If you’re worried about a low credit score, you might feel like getting a home loan is out of reach. The good news? That’s not always the case! A mortgage broker can still be a fantastic resource, even if your credit score isn’t exactly where you’d like it. Here’s how we can help.
Understanding Credit Scores
First things first, let’s quickly cover what a credit score is, because this stuff isn’t taught in schools! In simple terms, it’s a number that reflects how reliable you are when it comes to paying back loans or credit. Your score is ranked from 0-1200. The higher the score, the better. A lower score means lenders might see you as a bit of a risk. Things like missed payments, defaults, too many credit enquiries, or having too much debt can lower your score.
The majority of mainstream lenders wont approve a loan if your score is under 650.
But don’t panic! Having a low credit score doesn’t mean you’re out of options.
How Our Mortgage Brokers Can Help
We have access to a massive range of lenders. While most banks are more rigid with their lending rules, we work with many different lenders, including those who are more flexible when it comes to lower credit scores. This means we can often find you a deal that another bank might not even consider.
Here are a few ways we can help if your credit score is low:
- Cleaning up your credit report
If your score is low due to a default (i.e. the debt has been sent to a debt collection agency), my first recommendation to my clients is to have your credit report “fixed” using a Credit Repair company. This is always going to be cheaper, than paying for a non-conforming home loan.
If your score is low due to missed payments, or too many enquiries, then see below for some options. - Access to Specialist Lenders
There’s a small amount of lenders that will accept loan applications with scores under 650, if the score has been damaged due to a few missed payments and/or multiple credit enquiries. As long as there’s a valid reason that makes sense, these lenders will offer normal interest rates and fees. They’ll take a common sense approach at your application, rather than just saying “no” because your score is under 650.
If your score is low due to a default or bankruptcy, there are other lenders that you can use. They are called “non-conforming” lenders. These lenders will charge a higher interest rate and fees, because the risk they’re taking on is higher.
These lenders might not be on the radar for the average homebuyer, but we’ve got access to them. We can connect you with lenders who understand and are ready to work with your financial situation. - Tailored Advice
We will take the time to understand your personal circumstances. We’ll look at your entire financial picture, not just your credit score, and give you advice on what steps you can take to improve your chances of getting a loan. Sometimes, a little work in paying down existing debt or organising your finances can make all the difference. - Improving Your Loan Application
Our mortgage brokers know how to strengthen your loan application. They’ll suggest ways to present your situation in the best possible light to lenders. This could involve providing additional documentation, a larger deposit, advice on how to present your application, or even getting a guarantor to help support your application. - Negotiating on Your Behalf
We have the experience and relationships to negotiate with lenders on your behalf. We can often get you better terms than if you were to approach lenders directly, even with a less-than-ideal credit score.
It’s Not All About the Credit Score
Remember, lenders look at more than just your credit score. They’ll also consider your income, employment history, savings history, and how much debt you currently have. We will help you navigate all these factors and put your best foot forward when applying for a loan.
If you’re unsure about your credit score or how it might impact your home loan, it’s worth speaking to one of our mortgage brokers. At More Than Mortgages, we specialise in helping people in all kinds of financial situations. Call us on 02 6188 4555 or make an appointment for a free consultation today, and let us guide you through the process of securing your home loan.
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