I’m a mortgage expert – what to do if your credit score means you’re rejected for a home loan

YOU would think stepping on the property ladder is straightforward if you have enough money in the bank, but this isn’t always the case.

Lenders put a lot of stock in mortgage applicants’ credit reports.

These documents show how good potential borrowers are at managing their finances including repaying debt.

In the current cost-of-living crisis what the report shows could make all the difference for anyone hoping to step on the housing ladder, and the checks make sense.

The number of people struggling to make bill and credit repayments has risen by three million since May 2022, according to the Financial Conduct Authority, the financial regulator.

We asked Alan Davison, personal finance distribution director at mortgage broker Together, for tips on what potential homeowners can do if their credit report causes problems.

It comes as its research has found that more than half of all UK adults with a glitch on their credit report struggle to get a mortgage.

This rises to more than four in five among 18- to 34-year-olds.

There are several reasons why mortgage applications are turned down, but the lender should say where the problem lies.

Alan said: “A high street lender is unlikely to give you a specific reason as to why you’ve failed with a credit application, other than it relating to your credit file.

“If this happens, then the lender should provide you with the details of the credit reference agency they used so you can get further understanding of your credit status.”

How do you get your credit report?

If your application is rejected, you will need a copy of your credit report.

Lots of sites claim to give you access to your credit report, but beware of fraudulent sites that may charge you for outdated or fake information.

Always get your credit report from a well-known company like Experian, Equifax or Trans Union.

Alan said: “Most reputable credit scores and reports are largely available free of charge.

“Although some will require a paid-for monthly account after a 30-day free trial, if you wish to track your score progression.”

What if your credit report looks fine?

Getting a copy of your report is one thing, understanding it is quite another.

While straightforward or glaring errors will stand out, less obvious ones with be harder to spot.

Alan said: “If you’re not sure what it is you need to look for, or feel overwhelmed by the information, it’s always best to speak to a mortgage broker who can review it and offer advice.”

What if there’s an error on the credit report?

Some credit report blips are caused by simple oversights, but they still need to be addressed.

Alan recommends speaking with the relevant lender.

He said: “When it comes to unpaid bills you don’t recognise, it’s best to flag the issue directly with the provider who will be able to review your case and payment history to ensure no error was made.

“If a late payment is still due, then once this has been cleared your credit report will be updated and the blip removed.”

What if the problem is a CCJ?

In some cases, the problem might be triggered by a county court judgment you’ve forgotten about or didn’t realise was on your file.

In either case, you have options.

For instance, you can ask the court to review and potentially cancel the CCJ.

But, getting the judgment “set aside”, as it’s known, isn’t risk-free.

Alan explained: “For example, your case to ‘set aside’ a judgement may still be unsuccessful, and you may have to pay a court fee of £275 after giving evidence at your private hearing.

“The good news is there are still lenders out there who will still consider CCJs on applications, so long as a clear repayment plan has been set up.”

For example, The Sun recently spoke to a mum-of-four who bought a £255,000 first home despite a CCJ and no deposit.

When should you reapply for a mortgage?

After such a setback, it is tempting to apply for a mortgage elsewhere.

But, according to Alan, there are a couple of things to consider first.

He told us: “It’s important to not simply try another lender as each application might show up on your credit file and if blips haven’t been addressed then the risk of a further rejection remains.”

Instead, you may want to consider a specialist lender – but beware these often come with higher interest rates due to the increased risk.

Is a credit report blip the end of the world?

Bad news about your mortgage request can be crushing, but with a plan in place your dreams of homeownership needn’t be over.

“Securing a mortgage is one of the biggest financial commitments people make,” said Alan.

“While an initial rejection can be emotionally stressful and upsetting, it’s very important to remember that it doesn’t mean the journey to homeownership has to grind to a halt forever.

“Removing the stigma associated with credit blips is vital, as is raising awareness of the steps needed to improve applications.”

We’ve rounded up the best credit building cards, even if you’ve had a CCJ or been declared bankrupt.