Getting an Expat Mortgage With Bad Credit

Getting an expat mortgage with bad credit

Getting an expat mortgage is difficult enough by itself due to the limited number of lenders operating in the sector. Whether or not you will be able to obtain an expat mortgage with bad credit will largely depend on the level of bad credit that you have. Most lenders will use their own system of credit scoring and depending on where you fit on their chart will determine if you will be accepted.

If you have had credit in the UK in the past, you will be able to check your credit rating on sites such as equifax and experian and this would be well worth doing prior to making any mortgage application as often, any search made by the lender could further reduce your rating.

Once you have your credit rating, it might be worth your while contacting a whole of market expat mortgage broker in the UK to review your situation. A good expat mortgage broker will know the market and be able to give you advice on what might be available in the current lending market.


Do I have bad credit?

As we go through life, we all enter into credit arrangements with companies for a whole range of things  such as; taking out a credit card, getting a mobile phone contract, buying goods on hire purchase agreements, setting up direct debits and taking out a mortgage.

Every time you do this, you make a contribution to your credit score. If you have always made your payments on time and have avoided maxing out your credit cards then you should have a good credit rating. On the other hand, if you have had late or missed payments or have defaulted on any of your loans then your credit score will be affected, giving you a bad credit rating.

Credit reporting agencies such as Experian and Equifax collect your credit history and compile it into a credit report. This report, which you can obtain directly from these agencies, records your history of credit accounts and will identify any credit areas where you have had a problem. Each agency may use slightly different credit score ranges but a typical range would be 300 to 850. With this range, scores between 650 and 670 would begin to cause problems and lower scores might stop you obtaining a mortgage.


What are bad credit expat mortgages?

When you make an application to a lender for a mortgage, as part of their normal checks the lender will look at your credit rating and if they consider it to be poor they may reject your application altogether. This would then leave you searching for other lenders who might simply take the same view, leaving yourself very frustrated. However, where your rating falls short of good but is not excessively low, the lender may still consider your application for a mortgage but will treat you an increased risk.  When this happens, the lender will seek to reduce their risk and may change some of the features on the mortgage that they are prepared to offer to you. Such things would be:

Higher interest rates – The lender may increase the interest rate that they will apply to the mortgage which will make your monthly repayments more expensive. In this way, the lender increases their profit margin for taking on the extra risk.

Higher deposit payment – The lender may reduce the amount that they would be prepared to lend to you as a way of ensuring that you should be able to afford to make the repayments on your mortgage. This however would mean that you would have to find a higher deposit to purchase the property.

So, bad credit mortgages are essentially just normal mortgage products where the terms have been made a bit less desirable. How less desirable the terms become will depend on how the lender views their risk and each case with will be looked at individually.


How to Get an expat mortgage if you have a bad credit rating

Expat mortgages are difficult enough to obtain at the best of times and having a poor credit rating will only make this more difficult. Searching on the internet for a bad credit mortgage will bring up a huge list of potential offers which in all probability, wont turn out to be available to you. Unless you have had specific discussions with a lender who is prepared to consider you, your best approach would be to contact an experienced expat mortgage broker who will understand the market and be able to give you sound advice on what you will need to do.

Such a broker will have a good idea of what the different lenders will be prepared to offer and he or she will probably start by obtaining a copy of your credit file from one of the main credit agencies. This will let you broker assess the real situation with your credit rating and be able to introduce you to a lender that will be prepared to accept you or, if none are available, give you advice on what you need to do to bring your credit score to a level that a lender will accept.

Another advantage of using an experienced broker is that it avoids making multiple applications to a range of lenders, as every time a lender makes a credit search it can slightly damage your credit rating. The brokers knowledge of lending criteria should allow you to avoid this happening.


How can I make my credit score higher?

If you have a poor credit score and want to improve your rating, here are some ways of doing that.

Credit cards – credit cards are now used by everyone and most people would assume that so long as they pay the minimum requirement on time, that they can max out the card and be considered as having good credit. That may well be the view of the credit card company who is in the market to lend money at high interest rates but expat mortgage lenders may view that as a risk. From a mortgage lenders point of view, they are looking for clients who live well within their means as that type of client will be a better risk and therefore be scored higher.

Keeping well within your credit limit and paying more that the minimum allowed each month could help your credit score with lenders.

Multiple credit cards – where you have a number of credit cards all with small balances outstanding, credit agencies may lower your rating as they consider them nuisance balances. Changing to using only one card clears this and may improve your rating.

Applying for credit – making an application for credit can cause a slight reduction on your overall rating and making  multiple applications can indicate you are being rejected or not handling your finances property. When considering applying for credit it is always wise to check out as best you can that you meet the credit companies criteria before actually making your application.

Never had credit – if you have never before obtained credit in the UK you will not appear on any of the credit agencies listings. This will lower your credit score in the eyes of your mortgage lender because the lender will be unable to judge if you will be a good risk. If you are in this situation, building a little credit history will help the lender to give you a score.

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