Professionals in their thirties or forties and with a good annual wage are usually a mortgage lender’s dream. But growing numbers of these would-be borrowers are being turned down for best-buy home loans and forced to take out more expensive sub-prime deals designed for those with a chequered credit history.

The reason? A missed credit card payment or two, or perhaps a forgotten parking fine. In some cases borrowers are simply trying to sort out their finances after a divorce.

Sub-prime borrowers are often thought to be the low-earners who present a high risk of defaulting on a mortgage. However, research by GMAC-RFC, one of the largest lenders in the sub-prime market, challenges this picture. It says that nearly three quarters of people who have a sub-prime mortgage are in the 35-54 age bracket. BM Solutions, another sub-prime lender, says that the average annual salary of a borrower saddled with an adverse credit ratings is £30,000.

The irony is that home-buyers are often unaware that there is a problem until they are on the brink of buying a new home. Failing a lender’s credit scoring check may be the first clue that there is a problem. After all, who would think that a missed credit card payment three years ago would be relevent? The other hitch is that county court judgments (CCJs), which are more serious flaws on credit records, can be granted by a court in your absence, meaning that many people do not realise that they have one. CCJs remain on your credit record for six years.

Such borrowers then have to make a choice. If they make repeat attempts to obtain a mainstream mortgage and are rejected, their credit ratings may be further blackened. The alternative is to settle for a sub-prime deal.

Those with a perfect credit rating would be able to obtain a two-year fix from Cheshire Building Society at 5.45 per cent, with a £499 fee. The monthly repayments on a £150,000 loan would be about £916. But those with a CCJ for outstanding debts amounting to £1,000 or less, or who have missed a rent or loan payment in the past 12 months, would have to settle for a rate of 6.25 per cent and a £795 fee with GMAC. This adds £874 a year to the mortgage bill.

BM Solutions offers a marginally lower two-year fix at 6.19 per cent, but repayments on a £150,000 loan are £983 a month, which is still well above the best buy for those with a clean credit history. In addition, borrowers require a 25 per cent deposit to qualify for the BM Solutions deal.

Borrowers with more severe blemishes on their credit history will be forced to pay even more. Kensington, the specialist lender, charges up to 7.64 per cent on its mortgages for those with serious credit problems. Sub-prime borrowers are also clobbered by additional higher-lending charges (HLCs), which are often charged on loans of more than 90 per cent of a property’s value. While HLCs have been phased out on many mainstream deals, sub-prime borrowers must still pay them.

On the brighter side, some bigger lenders, including Bradford & Bingley, Abbey, Alliance & Leicester and Northern Rock, have signalled that they will relax their rules about borrowers’ credit records. But borrowers who have already been turned down once may be nervous about approaching another lender direct. This is where mortgage brokers may be useful because they will have a good idea which lenders are likely to be more understanding.

Melanie Bien, of Savills Private Finance, says: “Many borrowers with one or two blips, such as missed credit card payments, may find that they still qualify for a prime or near-prime mortgage, which should be explored by the broker before considering sub-prime deals.”

Another option is to grin and bear the increased cost of a sub-prime mortgage for two years and use it as a chance to repair your credit rating.

James Cotton, of London & Country Mortgages, says: “If you can make the payments for the length of the sub-prime deal, the chances are that you could have repaired your credit record sufficiently to take out a prime deal next time.”

He adds that Accord, the mortgage lender, has a “credit repair guarantee” on its sub-prime deals. “As long as you meet the payments on time, it will put you on a prime deal automatically when the sub-prime deal ends,” he says.

It should be noted that some mortgage brokers charge hefty fees for arranging a sub-prime home loan. These can add up to 3 per cent of the value of the loan. However, some of the larger brokers, including London & Country and Charcol, have chosen to waive any additional fees for borrowers with adverse credit records.

How to keep tabs on your credit record

Checking your credit record before applying for a home loan will cut down the chances of a nasty surprise after submitting your application to a lender.

There are three main credit reference agencies that you can use: Equifax (myequifax. co.uk, 0800 6569000), Experian (Experian.co.uk, 0870 0100583) and Callcredit (Callcredit.co.uk, 0113-244 1555).

Experian and Equifax offer a one-month free trial, after which you can subscribe for a monthly fee. This allows you to stay up to date on developments that may affect your credit record.

If you find any details on your record are incorrect, you can contact the credit reference agency to amend them. In addition, you can put a note on your file to explain any mitigating circumstances which led to you experiencing credit problems. If you have a note on your file, any loan application will be dealt with manually rather than by a lender’s computers. This may cause a delay in your application but could be worth it in the long run.

A lender will inform you that you have failed a credit check, but under data protection laws cannot tell you what the particular problems are.

The lender does, however, have to tell you which credit reference agency was used. You can then approach the agency to request further information.

Your mortgage may also be rejected if you have a low credit score. You could receive a low credit score even if you have no adverse credit history and are financially secure. This could be because you have failed to maintain regular employment or a fixed address. You can improve your credit rating by being meticulous about making all repayments on time. In addition, contact your local council to make sure that you are on the electoral register.

CASE STUDY: Dream move stalled by car tax hitch

Eddie Morgan does not seem the type who would struggle to get a mortgage. The 30-year-old had held the same job as an oil and gas trader for the past five years and he and his girlfriend had saved a £12,500 deposit for their dream home.

However, the day after submitting an application for a mortgage with Nationwide last year Mr Morgan received a phone call to say that there were credit “problems”. These were a £400 outstanding credit card debt with Capital One and a county court judgment (CCJ) lodged for nonpayment of vehicle tax.

Mr Morgan was astounded by the news because he had never owned a Capital One credit card and he had written to the Driver and Vehicle Licensing Agency (DVLA) when he moved house and scrapped his car 18 months earlier.

The Capital One debt turned out to be a mistake. The vehicle tax debt was more like bad luck – the DVLA never received his paperwork and, as Mr Morgan had moved home, he did not receive the letters demanding payment.

“We thought that we were going to lose the house and be forced to wait another six months,” Mr Morgan says. “During this time interest rates were going up and we almost lost everything.”

Mr Morgan contacted London & Country, the mortgage broker, which coordinated a deal with Intelligent Finance (IF). The online bank offered Mr Morgan a loan usually reserved for borrowers with clear credit ratings – a two-year fix at 5.78 per cent, with no higher-lending fees. However, the CCJ meant that Mr Morgan had to settle for a more expensive deal than the initial offer from Nationwide. “It’s not ideal,” he says, “but you can live with it.”

Despite having paid the outstanding car tax, the CCJ will remain on Mr Morgan’s record until 2011. “The CCJ affected my credit record at the most important time in my life. It was pretty devastating,” he adds.