A BAD credit score can see you struggling to get loans, credit cards and mortgages.
As a first-time buyers you already have to content with high house prices, so if you've got a bad credit score then buying a home might seem like an impossible dream.
However, a small number of mortgage providers will still lend you money to buy a property even if you have a poor credit score.
But it's likely that you'll end up paying a higher rate of interest than those who have a spotless credit record.
That means it could be worth waiting to get on the ladder until you've improved your score – as then you'll pay lower interest so your monthly repayments will be smaller and more affordable.
Whatever you decide, it's good to know that there are options.
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Paula Cook, mortgage broker at Paula Cook Mortgage Broker LTD, says there are six things you should do if you're saving to buy a house but have a poor credit score.
Check your credit report
If you've got a bad credit record, the best thing to do in the first instance is simply find out what your score is, Paula said.
"If you know what your credit score is, it shows lenders a sense of financial responsibility."
And it will leave you better placed to go for a mortgage which will suit you as some lenders will refuse you if your rating is bad, she said.
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"If you know what's on your report, you can look at that lenders criteria," she said.
"If you've had two large defaults, a lot of high street lenders won't touch you."
If you find yourself in a situation where you're struggling to find a lender, Paula said Aldermore, Pepper Money Mortgages and Together Mortgages are three lenders worth considering.
She also recommended using a specialist broker.
We have previously reported how one TikToker revealed mortgage brokers assist by helping you work out your financial situation, highlight any schemes and find the best mortgage deals.
Remember to look for a whole of market broker, so that they can compare ALL the deals on the market.
Check how they will be paid and make sure you're happy with it.
To check your credit score, Paula recommended checkmyfile.com, which collects data from four Credit Reference Agencies, not just one.
It's currently free on a 30-day trial, but you do have to start paying £14.99 a month after that point.
However, you can cancel your subscription at any point.
Pay your bills on time
This is one quick way to ensure your credit score goes back up and boosts your chances of getting a mortgage, Paula said.
"This can have a huge impact, especially in the six months running up to applying for a mortgage.
"Even lenders who specialise in low credit scores will not give you a loan if you have recently missed payments, so keep up to date and show that you have improved you money management skills."
Paula also said the more recently you have missed payments or defaulted, the higher your interest rate on a mortgage is likely to be.
This is because if you've defaulted or missed a credit payment, a prospective mortgage lender will see you as a higher risk and increase their interest rate to protect themselves financially.
Save, save and keep saving
If you have defaults or a low credit score on your bank accounts, you may need a larger deposit than usual.
This is because most of the mortgage lenders specialising in low credit scores expect a minimum of a 25% deposit, so you will need to save more than someone with a higher credit score.
With property prices as high as they are, for some a 25% deposit might be far too out of reach.
To combat this, Paula recommended saving, saving and saving some more.
We previously reported on a pharmacist who saved £800 a month over two years so she could buy her first home by limiting her leisure budget.
Register on the electoral role
Paula said one of the simplest ways and an "easy win" to be able to build your credit score up was by registering to vote.
Registering to vote can be done on the government's website.
In England you must be 16 or over to be able to vote. In Scotland and Wales you have to be 14.
You also have to be one of the following:
- a British citizen
- an Irish or EU citizen living in the UK
- a Commonwealth citizen who has permission to enter or stay in the UK, or who does not need permission
- a citizen of another country living in Scotland or Wales who has permission to enter or stay in the UK, or who does not need permission
Close old and inactive accounts
If you haven't used a credit card in years and have no intention of using it again, close it, Paula said, as it will be affecting your score.
She said: "The more credit lines that you have open the more your credit score will be reduced."
Having too much available credit will reduce what the lenders will give you.
Paula said this is because for whatever money you have in those accounts, it will be seen as a bigger risk than if you didn't have the account.
"If you've got a low credit score, lenders see it that you can get yourself in debt.
"So, ideally, you don't want to have too many accounts, especially if you've got accounts and you've got no intention of using them."
Before you close an account, check what impact it's having on your score. Sometimes it may be having a positive impact on your credit history.
Reduce your spending
Paula said to show lenders you can manage your credit by reducing your spending in the last six months prior to applying for a mortgage.
"This means no large impulse purchases," she said.
"You want a lender to see that you can manage your money and that you will pay your mortgage on time.
"Showing that you splurge and surplus cash will not look good when the lenders look through your bank statements."
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We have previously revealed others way to help you get a mortgage if you've got a poor credit score.
And we spoke to a business analyst who turned around his poor credit score in two years.
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