Does Equity Release Affect Your Credit Score?

When you’re looking to release equity from your home, one of the questions you’re likely to ask is how it will affect your credit score. After all, you don’t want any negative impacts on your rating that could make it harder for you to borrow money in the future.

When you apply for Equity Release, the provider will do a credit check. This will not affect your credit score. The company is more interested in the value of your property and how old you are.

 

Does Equity Release Require a Credit Check?

The first thing to note is that most Equity Release schemes will perform a credit check. The lender will conduct a credit check on each applicant as part of the Equity Release application process.

A poor credit score will most likely not affect your eligibility for Equity Release. However, most lenders will insist that any loans, CCJs or IVAs are paid off before receiving any net cash from your Equity Release.

As with any financial arrangement, lenders seek borrowers capable of repaying their debts. This is no different with equity release is the same.

The equity release lender’s primary collateral is the property itself. Each Equity Release plan operates indefinitely or until the Equity Release lender dies or enters long-term care.

It’s worth noting that you are not required to make payments to the lender during the length of the Equity Release plan. This is because the lender is repaid upon your death when the property is sold. As a result, it is a significantly longer-term loan than other types of credit.

The lender wants the property to be debt-free. They check this using some of the methods below…

Equity Release Interest Rates

Your title deeds will be checked with HM Land Registry.

Title deeds register is divided into three separate registers:

• Property Register
• Proprietorship Register
• Charges Register

Inside the Charges Register will show any burdens held against the property, such as restrictions on the use of the property known as covenants or obligations to maintain a drive or fence line known as positive covenants. The most common charges are mortgages and secured loans.

The title deeds will also indicate any other parties who have registered an interest in the property. This could involve overdue bills or potentially a property ownership dispute.

Equity Release lenders must be the sole chargers on the property. Any other registered charges must be repaid with Equity Release funds before you receive the net cash.

Max Equity Release Calculator

A Credit Check

A credit check will be performed by the Equity Release lender. It’s worth noting that some lenders are stricter than others and will require a clean report.

It is probably a good idea to bring up any defaults or CCJ’s with your Equity Release lender prior to applying. A bad credit report is unlikely to be the deciding factor in you getting approved for Equity Release, but not declaring something that is later found could be viewed as a red flag by the lender.

Why do Equity Release Lenders Perform Credit Checks?

There are a few reasons why Equity Release lenders perform credit checks. The primary reason is to assess the risk involved in lending money to an individual. Lenders want to minimise their risk as much as possible, and one way of doing this is by conducting a credit check on potential borrowers to find out about any poor credit history.

There are some debts that will likely be needed to be repaid before an Equity Release lender will work with you. These include:

• Mortgages
• Secured Loans
• Charging Orders
• Outstanding County Court Judgements (CCJ’s)
• Individual Voluntary Arrangements (IVA’s)

The debts which will not usually need to be repaid include:

• Small unsecured loans
• Credit card debts

If you’ve got questions that aren’t answered here, please don’t hesitate to get in touch.

Are there any lenders who won’t perform a credit check?

Whilst lenders view the credit report differently, there are no lenders who will not do a credit check on you.

Can I get an Equity Release with no credit score?

Equity Release eligibility will be affected by having no credit score. If your property is not registered, the lender will check that you own it from HM Land Registry.

How long does Equity Release take?

The average Equity Release application takes 2-3 months. Within this period, there are normally two credit checks performed, one at the beginning and one at the end of the application.

Will a low credit score affect the amount I can release?

No, a low credit score will not affect how much equity you can release. However, it will play a part in your chances of being accepted. You can use our Equity Release calculator to find out the maximum amount you could release.

Equity Release on a second property 

Can I get a lifetime mortgage with bad credit?

If the CCJ is not declared and the lender later finds the CCJ on the credit report, this may affect your chances of being approved.

If a CCJ is found, the lender will probably request that the CCJ be repaid before funds are provided to you. Alternatively, you may be asked to pay off your CCJ’s within 6 months of the equity being released.

Can you get Equity Release with a CCJ?

Any default will negatively affect credit reports, but your credit score is often not the determining factor of being approved for an Equity Release loan. Your property value and age are often more important.

Can you get an Equity Release with a default on your credit report?

Some missed payments are unlikely to affect your Equity Release application. Instead, the lender will look at your credit report as a whole. However, a more important factor is your home value and your age.

Can I get an Equity Release with missed payments on my credit report?

Previously going bankrupt will show up on your credit report if it was in the last 6 years. Credit reports are often not the biggest factor in the outcome of an Equity Release decision. Instead, your property value and age are used.

Can I get Equity Release after being bankrupt?

A lifetime mortgage is the most common form of Equity Release. As part of any application for a lifetime mortgage, the lender will check your credit report. As with any form of Equity Release, having a bad credit history will not be the main factor in whether you are approved for Equity Release. Your age and home value are more important.

How to check your credit report prior to applying for Equity Release

It’s easy to check your credit report, you can use companies such as Experian, Equifax, and Checkmyfile.com. They will provide a free trial, so you can access the report for free.

What happens if I fail a credit check for Equity Release?

If your credit check results in your lender not approving Equity Release, then there are alternatives to Equity Release to free up funds.

There are many alternatives to Equity Release. One option is remortgaging. If you want to remortgage, you should speak with a mortgage broker. But be aware that not all mortgage brokers can advise on Equity Release. If you decide to pursue Equity Release, make sure the supplier is accredited by the Equity Release Council.

Conclusion

Equity Release can help you free up funds for a variety of purposes. Whether it’s to pay off debt or pursue your dreams, Equity Release may be the ideal solution for you. To find out more about how Equity Release works and if it is right for you, you can explore further blog posts or get in touch via the contact form below.