What is a Credit Repair Mortgage? Here’s what you need to know
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What is a Credit Repair Mortgage? Here’s what you need to know

Clock  3 minute read

Carl Shave Carl Shave | January 18, 2018

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2017 was a good year for prospective homebuyers with less than perfect credit scores, thanks to a marked increase in the availability of ‘bad credit mortgages’. Research carried out in Q2 of 2017 found that there were 694 adverse credit mortgages on the market, representing an increase of 167 on the previous quarter. And the good news for those that may have struggled to get a mortgage in the past, is that this is a trend that looks set to continue.

What is a bad credit mortgage?

A bad credit mortgage is one offered by lenders who are willing to take on the perceived additional risk of lending to those with poor credit histories. As the borrower presents an additional risk, the interest rates and charges tend to be higher than those offered to homebuyers with clean credit records.

These mortgages are also known as sub-prime or adverse credit mortgages, but in recent years, they have also been marketed as ‘credit repair mortgages’ by some lenders.

Why is it called a ‘credit repair mortgage’?

The thinking behind the term ‘credit repair mortgage’ is that once a bad credit mortgage has been agreed, if the borrower makes their repayments on time, their credit rating will start to improve. In the future, prospective lenders that run a credit check will see a developing pattern of consistent payments which may help to reduce their cost of borrowing.

However, consistent mortgage repayments cannot do anything to remove adverse events like missed payments, defaults, bankruptcies and CCJs from a credit record. They remain on file for a period of six-years, which means a credit repair mortgage can only have a limited effect.

Why are credit repair mortgages on the rise?

With the economic crisis causing financial difficulties for so many borrowers, it’s not uncommon for people to have experienced some sort of blip on their credit records. Unfortunately, these adverse credit events are still impacting many people’s ability to borrow from a mainstream lender. That means the demand for this type of mortgage is not likely to fall anytime soon.

What should prospective bad credit borrowers do?

If you’re looking for a mortgage then the first step is to check your credit file. You can access your report for free at credit reference agencies like Experian, Noodle and Clear Score. If you find any errors on your credit record then you should contact the relevant agency to get them corrected immediately.

Once you have your credit report, you can then seek no-obligation advice from the team at Just Mortgage Brokers. We will advise you whether your credit history means you’ll be able to secure a regular mortgage or are likely to require a bad credit alternative. The former is certainly preferable as the interest you’ll pay on a two-year fixed rate credit repair mortgage can be twice as high as a regular deal.

Looking for a credit repair mortgage?

Then seek advice immediately. If you’re looking for a credit repair mortgage or are unsure whether a bad credit mortgage is financially viable for you, we can help. Please get in touch with our team for tailored advice.

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