One of the biggest points of appeal of bridging finance is its flexibility. Bridging loans can be used for almost any legal purpose and eligibility criteria are comparatively relaxed.
But does this mean that it is possible for applicants with poor credit to qualify for bridging finance? Assuming you have a low credit score (or no credit history whatsoever), what is your chance of qualifying for an affordable bridging loan?
Unlike mainstream loans and financial products, many bridging loan specialists welcome customers with poor credit. As for why, it is simply a case of credit ratings not being the main eligibility factor taken into account.
Your credit score may affect the rate you are quoted, but need not necessarily stand in your way of qualifying for bridging finance.
What Types of Credit Issues Are Relevant?
When applying for almost any financial product, bridging loans included, a variety of credit issues may influence the affordability of the facility.
Just a few examples of which include a poor credit score, having no credit history, bankruptcy, defaults on existing loans, consolidation loans, debt management schemes, repossessions and so on.
With any of these issues on your financial profile, your chances of qualifying for a conventional loan or mortgage are minimal. The vast majority of major banks and lenders base their decisions almost exclusively on these ‘binary’ credit checks.
However, things work in a different way with bridging loans. You can still expect a full credit check to be performed, but even a negative outcome will not necessarily result in the rejection of your application.
Why Credit Scores Are Not the Main Factor When Applying?
Credit scores are used by banks to ascertain the creditworthiness of an applicant and to assess the risk level of loaning money to them. But where credit checks like this fall short in their reliability is in their exclusive focus on the applicant’s past.
For example, you may have poor credit due to a series of missed mortgage payments 2 to 3 years ago. This may have happened due to circumstances completely beyond your control and the rest of your financial track record has been exemplary.
You may also have a stable job with a high annual income and a generally strong financial status. Even so, you can still expect to be turned down for most conventional financial products.
With bridging finance, eligibility checks work the opposite way around. To a bridging specialist what matters most is your current financial status and your ability to repay your bridging loan. If you can provide evidence of your strong financial position and details of a viable exit strategy, your credit history is largely inconsequential.
With bridging finance, it is all about your current capacity to repay the loan you are applying for – not the ‘blips’ on your credit history to date.
Better Credit = Better Deals
Even so, it is still a good idea to take all reasonable steps to get your credit score in order before applying for bridging finance. Where possible to do so, boosting your credit score even slightly could help you qualify for a more competitive deal.
In addition, it is important to target the right lenders with your applications, if you have poor credit. Not all bridging finance specialists are equally flexible with their eligibility checks, so it is vital to apply to those who welcome ‘subprime’ applicants.
For more information on any of the above or to discuss the benefits of bridging finance in more detail, contact a member of the team at Bridgingloans.co.uk today.
