Research suggests adults with a “credit blip” are finding it more difficult to secure a mortgage. If it’s something that’s affecting you, read on to discover some practical tips.

When lenders review your mortgage application, they’ll usually look at your credit report. This contains personal information, such as your address, payment history, and details about credit held in your name.

A “credit blip” is a negative factor in your report, such as a missed payment or county court judgement.

Lenders use the information in your credit report to assess how much of a risk you pose to them. So, a previous blip could signal that you’re more likely to default on your mortgage repayments, which could lead to unfavourable borrowing terms or the lender rejecting your application.

A report in Mortgage Strategy, suggests more than half (53%) of UK adults with a credit blip say it has affected their ability to get a mortgage. The figure rises to 86% among those aged between 18 and 34.

If you have a blip on your credit report, it doesn’t mean home ownership goals are out of reach. These practical steps could help you assess what you need to do to move forward with your plans.

1. Make any late payments that are still outstanding

If you still have late payments, pay them straight away if you can. While a late payment will still show up on your credit report, paying the outstanding debt to resolve the issue is a step in the right direction.

In some cases, you may want to delay your home buying plans if you’ve missed a payment very recently so you can demonstrate financial stability over the next few months. A mortgage broker can help you understand what your options are.

2. Check how long negative factors will remain on your report

Usually, negative factors will remain on your credit report for six years.

Check when the blip occurred and how long you have until it’s removed from your credit report. In some cases, postponing your homebuying plans by just a couple of months means you won’t need to worry about the blip affecting your application.

If you want to take out a mortgage within the six-year period, you may be able to offer lenders an explanation. Some lenders will overlook a mistake if you have otherwise good credit or your financial circumstances have improved.

3. Review your financial situation

There are many reasons why you may have a credit blip on your report. Perhaps you simply overlooked a payment because you didn’t have a direct debit set up. Or you faced a financial shock that affected your short-term finances.

Before you take on the large financial commitment of a mortgage, you may want to take some time to review your finances and assess what steps you could take to prevent blips from occurring in the future. It could provide you with peace of mind and highlight how to improve your financial safety net if necessary.

4. Apply for a mortgage in principle

A mortgage in principle is a useful way to understand the mortgage terms a lender may offer you, such as how much you may be able to borrow and what your repayments would be. It can help you set realistic expectations if you’re searching for a home or creating a budget.

However, a mortgage in principle is not a guarantee of a mortgage offer. The lender will not carry out a hard credit check, so will base their decision on the information you provide, which is not as thorough as when you apply for a mortgage.

Remember, when you’re ready to apply for a mortgage, you don’t need to choose the same lender you applied for the mortgage in principle with.

5. Consider if a non-traditional mortgage could be right for you

If you believe your credit history will mean you struggle to secure a traditional mortgage, there may be alternative options.

The report in Mortgage Strategy suggests 23% of people that have been affected by a credit blip opt for a non-traditional mortgage.

A guarantor mortgage, for instance, would involve someone you know agreeing to cover your mortgage repayments if you’re unable to do so. As a result, you pose less of a risk to a lender. Your guarantor would usually need to own their own home and prove they have enough income to meet your mortgage repayments if necessary.

There may be alternative mortgages that could suit your needs too.

6. Research lenders to find the right one for you

There are a lot of lenders to choose from and each will have its own lending criteria.

It’s important that you research which lenders are right for you and are likely to accept your application.

The mortgage process will usually involve a hard credit check, which will show up on your credit report for 12 months. Several hard credit checks close together could be a red flag for lenders as it suggests your financial commitments may have changed. So, you may want to limit how many applications you make.

As well as high street lenders you may recognise, there are many others, some of which are specialist lenders that may be more likely to accept applications from people with a credit blip.

A mortgage broker can provide invaluable support when you want to find a mortgage lender that suits your needs. Please contact us to discuss your concerns and how we could help you.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.