How can I get a mortgage if I have a bad credit score?

If you have a bad credit score, you may think that getting a mortgage is out of reach. But don’t worry, there are still options available to you and I’m here to help you overcome that challenge on your way to home ownership.

In New Zealand, a credit score is a reflection of your financial history. It takes into account things like missed payments, defaults, and bankruptcies. Lenders use this score to assess the risk of lending to you. If you have a bad credit score, it means that you’re seen as a higher risk borrower, and that can make it harder to get a mortgage - but it’s not impossible!

Here are some steps you can take to improve your chances of getting a mortgage, even with a bad credit score:

1. Understand your credit score

The first step in getting a mortgage is to understand your credit score. You can check your credit score for free from credit reporting agencies like Credit Simple or Centrix. Understanding your credit score will give you a better idea of where you stand, and what you need to do to improve your chances of getting a mortgage. It’s better the devil you know!

2. Work on improving your credit score

If you have a bad credit score, it’s important to take steps to improve it. This could include paying off outstanding debts, making sure you make all your payments on time, and avoiding applying for credit you don’t need. The better your credit score, the better your chances of getting a mortgage.

3. Save for a bigger deposit

One way to improve your chances of getting a mortgage is to save for a bigger deposit. The more money you can put down as a deposit, the less risk you are to the lender. This can help to offset a bad credit score.

4. Consider a guarantor loan

If you have a bad credit score, you may be able to get a mortgage with the help of a guarantor. A guarantor is someone who agrees to take on the responsibility of your mortgage if you can’t keep up with the repayments. This can be a family member or friend with a good credit score and financial stability.

5. Seek out a specialist lender

Finally, if you’ve tried all of the above and still can’t get a mortgage, it may be time to seek out a specialist lender. These lenders are more flexible and may be willing to work with you even if you have a bad credit score. However, be aware that these lenders may charge higher interest rates or have stricter repayment terms.

In conclusion, getting a mortgage with a bad credit score in New Zealand is not impossible. By understanding your credit score, working to improve it, saving for a bigger deposit, considering a guarantor loan, and seeking out a specialist lender, you can increase your chances of success. Remember, buying a home is a big decision, so take your time, do your research to find the best option for you and reach out to a mortgage advisor for guidance anytime!

Disclaimer: This content is not intended to replace advice from your mortgage advisor, and does not take into account your specific financial situation. This is not personalised advice and is factual only. Please do your research and work alongside a mortgage professional to find the best solutions for you. Please get in touch if you’d like specific advice or just want to have a chat!