How do I get a mortgage with my bad credit rating?

Q I am looking to apply for a mortgage but my national credit score is rated as poor (700 out of 1000). During my twenties I was irresponsible with debt but now have very few outgoings and no outstanding loans or credit cards (indeed I no longer own credit cards or have any loans/overdrafts).

I'm now in a position where I would rather get on to the property ladder than throw away money renting, as I do at the moment in London. I have a substantial deposit to place and family guarantors would not be a problem but would I still stand to have any mortgage application rejected?

Since looking into credit scores I've discovered that one of the aspects which pulls one's credit score down is having credit checks carried out. Naturally, any lender would have to do this so I'd like to know my rough likelihood of success before applying. Any help would be much appreciated.

JC

A Your past credit problems won't necessarily be a bar to getting a mortgage but - depending on how serious they were - they may limit your choice of lenders to those who sell 'adverse credit' mortgages; also known as 'credit impaired', 'sub prime' and 'non-conforming' mortgages.

You can expect to pay a higher mortgage rate than someone with a blemish-free credit record but competition in this specialist market does mean that adverse credit mortgages are less expensive than they once were. And the fact that you have a substantial deposit will also work in your favour as the bigger your deposit, the better the rate.

For example, if someone wants to borrow only 70% of a property's value - and so can put down a deposit of 30% - Bristol & West charges 4.7% which is quite a lot lower than the 5.95% it charges someone who can put down only a 5% deposit. But the actual rate you end up paying will depend on the lender's assessment of the risk that you might default on the loan.

As well as charging higher rates, most adverse credit lenders also charge a redemption penalty if you repay the mortgage and/or switch to another lender in the first three years.

If you want to make sure that you get a competitive deal, you'll probably need to use a mortgage broker to help you since most adverse credit lenders will do business only through mortgage intermediaries. But this can work in your favour because research that a broker does on your behalf won't affect your credit record.

If you do decide to use a broker, always check that they are authorised to do business by the Financial Services Authority (www.fsa.gov.uk) or you won't have any comeback if you feel that a broker has given you bad advice.