Being declined for a mortgage can be frustrating. If you have adverse credit, you may already be concerned about whether a lender will accept your application.
The temptation can be to try another lender straight away, hoping for a different answer.
But before submitting another application, it’s worth understanding something that could affect your next steps: the difference between a soft credit search and a hard credit search.
At Custom Mortgages and Finance, we believe it’s important to understand your circumstances and explore suitable options before rushing into a formal application.
Does being declined for a mortgage affect your credit score?
Not directly. A mortgage refusal itself isn’t normally recorded on your credit report as a rejection.
However, a formal application will generally involve a hard credit search, which leaves a footprint on your credit file.
Other lenders can see these searches. Although one hard search doesn’t automatically damage your chances of getting a mortgage, several searches in a relatively short period may affect your credit score and could raise concerns for lenders assessing your application.
This is particularly relevant if you have adverse credit and need to be careful about how and when you approach potential lenders.
The key is not to avoid applying for a mortgage altogether. It’s to make sure you understand your options before deciding whether an application is appropriate.
What is the difference between a soft and hard credit search?
Soft credit searches
A soft search is an initial check that can help assess your potential eligibility for a financial product.
Soft searches aren’t visible to other lenders in the same way as hard searches, and they don’t affect your credit score.
They can be useful when exploring mortgage options because they may help establish which lenders could be worth considering before a formal application is made.
However, a soft search is not a mortgage offer or a guarantee of acceptance. A lender may need to carry out further checks, including a hard search, before making a final decision.
Hard credit searches
A hard search is generally carried out when you make a formal application for credit, including a mortgage.
It leaves a footprint on your credit report that other lenders can see. Multiple hard searches over a short period may affect your credit score and how lenders assess your application.
This is why making several applications in the hope that one lender will say yes isn’t always the best approach.
Understanding your circumstances and identifying potentially suitable options first can help you make more informed decisions about when to apply.
How can a specialist mortgage adviser help?
This is where working with a specialist mortgage adviser can be particularly useful, especially if you have adverse credit or are concerned about being declined.
Lee Deveroux, our specialist mortgage adviser, takes a considered approach to exploring your options before a formal mortgage application is submitted.
The aim is to understand your circumstances, identify potentially suitable lenders and establish whether there is a realistic route forward before proceeding with a full application.
Step 1: Review your circumstances
The first step is to understand your situation, including your credit history, income, existing financial commitments, deposit and the reasons you may have experienced difficulties in the past.
This helps identify the factors that may affect your mortgage options and whether there are any issues that need to be addressed first.
Step 2: Explore your options using a soft search
Where the process and lender permit, Lee can carry out an initial soft credit search and explore potentially suitable mortgage options.
He can then speak to the relevant lender to discuss your circumstances and establish whether there may be a suitable route forward.
A soft search doesn’t affect your credit score and can help you explore potential options without immediately leaving the hard-search footprint associated with a formal application.
It is important to remember that this is an initial assessment, not a guarantee that a lender will agree to offer a mortgage.
Step 3: Obtain a Decision in Principle
If the initial review and discussions with the lender indicate that you may be eligible, Lee can obtain a Decision in Principle (DIP).
A DIP provides an initial indication that a lender may be willing to lend, subject to its criteria and further checks. It can help you understand whether there is a potential basis for moving forward.
It is not a formal mortgage offer, and the lender may still decline the application following its full assessment.
Step 4: Proceed to the formal mortgage application
Once the Decision in Principle has been obtained and the next steps have been agreed, Lee can proceed with the formal mortgage application.
At this stage, the lender will generally carry out a hard credit search and undertake further checks on your finances, supporting documents and the property, as applicable.
The benefit of this staged approach is that your circumstances and potential options are explored before moving to a formal application.
It cannot remove every risk of being declined, but it can help you make a more informed decision about whether to proceed.
What if a mortgage isn’t possible right now?
Sometimes, the review will identify that a mortgage isn’t realistic at the moment.
That could be because your current income doesn’t support the borrowing required, you have an active insolvency arrangement, your deposit is insufficient or your credit history needs time to improve.
In these situations, the right advice may be to wait rather than apply elsewhere immediately.
Depending on your circumstances, useful next steps might include:
- Checking your credit reports for errors and challenging inaccurate information.
- Bringing overdue payments up to date where possible and maintaining a consistent payment record.
- Reducing existing financial commitments where appropriate.
- Building a larger deposit and keeping clear evidence of its source.
- Obtaining appropriate debt or insolvency advice if you’re dealing with a formal arrangement.
- Reviewing your affordability and considering whether a different borrowing amount may be more realistic.
Some changes can be made relatively quickly, while others take months or longer. There is no universal waiting period that guarantees a mortgage will become available.
The important thing is to understand what needs to change and make a realistic plan.
A mortgage refusal doesn’t have to be the end of the conversation
If you’ve been declined for a mortgage, or you’re concerned about adverse credit, you don’t have to start by submitting another application.
At Custom Mortgages and Finance, we can help you understand your circumstances and discuss the options that may be available.
With Lee’s initial review, discussions with potential lenders and the Decision in Principle process, you can explore whether there is a possible route forward before progressing to a formal application.
If a mortgage looks achievable, we can explore the appropriate next steps. If it isn’t realistic yet, we can help you understand the barriers and what you may need to work towards.
Sometimes the answer is yes. Sometimes it’s no. And sometimes it’s not yet.
Before you apply, understand your options.
Contact Custom Mortgages and Finance to discuss your circumstances and find out how we may be able to help. Mortgage availability depends on individual circumstances, affordability and lender criteria. A soft search or Decision in Principle does not guarantee that a mortgage will be offered. Credit-search processes vary between lenders
