revealed that the number of residential mortgage borrowers who were failing to keep up payments is at an all-time low. Just 0.79% of these borrowers were 2.5% or more in arrears of the balance owed, which is a drop of 9% on the previous year.

Mortgage advisors with CeMAP training should encourage the big lenders to take a risk on borrowers with some credit report baggage, as the current situation means both these lenders and the customers lose out.

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