A quarter of all mortgage applications are rejected by mainstream lenders due to the applicant's credit rating or employment status. You can get turned down for a wide range of relatively minor problems, such as not being on the electoral roll, not having a bank account, receiving income benefits and even making several mortgage applications over a short space of time. Having CCJs, being a bankrupt or defaulting on previous borrowing will limit the range of mortgage products available to you.

Even something as trivial as missing a payment on your mobile phone contract could have a detrimental affect on your mortgage application, with the missed payment remaining on your credit file for three years. 

As the much publicised credit crunch rumbles on, lenders are getting more cautious about who they lend to.  If the current uncertain financial climate continues, an increasing number of people may face problems getting a mortgage from their bank or another high street lender, particularly if they have a bad credit history.

Lenders check credit ratings to decide whether a mortgage applicant is a suitable person to lend money to, using a process known as credit scoring. 

Three credit reference agencies in the UK, Experian, Equifax and CallCredit, hold information about every financially active adult. Your credit  file includes personal information, such as your name, partner's details and previous addresses and publicly available information from the electoral roll, court judgements, and details of bankruptcies. 

A credit file will also include your credit and financial history, including details of your current and previous financial accounts, how much credit you currently have available to them (in the form of credit cards, for example) and your record of paying back debt.

If you know you have had minor credit problems and are worried about whether you qualify for a mainstream mortgage, the best course of action is to contact to a mortgage broker. He or she can advise you on your eligibility for any type of mortgage.

If you run into serious arrears, perhaps because you get divorced, fall ill or lose your job, getting a mortgage on the high street can be extremely difficult. Most mainstream lenders will not consider applicants with County Court Judgments (CCJs) against them, even if they have been satisfied months ago.

Fortunately, plenty of specialist lenders, which mainly operate through mortgage brokers, understand that just because you have run into financial problems in the past, it doesn't necessarily follow that you will be default on repayments in the future. Specialist lenders will provide mortgage to many types of applicants - even discharged bankrupts -as long as the borrower can afford to meet their monthly mortgage payments.

While a mortgage from a specialist lender is still likely to be charged at a higher rate than a mortgage from a mainstream lender, rates for borrowers with bad credit have become more competitive in recent years.

Mortgages for borrowers with bad credit are now distinctly graded, so that a person with only a small black mark on their credit record will pay a lower rate than a discharged bankrupt, for example.

And the good news is, it's easy to move up those grades. You do not have to stay on a high rate forever -as time passes and you demonstrate that you are a responsible borrower, your credit record gets healthier and you can move up the ladder towards mainstream interest rates.

Did you know? If any arrears on your application are over three years old and there are no further adverse marks on your credit record, many lenders will consider you as a mainstream applicant. A broker can check whether you are eligible.

PROS of a bad credit mortgage

· Enables borrowers with bad credit histories to buy property
· Rates have got more competitive in recent years

CONS of a bad credit mortgage

· Rates are still likely to be higher than a mainstream mortgage

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THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

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