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Discover how a declined mortgage can impact your credit rating. Learn what gives you a bad credit rating and how to navigate the effects in our latest article.

What gives you a bad credit rating?

Defaults, high levels of debt, bankruptcy, repossession, and a history of late payments are some factors that can contribute to what causes a bad credit rating. Applying for a mortgage with a bad credit rating will reduce the prospects of a successful outcome.

Reasons why your mortgage may have been declined

Each lender has its own set of criteria, which they use to determine whether they will offer you a mortgage or not. Due to these criteria, there are many reasons why your mortgage application may be declined:

  • You have a poor credit history or have possibly defaulted on payments.
  • You aren’t registered to vote on the electoral roll (you have to be registered at your current address as lenders use this to confirm your identity).
  • You’ve applied for credit too many times (this results in numerous credit searches, which will be recorded on your credit report).
  • The lender has determined that you have too much
  • You aren’t earning enough or, based on the lender’s calculations, you won’t be able to afford the mortgage repayments.
  • There are administration errors on your application (for example, an incorrect address, or incomplete documentation).
  • You have missed a debt repayment
  • Your earnings fluctuate since you are self-employed or are a contract worker.

Does a refused mortgage affect a credit rating?

When a mortgage loan is declined, the only thing that will show up on our credit report is the application. Thus, a declined mortgage won’t lower your credit score in itself. However, a declined mortgage will likely lead you to apply again. It is these applications that are a part of what gives you a bad credit rating.

While your credit score may drop after a mortgage application, there’s no need to worry as this is usually only a short-term effect. Your credit score will usually return to normal or even improve in the months following your credit application. Just be sure to stay up to date with any other debt repayments you may have.

What should you do if your mortgage application is declined?

While a declined application may leave you frustrated and a little stressed, it doesn’t mean that you cannot get a mortgage. However, before going ahead and submitting a new mortgage application, there are some things you should do first.

Firstly, you’ll want to ask the lender why your mortgage application was declined. If the lender doesn’t disclose the reason, you’ll have to look at your own credit report and see if there is anything there that may have negatively impacted your application.

If you can’t spot anything on your credit report, you should try to increase your current credit score. There are several easy ways to do this, such as:

  • Paying off your existing debt
  • Using less credit than what you have available or
  • Ensuring your regular payments are settled timeously and in full

By increasing your credit score, you will demonstrate that you are a responsible borrower.

How mortgage advisors can help after a mortgage is declined on credit score grounds

Mortgage advisors are instrumental in supporting applicants after their mortgage is declined on credit score grounds. They can assess the impact of a refused mortgage on a credit rating and provide insights on how to mitigate the effects. By analysing the reasons why, a mortgage is declined on credit score, advisors can offer tailored strategies to improve creditworthiness.

Many clients ask ams:Does a refused mortgage affect a credit rating?" From our experience, undoubtedly, it does. Mortgage advisors like our team, help clients understand the specific factors that led to the decline and provide guidance on addressing them. Mortgage advisors (like us at ams:) recommend actions such as timely bill payments, debt reduction, and establishing a positive credit history to boost credit scores.

Additionally, mortgage brokers leverage their network to connect clients with alternative lenders who are more accommodating of credit challenges. Throughout the process, mortgage advisors offer ongoing support, working diligently to improve credit scores and enhance the chances of future mortgage approval.

Contacting the ams: team

Are you seeking mortgage advice? Gain insight into the impact of a declined mortgage on your credit rating. Don't allow misconceptions to hinder your progress. Understand "what gives you a bad credit rating" and "what causes a bad credit rating", when you speak to our team. Empower yourself to shape a prosperous financial future after your mortgage is declined on credit score grounds when you dial 0121 4000 052 or visit our website for expert guidance. Contact us today.