Self-Employed Bad Credit Mortgage

What role does credit score play in getting a mortgage as a self-employed borrower with bad credit?

People talk about credit score, but lenders aren’t so worried about that. The score is made up of lots of different factors and while it does give an indication of overall credit, lenders are more focused on your history – your payments and your history of paying things on time.

You could have a low score because you’re not on the electoral roll or you haven’t really got any credit. It doesn’t mean you’re a bad borrower, it just means there’s not much to go on.

So score isn’t the be-all and end-all. It’s history that’s key. I’ve seen people with good scores that have six missed payments in the last 12 months. That’s not going to be good for a lender. Their score looks good because they’re on the electoral roll, they’ve done the boost, but they’ve still missed six payments and lenders won’t like that.

Do any mortgage lenders specialise in lending to self-employed individuals with bad credit?

Yes, in a way. There are lenders that specialise in mortgages with bad credit, and some more than others. With some high street lenders, if it’s not too bad we can still get you a mortgage. It depends on the deposit.

If we go off the high street to lenders for fairly severe bad credit, most of those lenders will have criteria for the self-employed. You don’t have to just be employed.

There’s not a specific lender that will just lend to self-employed people with bad credit. But lenders will lend to people with bad credit who are self-employed – so there will be an option.

What steps can self-employed individuals with bad credit take if they have been declined for a mortgage?

It depends where you’ve been and who’s declined you. If you’ve been to Nationwide or Santander there will be lots of other options. Those are nice, squeaky clean high street lenders that aren’t particularly open to bad credit.

If you’ve been declined by Bluestone or Pepper Money, there might not be many other places to go from there.

If you’ve been declined, speak to a mortgage broker. Give us your credit file, and we’ll be able to see why you’ve had the decline and where to go next.

Sometimes we’ll look at a credit file and realise it will fit with a certain high street lender – and most of those do a soft credit check. Doing an Agreement in Principle won’t leave any trace on your file, so it can be worth trying a couple of high street lenders – if it works, great. If not, we’ll go from there.

Having a decline can be a good thing. It’s like when you offer on a property – I always think it’s good to get your first offer rejected because if you go in too low at the start and they say no, you can go higher.

It’s good to try a couple of things before you land on the final option.

How long does it take for self-employed individuals with bad credit to get a mortgage offer?

Again, that depends. Which lender are we going to? Is it a remortgage or a purchase? How bad is the credit?

With some lenders, if it’s a minor credit issue and everything else is fine, we might get a mortgage offer straight away.

If lenders are coming back with question after question and it’s taking months, that’s a sign that things aren’t going so well. But a couple of weeks is pretty normal.

You’ve demonstrated how a mortgage broker can help. Have we covered all we can for now?

I think we’ve probably covered it, but if you’ve got anything unusual about your situation or your credit, just speak to a mortgage broker – because we can save you a lot of time.

We know not to go to certain lenders with certain situations. We save time, heartache and avoid potentially making your credit score worse. If you’ve gone to 10 high street lenders that have all done a hard search on your credit report, that’s not going to look so good.

So don’t do that. Just go to a mortgage broker – we’ll know where to start.

Key Takeaways:

• Lenders prioritise your history of paying things on time over your overall credit score. A low score might be due to a lack of credit history or not being on the electoral roll, not necessarily a sign of a bad borrower.
• Negative credit information generally drops off your credit file after six years. Even for more recent issues, anything older than six to twelve months is viewed more favourably by lenders than very recent problems.
• A mortgage broker is essential as they can save time and prevent further credit score damage by directing you to appropriate lenders, avoiding unnecessary hard searches on your credit report.
• Self-employed individuals with bad credit need the same standard documentation as everyone else (payslips, bank statements, ID) and are advised to provide their credit file (e.g., from CheckMyFile) to the broker for initial assessment.
• While there is no single lender just for self-employed people with bad credit, there are lenders who cater for individuals in this group, offering an option for most situations, though possibly at a higher interest rate.

Think carefully before securing other debts against your property. Your property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

The information contained within this article was correct at the time of publication but is subject to change.