A bad credit history can cause borrowers difficulty when they remortgage or apply for another type of credit.
While it doesn’t always mean you’ll be turned down, it could make borrowing more expensive and mean you miss out on the deal you want.
When you apply to remortgage, the lender will check your credit history. If you’ve previously missed or been late with your repayments, lenders may see you as a ’risky’ borrower. This could prompt them to turn you down, or charge you more to borrow.
But having said that, even if you’re charged more because of your credit history, you may still save money by remortgaging with a different lender.
To work out whether or not remortgaging is a cost-effective move, you’ll need to do your sums - and you can use our mortgage calculator to help.
Should I remortgage?
There are three main reasons people choose to remortgage:
An existing deal has ended and you want to choose a new one
You think you could be getting a better deal with a different product or lender
You want to borrow more and pay it off as part of your mortgage.
Whatever your reason is, securing a competitive deal will depend on whether your credit history is in a good shape.
What role does bad credit play in remortgaging?
Every time you’re late with or miss a payment, your credit history is marked. Your lender will inform the credit checking agencies – Experian, Equifax and Callcredit - that you’ve broken your agreement, and this will be recorded on your credit history.
These negative marks will remain on your credit history for six years or so. During this time, they will be visible for other lenders to see. This can make it harder to remortgage with a lender offering a competitive deal.
How can it affect me?
"The one thing all lenders have in common is that they’ll look at your credit history."
When it’s time to look for a remortgage deal, if lenders don’t think you’re a responsible borrower, they may be unwilling to lend to you.
Each lender has its own set criteria. The one thing all lenders have in common is that they’ll look at your credit history.
After all, they want the reassurance that you’ll pay back what you owe. If they don’t feel that you’re a responsible borrower they may reject your application. Or they may charge you a higher interest rate than advertised.
Taking this into account, you need to ask if you’ll actually save money by remortgaging. Remember, there may be a high fee for ending your current deal early.
What steps can I take to improve my chances?
To improve your chances of getting the best remortgage deal you can, you should make sure you keep on top of all your credit agreements and don’t fall behind with any payments.
"Don’t apply for more credit in the run-up to remortgaging, as this will add to your outgoings."
If you have several lines of credit, it’s also worth considering whether you have room in your budget to repay some of them in full.
Some mortgage providers take into account the amount of credit already available to you. If they feel you’re already juggling a lot of credit, it could affect what interest rate you’re accepted for - and whether they choose to lend to you at all.
Don’t apply for more credit in the run-up to remortgaging, as this will add to your outgoings. Remember, when you remortgage, lenders will consider all the same things they would if you were applying for a mortgage for the first time, including your income and outgoings. Try to keep your non-essential spending to a minimum for the few months before you apply to remortgage.
Finally, always check your credit history before you apply. Make sure all the information it contains is correct and up to date. If it’s not, this could act against you so take steps to fix any errors as soon as you can.
For more information on checking your credit history for free, head here.
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Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender.