Are there credit checks with bridging finance?

Do Bridging Loans Require A Credit Check?

Lacking a credit history, or having a low credit score, will make it challenging to secure a traditional loan. Lenders’ primary concern is the long-term monthly repayments involved in mortgages, and the risk is elevated when a borrower lacks substantial evidence of repaying on time.

Thankfully, bridging finance can present a solution regardless of credit history. Lenders may overlook credit details, offer flexibility, and fast-track you into securing funds to resolve your property finance problem.
In this short guide, we can help you navigate bridging finance – explaining the possibility of getting a bridging loan with poor credit and ensuring you don’t fall short in a competitive market.
 

What is bridging finance, and how does it work?

A bridging loan is a fast and flexible alternative to traditional finance – making you a cash buyer for properties or securing funds for property development projects and renovations. 

Essentially, it frees up options when there is a gap to bridge in property finance.

Bridging loans have flexible terms, typically 12 months, repaid by the proceeds from a property sale or additional security – such as a high-value asset.

Crucially, with short-term finance, you must always consider your exit strategy – if applying with a poor credit history, it is essential that you provide adequate security against a loan.
You must make arrangements to repay within the term before you begin the process, proving your ability to pay to a lender. Often, putting down a larger deposit and having a clear exit strategy may increase your chances of success as it reassures bridge lenders.

 

What credit issues might bridging lenders overlook?

Bridging lenders are willing to overlook specific credit issues which would flag up in applying for traditional finance – such as a personal loan or mortgage. The primary concern of bridging lenders is the security being offered. The loan will be based entirely on the valuation of a property or assets, not based on credit history.

A bridge loan application can overlook credit issues such as missed payments or defaults, low or non-existent credit scores, debt management schemes such as IVAs, CCJs or bankruptcy, and any outstanding debt or late payments. Again, this will only be the case if your repayment plan offers adequate security – most often, this will be the property you sell.

However, if you are planning to remortgage your property, poor credit history can become an issue for bridging lenders. Lenders may doubt an alternative exit strategy if there is no lump sum raised through a property sale.
If you are facing this situation, contact us to discuss available options. We can advise you and assist in finding the right bridge lender for your circumstances – those who deal with non-standard exit proposals.

 

How is my credit rating affected by bridging finance?

Generally speaking, improving your credit score is helpful when applying for bridging loans. Despite credit issues being overlooked, an improved score can help your success rate further – it mitigates potential risk for lenders if a credit check is made.

The application process for a bridging loan, if unsuccessful, may affect your credit history. This is only true if a hard check is made against your credit file.

To prevent this, you should get a soft credit check before committing, which allows you to see the realistic chances of success when you receive an “agreement in principle” – this will not affect your credit score.
Lastly, if you cannot initially improve your credit score before applying, paying off a bridge loan successfully can improve your score.
 

How a bridge loan specialist can help with bad credit

In addition to expert knowledge of the loan market, our team has access to niche lenders that cannot be approached directly by the public – these lenders may provide options, regardless of credit score.
We understand the varying circumstances of our clients. Ultimately, we can provide you with expert advice on improving the success rate of any applications for bridging finance.

Our experts can assist you with all the necessary documents. They can get you a decision in principle within a day if a loan is available - following an initial assessment by an advisor.