Bad credit mortgages

If you have bad credit and want a mortgage, don’t panic. Some lenders accept various credit issues, so you must apply with a suitable lender to get a mortgage.

Having a bad credit rating is very common. In the UK, one in five people has a low credit score. Each of us has a unique credit history, so lenders are more than used to seeing their fair share of the good, the bad and the ugly.

This guide will give you the confidence and understanding of how to get a mortgage despite having bad credit.

Can I get a mortgage with bad credit?

You can get a mortgage with bad credit if you apply with a suitable lender. Lenders have different criteria, so while some may accept credit issues, most don’t.

For instance, the big high-street lenders tend not to accept adverse credit, but some lenders will. There are also specialist lenders for applicants with severe credit problems, such as bankruptcies.

Although some lenders may approve you, they may charge higher than average rates to compensate for the risk involved. Depending on the issues on your credit file, you may also need a higher deposit, such as 15%-20%.

What credit issues can affect my mortgage?

One of the most significant factors that can affect your mortgage is the type of credit issues you’ve had. Certain credit issues will affect your mortgage chances more than others.

Late payments

Missed or late payments aren’t deemed severe and will have little effect on your mortgage. Lenders will usually assess how many late payments you’ve had within the last two years and whether you’ve previously missed any mortgage payments.

Missing mortgage payments within the last two years will slightly limit your options, but some lenders may still consider you. If you missed the odd phone bill a while ago, it should have little impact on your mortgage.

Learn more: Getting a mortgage after late payments

County court judgments (CCJs)

A county court judgment will stay on your credit file for six years. If your CCJ happened over six years ago, it won’t affect your mortgage.

If your CCJ was recent, lenders will check the value and whether it’s been satisfied. Satisfying your CCJ before applying for a mortgage will give you more options, but it is only sometimes necessary. Some lenders will accept applicants with unsatisfied CCJs.

Find out more: How to get a mortgage with a CCJ

Defaults on your credit file

If you have a recently registered default on your credit file, your lender will investigate further. Any defaults over three years old will have little impact, and you should have a choice of lenders to apply with.

Having several defaults in comparison to one can leave fewer options. If you’ve defaulted on credit within the last 12 months, you can still get a mortgage, but you’ll need a mortgage advisor.

Read more: Getting a mortgage with defaults

Debt management plan (DMP)

If you’re on an ongoing debt management plan, there will be fewer lenders, but a mortgage is still possible. Most lenders require applicants to apply once a DMP is complete.

It’s also important to keep up with payments during your DMP. This is to ensure your credit file isn’t damaged any further.

Learn more: How to get a mortgage with a DMP

Individual voluntary arrangement (IVA)

If you’re in an active IVA, only a few lenders will consider you for a mortgage. Some lenders require a discharge period of 1-2 years after your IVA before accepting applicants.

Missing payments or falling behind during your IVA will damage your credit file quite severely. It’s crucial to keep your credit file intact after your IVA, as further credit issues will make it very hard to get a mortgage.

Find out more: Getting a mortgage after an IVA

Bankruptcy

Bankruptcy is a severe form of adverse credit. Even so, some lenders consider applicants who have been discharged for 1-2 years. You won’t be able to apply for a mortgage while your bankruptcy is ongoing.

Bankruptcy will impact your mortgage more if you’ve only been discharged for less than a year. It will have less of an effect on your mortgage if your bankruptcy happened over three years ago.

Learn more: How to get a mortgage after bankruptcy

Other credit issues

Many credit issues can affect your chances of getting a mortgage, and you may have more than one on your file.

Other credit issues that can affect your chances of getting a mortgage include:

You can speak to an advisor if you’re unsure whether you’ll qualify. Our advisors have helped many applicants with credit issues to get a mortgage.

How to get a mortgage with bad credit

The following steps will improve your chances of getting a mortgage if you have poor credit:

  • Organise your finances – Reduce your spending at least three months before your mortgage application. Pay your bills on time and minimise as much debt as possible. Showing lenders that you’re financially responsible can help you to get a mortgage.
  • Download your credit file – If you’ve had credit issues, you must download your credit file. Doing so lets you see what’s recorded on your file and whether it’s accurate. Your lender will also check your credit history when you apply for a mortgage.
  • Repair your credit score – Repaying your bills on time will help, but you can improve your credit score by repaying your credit card each month in full.
  • Save a bigger deposit – Saving for a 15%-20% deposit will make getting a mortgage with bad credit easier. A mortgage can be difficult with deposits of 10%. The more you can save for a deposit, the better. 
  • Speak to a mortgage advisor – Speaking to an advisor is one of the best things you can do to get a mortgage with poor credit. An advisor can assess your credit file before finding a suitable lender. Without an advisor, you’d have to find a lender by yourself.
  • Consider getting help – If you’re struggling to save a deposit, consider getting help from a family member. You can use a guarantor or a gifted deposit to strengthen your application. Applying with a partner can also help your application, especially if your partner has a good credit score.
  • Find a lender – Once you’ve found a lender that accepts adverse credit, you’re well on your way to a mortgage. You’ll have to meet the rest of their criteria, such as having an income to repay the mortgage. An advisor can help you with this.

