If you've got a less than perfect credit record and are looking for a mortgage, you could find yourself with the unfortunate tag of 'near prime borrower'. Near prime mortgages are a form of sub-prime mortgage; there are around five or six different types of sub-prime used by lenders to decide how much more they charge a borrower with a less-than-perfect credit record.

The workings of sub-prime

For example someone who has a really bad credit rating - for example, they may have been a discharged bankrupt or have a lot of county court judgements CCJs against them - will be sold a 'heavier' version of sub-prime, while someone who has missed a couple of mortgage or loan payments in the past will often be sold a 'near prime' or light version of a sub-prime mortgage.

Someone with a 'heavy' sub-prime mortgage could expect pay an interest rate of at least 2% more than a borrower with a clean credit record, while a 'near-primer' can expect to pay around 1% more. This means that, over the life of a mortgage, someone could be paying thousands more a year.

Prime borrowers tarred with the same brush

With growing debt levels there are fears borrowers who could once take out a mainstream mortgage are now being forced into taking out a sub-prime loan. One adviser, who didn't want to be named, claims mortgage lenders are deliberately cherry-picking who they lend to. Evidence of this is a growing number of 'niche' lenders who specialise in offering mortgages to people who have had some kind of credit 'problem'.

The adviser said: "By taking on more and more near-prime borrowers these lenders are able to make their mortgage books look good because these customers are less likely to default. While at the same time the mainstream lenders - some of whom are setting up niche offshoots - are able to cherry-pick the best customers and make their mortgage books look good too."

Discounting prime lending first

Having a less than squeaky-clean credit record doesn't mean you should go straight to a lender or broker that claims to specialise in getting mortgages for those with credit problems - in fact this should be avioded at all costs. Not only do these firms tend to charge a hefty fee they probably don't have access to both mainstream and sub-prime mortgages.

Instead, several mainstream lenders will consider minor debt cases so these should be your first port of call. Abbey, for example, will allow borrowers with just a spattering of credit problems to take out a mainstream mortgage - on the premise you have had the same address or have been in the same job for a few years.