Stuck with a low credit score and now struggling to get mortgage finance? The fact is a low credit score can have a negative impact on your home loan application. But it’s not all bad news. For those with a bad credit history, there are still financial options available with access to competitive mortgage rates. Read on to find out all you need to know about bad credit home loans.
What is your credit score?
Your credit score is a numerical value that denotes how likely you are to repay your debts on time and in full. Credit bureaus collect information about your spending and repayment history and then calculate your credit score.
Things like credit card payments, personal and car loans, phone and electricity accounts, and more all go into the calculation of your credit score. If you miss a repayment on any one of these, your credit score could drop. On the other hand, making consistent and on time repayments usually improves your credit score.
To find out what your credit score is, apply for a free copy of your credit report from any one of the three credit reporting bureaus in New Zealand.
Why is a credit score so important?
Every time you apply for more credit, lenders will access your credit score and then decide whether or not to lend to you. The higher your credit score, the more likely it is that lenders will approve your finance application.
If you have a low credit score because of late repayments, defaults or even insufficient credit history, lenders may perceive you as a high risk borrower and be less inclined to lend to you.
Furthermore, even after you’ve repaid a loan amount in full, any defaults on your credit record can remain there for up to 5 years. Which is why it’s so important you maintain a good credit score at all times.
While a bad credit score can make it harder for you to get mortgage finance approval, it’s not impossible. Working with a mortgage adviser from Mortgage Express can help you find the right lender and provide you with some options for bad credit home loans.
What are bad credit home loans?
Some non-bank lenders – such as building societies or credit unions – offer credit and loan products suitable for those with a bad credit history. Being privately owned, these financial institutions have eligibility criteria that is different to the bank. As such, they don’t use credit score as a means of determining creditworthiness.
This allows non-bank lenders to offer a diverse range of financial products - like bad credit home loans - ideal for those borrowers who may not meet banks’ strict lending criteria. Bad credit home loans tend to have slightly higher interest rates, but could suit those looking for a means onto the property ladder with a view to refinancing once they’re able to establish a good credit history.
Get a bad credit home loan
Mortgage Express advisers understand that not everyone ticks the boxes when it comes to lending criteria. That’s why we work with a panel of non-bank lenders too, that provide options for bad credit home loans.
To find out more about securing this type of loan, get in touch with a Mortgage Express adviser today.
While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Mortgage Express Limited for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication.