PEOPLE with bad credit histories now have more choice when it comes to getting a mortgage as Virgin Money has opened up its range.
Until last month, Virgin Money had a blanket ban on offering mortgages to those who had been subject to County Court Judgments (CCJs) in the past.
This happens when someone takes legal action against you, saying you owe them money, and you don’t respond.
Records of judgments are listed on your credit file for six years – unless you pay the full amount within a month – which means you are often blacklisted by lenders during this time.
But Virgin Money says it will now lend people who have repaid – say ‘satisfied’ – CCJs up to £500.
Virgin Money will also now lend to people who have repaid defaults (missed payments) of up to £500 or who have had defaults of up to £2,000 that are more than three years old.
How to get a mortgage with bad credit
If you’re considering buying a home, use an independent mortgage broker to ensure you get the best deal.
You should check that your broker will compare the whole market and ask what the fees will be – brokers, such as London & Country and Trussle, are free to use.
Don’t be tempted to start applying for mortgages from your bank or any other provider you can find.
A scattered approach will only hurt your chances of getting a mortgage, as potential lenders will check your credit report, and every check that doesn’t result in a successful mortgage application will lower your credit score.
Before going to a broker, you can use free eligibility tools to check your likelihood of getting a mortgage before applying, which means your credit score won’t be affected.
Comparethemarket has a tool like Experian – but be aware that they can’t compare every offer out there.
“It’s encouraging to see”
Rachel Springall, an expert at comparison service Moneyfacts, says it’s good to see a big brand opening up its mortgages to those with less than perfect credit scores.
She said: “Borrowers may not have the most pristine credit scores and mortgages for those with lackluster financial footprints are therefore vital.
“It’s great to see such a recognized brand opening up its loans to those who have had CCJs against them or have defaulted on previous loans.
“At the moment, building societies seem to be leading the way in their underwriting processes to accommodate these types of borrowers, so it’s encouraging that more brands are reconsidering their lending criteria.”
How do Virgin Money mortgages compare?
But just because Virgin Money has started lending to people with bad credit doesn’t mean it’s better for you.
Always use a free mortgage broker on the whole market to find the best deal for your situation.
Keep in mind that you should not only look at the rate, but also compare the fees, as these can add up.
That said, on rates alone, Virgin Money mortgages are competitive.
On variable mortgages for people who have repaid CCJs, Virgin Money’s 1.68% rate can only be beaten by the Yorkshire Building Society’s 1.41% rate. Both are intended for borrowers with a deposit of at least 35%.
On two-year fixed rates, Virgin Money offers rates from 1.67% for those with at least a 35% deposit up to 2.99% for those with at least a 5% deposit.
While over five years, Virgin Money offers mortgages between 2.01% and 3.35% for those with deposits between 5% and 35%.
One rate, its two- and five-year patches can only be beaten by Atom, Skipton and the Yorkshire Building Society – although it depends on how much you borrow.
How to Boost Your Credit Score Before Applying for a Mortgage
FIRST, make sure all your payments are made on time – this includes everything from household bills to credit cards to loans.
Mortgage lenders take a dim view of late payments.
If you have debt, look for ways to put money aside each month to help pay off your debt.
If you’re struggling to meet your repayments, talk to your lenders – they may agree to a payment plan that suspends the interest you owe, as long as you stick to the plan and make your payments in full and on time. time.
Then check if your expenses are lower than your income and look for ways to reduce your expenses if they are too high.
Finally, check your credit report to find out your score. That means getting a free credit report from each of the three credit bureaus – Experian, Equifax and Noddle – because you can’t tell which one a potential lender will use.
Virgin Money still won’t lend to you if you’ve gone bankrupt or have an IVA
But keep in mind that Virgin Money still won’t lend you if your CCJ hasn’t been paid back or is over £500 – even if they’re happy.
It also won’t lend to you if you’ve gone bankrupt, have an IVA or are consistently behind on paying off your debts.
Also, they won’t give you a mortgage if you’re in default between £500 and £2,000 or if you’re in default of up to £2,000 that’s less than three years old.
It also generally prohibits people with defaults of more than £2,000.
We spoke to a family who got a mortgage despite having £50,000 debt and bad credit.
Here’s how you can do the same.
And if you’re struggling with debt, here are eight simple tips to reduce what you owe.
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