Bad credit and poor credit issues come in all different shapes and sizes with some issues being more serious than others. It could be that you were declared bankrupt owing £500,000 or to the other extreme have two missed payments with a mail order company. 

 

Missed payments are a common way your credit profile can go from good to bad. One ‘blip’ with a reasonable explanation should be OK, but if you’ve missed 3 or more payments over a 12-month period, your options may be limited. If you’ve missed mortgage payments over the last 12 -24 months you could find things even more difficult.

 

You may be classed as needing a bad credit Buy to Let if you’ve had a payday loan recently, even if your current credit score is good. This is because using payday loans is seen as high cost and is usually only done if people have a gap in their finances and need emergency money quickly. Some of our specialist lenders will still allow a bad credit Buy to Let if you’ve had a payday loan (depending on the amount).

 

Debt Management Plans indicate that somewhere in the past you’ve had difficulty with your committed payments which will affect your ability to borrow money. However, if you’ve had a debt management plan and made the payments on time, some lenders will allow you to have a bad credit Buy to Let mortgage. Some will insist that the plan is paid off before they will lend and some will be OK with the plan remaining in place. This is where our knowledge of different lenders and their criteria will make a difference in the outcome.

 

Count Court Judgements (CCJ) are a sign that there has been a dispute between you and a creditor and can put you in the bad credit zone. CCJ’s come in different shapes and sizes but they are typically in two categories; settled or unsettled. If you paid off (or settled) your CCJ within a reasonable time frame your credit profile will look better than an unsettled CCJ. Equally, if there was just one CCJ with a value of £100 or under, your credit profile will look better than three CCJs with a combined value of £2500. The final things that impact whether your CCJ pushes you into a bad credit Buy to Let is how long ago your CCJ was registered and whether the creditor was a communications supplier, utility company or loan company. 

 

Defaults are one of the most common types of bad credit history we see. A defaulted credit agreement means that you’ve not kept to your contracted payments and is a clear indicator as to whether you should be looking at a mainstream Buy to Let or a Bad Credit Buy to Let. The same sort of criteria around CCJs also applies to defaults. Meaning that how long ago you defaulted, the amount of the default, whether the default is paid off or still outstanding and who you defaulted with are all taken into account.

 

Bankruptcy and Individual Voluntary Agreements (IVA) are often seen as more serious bad credit problems. If you have been made bankrupt, you are not able to borrow money until you’ve been discharged. Lenders will want to understand what led you to be declared bankrupt and how long ago it happened. They will want to see evidence that you have been discharged and what your credit profile looks like since then. If you have been declared bankrupt within the last 6 years, you will find it almost impossible to find a mainstream lender for your Buy to Let mortgage. But again, with some expert help and support, Twin Pine Mortgages can arrange bad credit Buy to Let mortgages for customers who were discharged just 12 months ago.​

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The impact of bad credit on a buy to let mortgage

 

For landlords looking to purchase or remortgage a buy to let property, having a bad credit history can be a major obstacle to securing a mortgage. Bad credit can negatively impact your ability to get approved for a mortgage, and even if you do get approved, it can result in a higher interest rate, making the mortgage more expensive.

 

One of the main ways that bad credit can impact a buy to let mortgage application is by reducing the number of lenders that are willing to work with you. Many mainstream lenders have strict credit score requirements, and may reject your application outright if you have a history of missed payments, defaults, or CCJs. This can limit your options and make it harder to find a lender who is willing to offer you a mortgage, but this is where we can help.

It is also worth considering the impact of a poor credit rating on the profits you can make with your portfolio. Lenders view borrowers with bad credit as higher risk, and may charge a higher rate to offset that risk. This can make your mortgage more expensive over the life of the loan, resulting in higher monthly payments and less profit from your rental property.

 

Having bad credit can also impact the amount that you are able to borrow for a buy to let mortgage. Lenders typically assess your credit history, income, and other factors to determine how much they are willing to lend you. If you have bad credit, they may be less willing to lend you as much money, which can limit your ability to purchase or invest in additional properties.

 

Overall, having bad credit can make it more challenging to secure a buy to let mortgage but it’s by no means impossible. There are steps that you can take to improve your credit score and increase your chances of getting approved for a mortgage with better terms and a lower interest rate.

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