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7 reasons you're being declined for a mortgage
Posted: 4th Jun 2021

Being turned down for a mortgage can be frustrating, especially if you’ve been saving hard towards your dream home. Research from Which? suggests younger people are disproportionately affected when it comes to having a mortgage application declined, but luckily there are steps you can take to avoid this.

Whilst most people looking to get a foot on the property ladder will be aware that having a poor credit history, or failing to meet affordability tests, may result in being turned down for a mortgage, there are some lesser known factors that could cause you to be declined as well:

Too many applications

Before you jump to another lender, hot off the tails of your disappointment, it’s important to know that too many applications can set you back. When applying for any form of credit, a provider will usually check a credit report, leaving a footprint on it. Therefore racking up too many (failed) applications, sends warning signals to the lender that you may have financial problems.

Before applying for another mortgage, seeking the help of a mortgage intermediary can help you understand what your options are, find the best deal for you, and advise you on making a more successful application next time around.

Mistakes on your credit report

Mistakes on your credit report could result in you being automatically declined by some lenders, so it’s important to check with the three major credit agencies for any errors first. Similarly, something as simple as getting married and changing your name, but forgetting to update various authorities and providers with your new legal name could leave them unable to access your credit report. If you can’t be traced your application is unlikely to get through, or will at least face lengthy delays.

Being financial linked to another person

Many people are also unaware that they could be financially linked to another person, for example by having had a joint bank account from a previous relationship. If the other individual has poor credit, this could affect your rating too. Luckily, it’s fairly straightforward to unlink from financial associates.

You haven’t borrowed money before

Being turned down for a mortgage could, in some cases, be less to do with bad credit, and more to do with the fact that you simply haven’t had as much time to build up a credit history – borrowing money and then paying it off in a responsible way provides a higher score than not borrowing at all, when it would be natural to assume that not needing to rely on credit would be a good thing in itself. Don’t take out a credit card for the sake of it - if in doubt seek the advice of an intermediary who may help put your case to the lender.

Old unpaid bills

A common, but easily avoidable, issue we see a lot with people in their twenties and early thirties is 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 your credit score too. Ask to see a copy of your credit report to check if you have any outstanding payments in your name. Unfortunately, even a small unpaid balance can cause an issue.

Not being on the electoral roll

If you aren’t already on the electoral roll, make this a priority. Lenders use this to check you live where you say you do, so naturally this can affect your application. Registering is free and doesn’t take long.

Recently starting a new job

Finally, remember, it’s about affordability not just now but in the future too – so if you’ve recently moved jobs or industries, a lender may see you as more of a risk. Waiting until you’ve been in your role a little longer could help to demonstrate stability. Additionally, opting for a lender who operates a manual underwriting system, rather than relying on a computer algorithm, and will judge circumstances on an individual basis, could prove beneficial.

If you’ve recently had a failed mortgage application, try not to be too disheartened; check if any of the above factors apply to you, reach out to a mortgage adviser, or speak to us for some advice on your next steps.

In the meantime, why not think about how you could improve your credit score?

Your home may be repossessed if you do not keep up repayments on your mortgage.