Mortgage Clinic: 'I've had bad debt - can I get a mortgage?'

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'I've had debt problems in the past and have now been turned down for a mortgage. What can I do to up my chances of getting a decent mortgage offer? I am worried about being forced to pay over the odds, especially as my debt problems were not my fault'

HS, by email

The first question you should ask is whether you should be buying a house at all. Having said that, plenty of companies will give mortgages to people with debt problems. But the greater your (past) financial troubles, the more you will pay for a home loan, so you're right to worry about paying over the odds.

If you proceed, try to find out why you were turned down. The lender is not obliged to tell you. If you used a broker, discuss it with them: they can often find out from the underwriters.

Check your credit records (at www.experian.co.uk; www.equifax.co.uk; or www. callcredit.co.uk). Sometimes a small factor such as not being on the electoral roll or not having a land-line phone can reduce your score. If you have cleared your debt problems in the past, check that your credit file reflects this.

Lenders will overlook debts, even County court judgments, if they are satisfied that your record has been good since. But if the record is out of date, it will cause real headaches.

Also, check any "associations" on your file. A family member or ex with bad credit can affect you. "Some lenders will accept a satisfied County court judgment, provided it is not major, such as a dispute with a company while a student," says Cath Hearnden of MyMortgageDirect.

If you've had debts that were your fault, then it's important to have kept a clean credit record since. Hearnden points out that some lenders look at an applicant's overall financial track record. But certain factors, such as unsatisfied County court judgments or mortgage arrears, are harder to overlook.

If your debt problems were due to a change in circumstances, such as divorce, some lenders will be sympathetic. Yorkshire Building Society has a scheme for divorcees called Fresh Start.

In your circumstances, it is worth talking to a mortgage broker. However, make sure that you approach one that covers all of the market, not just sub-prime loans. Don't automatically assume that mainstream lenders are out of reach. A good broker will always try them first.

If you do have to turn to a sub-prime lender, view it as a short-term way of improving your credit record.

You can pay two per cent more, but in two years' time you might switch to a mainstream loan. So, check on exit terms before signing.

Send us your questions and you could receive £50 to spend at Amazon

Foxed by jargon? Confused by all the options? Email a question to mortgageclinic@independent.co.uk. We will not reveal your identity, and we cannot give specific advice.

If your question is printed, you'll receive a £50 voucher from Amazon.co.uk, so you can kit out your home with anything from a lawnmower to an espresso machine. www.amazon.co.uk/homeandgarden

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