Refused mortgage due to lack of credit rating (long)

ElleWoods

I've been browsing this site for months but have only just registered - don't know why it took me so long! I want to try and help out a friend of mine who has been refused a mortgage (she doesn't have net access). The reason she's been given is that at the age of 32, she has never had a credit or store card, taken out a loan or had any other debt, so the mortgage company her broker recommended wouldn't take her on because they have no proof that she is a good repayer. She was really upset as she was applying for a mortgage with Halifax and she has banked with them since she was little! Obviously loyalty counts for nothing.

She sent for her credit rating which classed her as a 'fair' risk. Since this happened her broker has recommended other mortgage lenders but because she's never had any debt, they will only take her on at a much higher interest rate than normal, which she cannot afford. Her broker has said that her only other option would be to take out a credit card and start using it regularly but paying it off every month, just to show she is a good repayer, then re-apply for the mortgage in 6 months time. So she went to Halifax for a credit card and they refused her one - no doubt they used the same scoring system for that as for the mortgage.

What are her options? Should she do as the mortgage broker recommends and try another lender for the credit card then wait 6 months before re-applying for the mortgage? Or is there another option for her? Any advice would be really appreciated as she has already lost the flat she was accepted to buy and doesn't want it to happen again if she finds another property.

Thanks,
Cuba Cat x

MortgageMamma

HI There

Did you just check her credit score or did you actually obtain a full credit report. without a full credit report it really is difficult to tell why her score is so low but taken on face value there are literally hundreds of lenders who would be prepared to take on this morthgage. Your friends best option is to seek the advice of a whole of market broker, who should be able to find the best deal for her circumstances. Her original broker (if independent) should have attempted to find her an alternative product - I don't understand why they didnt do this unless they felt out of their depths. was the broker whole of market or based in a bank?

Joe_Bloggs

If you have no previous relationship with a bank/lender that that offers credit cards, savings accounts and mortgages then open up a savings account with one. Pretty soon you will be invited to apply for their other products. Perhaps consider opening up a second current account with an unrelated lender that also does mortgages and credit cards. The Halifax account is doing no favours, but do not close it as it is a sign of stability for credit card application purposes. Build up financial relationships on computer records.
Check Experian, Equifax and Callcredit reports, for progress and factual errors. An unpaid mobile phone bill could mess with ones credit report.
J_B.

herbiesjp

Agreed - you need your friend to get a copy of her full credit report from Experian or Equifax - if you do a google it should come up.

Tell your broker to stop running credit checks against her name, if he has been doing this in an attempt to get the mortgage agreed for her, as this could be compounding the problem. All these searches against an already low score would not be good.

You have not posted what figures your friend is looking at - purchase price, deposit, mortgage needed, income, any other debts

Without knowing these details, it could be the broker is trying to place you with lenders that your friend does not fit the criteria of