Can I Remortgage even though I have Bad Credit?

By January 13, 2009Mortgage

Do you think you’ve got a bad ‘credit score’, are you left with no choice but to apply for a bad credit re-mortgage?

Before assuming that your financial options are seriously limited, it is always a good idea to double check your credit status rather than just accept it.

What is a credit score?

Simple. Every time you take out a loan or credit whether it’s a mortgage, a credit card or a mobile ‘phone contract, lenders will give you a score by predicting how likely you are to pay the loan back on time and in full. They do this based on your previous behaviour. Lenders don’t make the ins and outs of their scoring systems public, and each lender has a different – but fundamentally similar – way of evaluating your credit record.

That’s good news because it means that, just because one lender has rejected your application for credit, that doesn’t mean they all will. In the UK there’s actually no such thing as a central credit ‘rating’ and nobody holds or operates a blacklist. Keep trying because you might find yourself being offered a different solution, saved from having to resort to a bad credit re-mortgage.

Experian.co.uk, equifax.co.uk and checkmyfile.com can all give you details about your credit score. They’re legally obliged to do so under the Consumer Credit Act (1974) and all three give free online credit reports. These act as a snapshot of your situation and, because they all use different credit scoring procedures, it is a good idea to check the lot to get a full picture of how the outside world views your credit-worthiness! You can also write for copies of your files, at a cost of £2. For all three agencies that’s £6 in total and a much longer wait.

If your credit score is inaccurate you might be able to get it changed. Just write to the credit reference agency concerned and ask. If they agree, they’ll change your record pretty quickly. If they turn you down you can request a ‘notice of correction’, which lets you add your own personal comments to your file. A good idea because it can be the one thing that helps you qualify for regular refinancing of some sort rather than risking your home to pay off your debts with a bad credit re-mortgage.

If your credit score is genuinely bad, there are a few common sense things you can do to iron things out over time. But there aren’t any quick fixes, if a company promises you they can improve your credit score, they can’t.

If a genuinely bad credit score means you have to resort to a bad credit re-mortgage after all, what’s the deal? The first thing to ask yourself is, “Is a bad credit re-mortgage better than no re-mortgage?” If you’ve got some equity in your home you can re-mortgage to consolidate your debts, even when you’ve got credit problems. But putting your home at risk because you’ve got into debt is a risky strategy. If you’re in desperate straits, having problems with debt and about to lose your home, there are other options available. Try every avenue before making a big decision, and always take sensible expert advice.

We would like comments from those with bad credit, who are trying to improve their credit rating.