Getting a mortgage with Bad Credit

Last updated: May 17th, 2022
  • Missed or late payments
  • Debt management plan
  • Discharged bankruptcy
  • Defaults, CCJs or IVAs

Getting a mortgage with Bad Credit

Last updated: May 17th, 2022
  • Missed or late payments
  • Debt management plan
  • Discharged bankruptcy
  • Defaults, CCJs or IVAs

Can I get a mortgage with bad credit?

Yes. While it can be more difficult to secure a mortgage with a bad credit history, it’s not impossible. There are steps you can take that could improve your chances of being accepted for a bad credit mortgage.

The kind of lenders that will be willing to offer a mortgage to a borrower with bad credit are usually specialist niche-market lending companies.

Many mainstream lenders will either have no set rules for dealing with bad credit applications (or they’ll have one criterion that excludes them), or they may only accept applications for a very restricted range of products, while a bad credit mortgage lender will be open to applications for a wider range of products.

They will outline which types of adverse credit events they will take into account, as well as the amounts involved and the time frames they occurred. An experienced bad credit mortgage broker will be able to use their expertise and knowledge to match the potential borrower to the most suitable lenders for their case.

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An introduction to Bad Credit Mortgages

What is bad credit?

Credit means making a purchase or borrowing money with the agreement that you’ll pay later. You will develop a ‘credit score’ that tells lenders how likely you are to be able to pay back debt and if you can pay it on time. This score also helps lenders to know more about your history when, or if you apply for more credit.

Having bad credit (sometimes called bad credit history or a bad credit rating) usually means your credit reports show negative credit behaviours in your recent past. These behaviours include not repaying your debts according to your borrowing agreements, or late or missed payments.

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What is a bad credit mortgage?

A bad credit mortgage is the term used to describe a mortgage arranged with a specialist lender for a borrower who has experienced financial difficulties in the past. Typically, bad credit mortgages will be offered at a slightly higher rate than mortgages offered by your usual high street lenders. It may also require a slightly bigger deposit or a larger amount of equity.

While it can be more difficult to secure a mortgage with a bad credit history, it’s certainly not impossible for all. Also, there are things you can do that could improve your chances of being accepted for a bad credit mortgage.

How to improve your credit for a mortgage:

  1. Consider doing these things now:
  • If you aren’t on the electoral roll, get registered.
  • Request copies of your credit report from the three main UK agencies.
  • Close any accounts you don’t use – e.g. store or credit cards.
  1. Next, do this:
  • When you get your credit reports, check that the information they contain is accurate. If anything is wrong, get in touch to get it corrected.
  • Make a list of all your sources of income and outgoings, so you understand how money flows into and out of your household. Use this to work out a realistic budget, and stick to it.
  1. Longer term actions:
  • If you’re struggling with your budget, look at the figures again – maybe you haven’t allocated enough for groceries (for example) or you forgot about something.
  • Open a savings account and put something into it every month – no matter how small a sum. When you have a little bit extra – such as your ‘free’ council tax months – put that money into your savings account.

Take a look at our in-depth guide for more guidance on how to boost your chances of being approved for a mortgage with bad credit. For further information on bad credit mortgages, contact our team of specialist brokers. They have a wealth of experience of securing mortgages for people with a history of bad credit and have access to exclusive deals you wouldn’t necessarily find on the high street.

This chart shows how bad credit factors might affect a mortgage offer. The more time that passes after the bad credit event, for example a missed payment, the better chance you have of being approved. However, each case is unique, so treat this as a guide and speak to our experts for more details about your circumstances.

With so many variables, it’s impossible to give an exact figure for how much more than a conventional residential mortgage a bad credit mortgage will cost.

The best way to lower the cost of the mortgage is a high deposit. If you can provide upwards of 25% instead of the typical 5%–10%, then you may be able to access deals closer to standard interest rates.

Talk to one of our specialist team, who will quickly outline your options.

It’s entirely possible that you could be unaware of any bad credit events on your file, or that you have a potentially poor credit rating. It might be that any infringements have simply had no after-effects on your finances, or were so minor that they were not noticeable to you or those around you. You have been able to blissfully carry on with your life, without the experience of being chased by debt collectors or receiving letters from credit card companies, which would have been a clear sign that your credit history is not as strong as it should be.

For some people, the first real sign they have a bad credit rating is when their application for a mortgage is declined by a high street lender. This can be a surprise if you have not had a long credit history period (or no credit history at all), or have not considered any payment errors to be of any significance. For others, it may be less of a shock, simply because they may be aware of missed payments or court actions in the past, but have not seen any impact in their day-to-day lives.

