Updated on July 8, 2016
To be in a position where your credit score is nothing to write home about is something that most people loathe. Financial lenders have since time immemorial been very sensitive when it comes to having a good credit rating to a point where those with a poor credit rating feel as if they have been discriminated upon. While financial irresponsibility is the biggest reason for having a poor credit score, there are instances where a person’s poor credit rating is as a result of factors beyond them. Take for instance a person who was unable to meet their financial obligations in the past due to loss of a job or incapacitation and you will understand why everyone needs a second chance.
Having a poor credit rating is not always an indication of poor financial decisions in the past but can also be as a result of circumstances beyond a person. Well, today we are not looking at circumstances that informs a person’s poor credit rating but rather we are going to focus on the strategies that a person with a poor credit rating can utilize to get access to a home loan. The idea is to look at strategies that a person with a poor credit rating can take advantage to ensure that they get approved for a home loan.
Look for a guarantor with a good credit rating
The fact that you have a poor credit rating doesn’t mean that you need to sit back, feel sorry for yourself and avoid home loans like a plague. Most financial institutions in the UK would approve your home loan if you have a guarantor with a good credit rating to cosign your loan. In the event that you default in repaying your loan, your guarantor will be liable to pay the loan amount. All you need to do is ensure that you convince your guarantor that you do not have any intention of defaulting your loan but that you need him to cosign for the purposes of you getting the loan you need. The guarantor must have a good credit rating as well as a stable source of income if he/she is to qualify.
Provide collateral or security
From time immemorial, individuals with a poor credit rating have found the going easy when applying for a home loan especially if they have some form of asset to pledge as security. Financial institutions rarely decline a home loan application especially if the applicant pledges security or collateral. Assets that you can use as security include jewelry, boats, land, your home, car, property and so on and so forth. So long as the valuation of the said security is enough to cover your loan amount plus interest should you default, lenders have no problem approving your home loan request.
Make use of your savings as bait
Well, the word bait might seem sinister but if you are able to prove to your lender that you have sufficient funds in your bank account, there shouldn’t be bottlenecks when it comes to approval of your home loan. Lenders believe that if you have substantial savings, you are capable of repaying your loan. People with a savings habit are viewed favorably as opposed to those with no savings to their name.
Work on improving your credit score
Granted, there are times where your bad credit is as a result of errors here and there. All the same, if you have bad credit, it’s essential that you check your credit report for any errors and have them resolved before you apply for a home loan. At times, your poor credit rating could be as a result of bills you settled beyond the set date and which have not been reflected hence the need to work with a financial advisor to resolve the situation before you apply for a home loan.