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How to get a mortgage if you’ve got a poor credit score



BUYING a house is difficult enough at the best of times, but if you have a poor credit score, it could be even harder and more expensive.

Millions of Brits have been rushing to buy a home during the Covid crisis, and raced to beat the stamp duty holiday deadline last month.

A bad credit rating could hinder your chances of getting a mortgage


A bad credit rating could hinder your chances of getting a mortgageCredit: Getty

But lenders became nervous dishing out loans over the crisis – some big banks even stopped lending to certain people, including those on furlough.

Those with poor credit scores could find it even more of a challenge to clinch a deal.

We explain how to get a mortgage even if you have a bad credit history – and how to boost your chances of getting an application accepted.

What is a credit score?

Your credit score shows how well you’ve managed your borrowings over the last six years, and lenders use it to calculate how risky it would be to give you money.

So it can help you – or hinder you – from getting a mortgage, loan and credit card.

Any county court judgements (CCJs) or bankruptcies will also damage your rating and remain on your credit report for six years.

Having a low score and lots of unpaid bills means you are in bad credit.

Can I get a mortgage if I’ve got a bad credit score?

If you have a poor credit score, you may find it more difficult to get a loan.

A lender will do a credit check when you make a mortgage application and any bad marks or a low score can make it harder to get the best home loans.

This is because you may be seen as a more risky borrower, so a lender could ask for a larger deposit than on a traditional mortgage.

Not having a credit history could also impact your chances of getting a mortgage too, First Mortgage compliance director David McGrail adds.

This is when you haven’t taken out any credit – like a credit card or a loan – at all.

“Having credit in place and repaying it can improve a credit score as it demonstrates an ability to keep up with repayment on credit taken,” he said.

“Having no track record of being able to repay credit is viewed as a step into the unknown meaning lenders can take a slight negative view on those taking credit for the first time.”

What lenders offer mortgages to people with poor credit scores?

While it might be tricky getting a mortgage lined up if you have a poor credit score, a number of banks have deals that are more suitable for these homebuyers.

For example, Metro Bank launched two new mortgage deals for buyers with bad credit histories in March.

The lender will give home loans to borrowers with an imperfect credit history as long as they put down at least a 20% deposit – it will even consider lending to those with County Court Judgements against their name.

The two and five-year fixed-rate deals are open to applicants who’ve defaulted on previous credit payments, such as missing a credit card payment, up to twice in the past two years.

Specialist lenders offer deals too.

Kensington Mortgages will consider offering loans to customers who are debt management plans and who have poor credit scores, with interest rates starting at 1.99%.

While Bluestone Mortgages will offer consider lending to those with CCJs too.

ClearScore chief executive Justin Basini said these so-called “bad credit” mortgages are usually only available through mortgage brokers.

“An experienced broker will know which lenders are likely to accept someone with particular circumstances,” he said.

“Speaking with friends or family who already have a mortgage broker or having a look on Google would be a good place to start your search.”

However you apply, the level of deposit is likely to be higher – at around 25% – and the interest rate will be more expensive than on a standard product.

It’s best to shop around for the best deal using a price comparison site such as Uswitch or ComparetheMarket.

What is a typical mortgage rate for bad credit?

Rates can change all the time and will depend on the lender and the economic environment.

Pricing will be higher than on a standard mortgage to reflect the added risk a lender is taking by giving a loan to a borrower with a poor financial track record.

Typical bad credit mortgage rates were at around 4% at the start of May 2021 based on a 25% deposit.

In contrast, the average rate for a standard two-year fix with a 25% deposit in March 2021 was 1.56%, according to the Bank of England.

How do I find a mortgage broker?

Most people get advice from a mortgage broker – and if you have a poor credit score, they could be handy helping you get a deal.

These are essentially a qualified middleman who has a duty of care to recommend a suitable mortgage for you.

If you do choose to use one, you may be able to get better deals than ones offered directly by the lender, and if your mortgage turned out to be unaffordable then you can complain and be compensated.

But their services do come at a cost and you’ll be required to pay a fee of around £500 according to Money Helper, and sometimes there’s the agent’s commission on top to think about too.

New rules came out in 2019 which means advisers have to explain to borrowers why cheaper deals haven’t been recommended.

This should help you understand why you’ve been offered a certain price – and it gives them a chance to challenge any recommendation.

Mortgage brokers must be regulated by the Financial Conduct Authority – you can check to see whether the one you’re planning on using is listed on the watchdog’s website.

How do I boost my credit score?

Improving your credit score will likely boost your chances of getting a mortgage.

Online Mortgage Advisor managing director Pete Mugleston said checking your credit score is the best first step to take.

You can check your rating for free by heading to Equifax, Experian or TransUnion.

“Reviewing your credit reports yourself so you can challenge any inaccuracies and have outdated information removed would be a good start,” he said.

While Ipswich Building Society’s Joanne Leek said you should check if information in your credit score is “linked” to another person.

For example, this could be through having had a joint card or bank account from a previous relationship, or from living in shared accommodation from their student days.

“Many are surprised to find they have an outstanding payment from a joint energy or phone bill for example, but this can impact their credit score to,” she said.

You can get on the electoral register, which proves who you are and where you live, which means its easier to get credit if you’re on the list.

You should also limit your number of credit applications, as lots of requests could be seen as a sign of financial distress to some lenders. 

Pay your bills on time to boost your score, as any missed payments will be logged on your file.

Try and pay down any debt you have as this might put lenders off signing off your loan.

Money expert explains how to get £1,274 to start your own business if you’re on Universal Credit or benefits

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Are Sallie Mae Student Loans Federal or Private?



When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances



Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit



Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.



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