The one sure way to find out if you have a bad credit history is to request a copy of your credit report from the three main UK credit agencies – Experian, Equifax and TransUnion. Each of them collects information and scores it in a different way, so it’s advisable to get a copy from all three to make sure they all have the correct information and spot anything that should be updated.

The process of obtaining your credit report used to take a while, require a written application and a small fee to pay, but thanks to new developments in recent years in managing our finances online, and new rules regarding access to personal information (GDPR), you can now check your credit score on your phone in a matter of minutes free of charge via one of many credit checking apps or websites.

If you have any concerns over what a particular score might mean for your chances of getting a mortgage, speak to one of our team of specialists today. They will be able to advise on your chances of getting a mortgage, who with and how much for, and give you options for the next steps going forward.

We have a full guide to improving your credit score. Follow these steps to get you started:

  • If you aren’t on the electoral roll, get registered
  • Request copies of your credit report from any or all of the UK agencies, Experian, Equifax, TransUnion, and Crediva
  • When you get your credit reports, check that the information they contain is accurate. If anything is wrong, get in touch to get it corrected
  • Check your score using free tools, like Clearscore or Klarma
  • Close any accounts you don’t use like store or credit cards
  • List all sources of income and outgoings, to understand how money flows in and out of your accounts
  • Work out a realistic budget based on this list, and stick to it
  • If you’re struggling with your budget, look at the figures again, maybe you haven’t allocated enough for an expense or you forgot an outgoing
  • Open a savings account and put something into it every month, no matter how small a sum

Are you tied to high street lenders?

No, we have unlimited access to the market which means we can go that extra mile to find you the mortgage which is right for you.

Do overdrafts make credit scores worse?

Used responsibly, an authorised overdraft shouldn’t impact your credit rating. If you keep it pretty much up to the limit for an extended period of time, however, then it could have an impact on a lender’s decision.

What do I need to get started?

In short, you only need to pick up the phone or send us a message. However, if you can obtain a copy of your credit report and have that to hand when you speak to us, this will speed up the process.

It is important as part of this process that you do not make multiple searches on your credit file when you are looking for a mortgage. This is typically caused by applications for credit cards, finance options, loans etc. Whilst doing this doesn’t stop you from getting a mortgage, it can be warning sign for some lenders.

What does a bad credit score look like?

It’s very hard to say exactly as lenders look at different criteria when they assess a mortgage, but if you’ve got CCJs, any recent defaults or IVAs or you’re on a Debt Management Plan you may need to seek specialist advise in order to obtain the right mortgage for you.

How does bad credit affect you?

When there is a record of bad credit in the background, lenders will typically class you as a higher risk. That means you may not be granted further credit and, if approved, you are likely to be offered a higher rate of interest. It may also affect job applications, especially those within the financial sector.

Can I apply for a joint mortgage if my partner has bad credit?

For a joint application, both borrowers’ credit histories will be taken into consideration. Depending on the severity of the credit history, there are lenders that can still consider discharged bankrupts, as well as applicants who are in an IVA or have defaults and CCJs on their credit report.

Can I refinance a mortgage with bad credit?

It could still be possible to refinance your mortgage if you have a history of bad credit. Your overall financial situation will be taken into consideration, and obtaining a copy of your credit file is recommended. It may be advisable to speak to a specialist mortgage broker to evaluate your options.

Can a mortgage broker help with bad credit?

A mortgage broker who specialises in applicants with a history of bad credit should be able to advise you on the most appropriate mortgage for your needs, as they will have the necessary knowledge of this market. If a mortgage isn’t possible at the time, they can then still hopefully offer you guidance on how best to work towards a solution in the future.

Is it possible to remove bad credit from your record before seven years?

Unless a record is registered incorrectly, it is typically unable to be removed. If you believe something has been recorded on your report in error, we would first recommend speaking to the account provider and also the credit agency that it has been recorded with. Do ensure you check all the reference agencies to ensure any errors are rectified.

Does marrying someone with bad credit give you bad credit?

Being married to someone with bad credit doesn’t necessarily give you bad credit. However, if financial accounts are taken out jointly, this will create a financial connection which can sometimes affect the other person’s credit and how they are viewed by lenders. Taking out credit with a partner who has bad credit could ultimately result in your application being declined or approved at a higher rate.

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