Should I apply for a mortgage with bad credit?

Waiting until your credit issues have passed for at least a year before applying for a mortgage can be beneficial. You may need a mortgage now and can’t afford to wait, so you’ll need to weigh up the advantages and disadvantages before making a decision.

Advantages

  • Get a mortgage sooner – The best advantage of applying now is that you won’t have to wait to get a mortgage.
  • You might not need to wait – You could be eligible for a mortgage without paying a larger deposit and higher rates. So, you could find yourself waiting for no reason when you can get a good mortgage deal now.
  • Opportunity to improve your credit – Repaying your mortgage on time will do wonders for your credit history. Although you have poor credit, repaying a mortgage can improve your credit score.

Disadvantages

  • You’ll need a larger deposit – Most lenders require a 15%-20% deposit if you have adverse credit. You can get a mortgage with a 5%-10% deposit without having credit issues, so it might be worth waiting. 
  • Rates and fees tend to be higher – Mortgages with bad credit tend to have higher interest rates. Waiting until your credit has improved will unlock better deals. The fees charged by your lender and mortgage advisor will be higher than usual due to your credit rating.
  • Fewer lenders – A good credit rating unlocks almost every lender. On the other hand, only some lenders accept poor credit, so you’ll have fewer deals to choose from if you apply now.

Which mortgage lenders accept bad credit?

  • Bluestone is a specialist mortgage lender offering mortgages for all credit issues. They’ll consider applicants without defaults or CCJs in the last six months. If your credit issues are below £300, they may still lend, even if you’ve had poor credit within the previous six months.
  • Vida is a specialist lender that accepts severe bad credit. For instance, if you’ve been bankrupt or had an IVA, they’ll consider you for a mortgage if your discharge date was over three years ago.
  • Norton accepts adverse credit as part of its criteria and considers applicants with active or historic debt management plans. CCJs and defaults won’t count if they’re satisfied and less than £3000.
  • Kensington considers most credit issues, apart from bankruptcies and IVAs. However, they will accept CCJs, defaults, DMPs and late payments.
  • Precise only accepts IVAs and bankruptcies discharged over six years ago. They’ll also accept CCJs, defaults and late payments if they’re over three months old and paid.
  • LendInvest is an online lender that accepts CCJs and defaults registered in the last three years. However, the lender won’t take IVAs, bankruptcies, or debt management plans.

Important: Speak to an advisor before approaching a lender. Although lenders accept bad credit, there are other criteria you’ll need to meet, such as income, affordability and your deposit amount. Many other lenders will consider credit issues.

Bad credit mortgage FAQs

There isn’t a specific credit score that’s needed for a mortgage. This is because each credit reference agency uses a unique scoring system.

Lenders will check your credit history when you apply for a mortgage to assess whether you’re a high-risk borrower. Nonetheless, improving your credit score before applying for a mortgage will help your application.

You can download your credit files online. Downloading your reports from each credit reference agency will give you an idea of your credit score and the health of your credit history.

The amount you can borrow for a mortgage largely depends on your income. That said, having a bad credit rating can affect the amount you can borrow.

You can typically borrow between 3 and 5 times your income, with each lender using a different income multiplier. As you have bad credit, you won’t have the option of choosing the lender you want, so you may have to apply with a lender that only offers three times your salary.

A bad credit history means your credit file will show records of missed or unpaid debts. This can involve late payments, defaults, CCJs, bankruptcy, IVAs and anything related to you not paying a debt.

Having no credit history is where applicants haven’t ever borrowed using a loan or a credit card. Lenders cannot credit check applicants who haven’t used credit, making it hard to assess.

If you have bad credit, but your partner’s credit is generally good, it can help your mortgage application. You can also borrow more with a joint application, as lenders will consider both incomes instead of one.

Read more about joint mortgages with bad credit here.

If you require a specialist mortgage lender, your rates will be higher than average. Be prepared for interest rates up to 7% as a first-time buyer. The rates offered can be much higher if you’ve had severe credit issues in the past year.

If you’ve already had a mortgage, lenders will assess your current mortgage payments. Lenders may offer you the same rates available to everybody else if you’ve repaid your previous mortgage on time.

Depending on how many credit issues you’ve had, lenders and mortgage advisors can charge higher fees. This is because mortgages that involve adverse credit are more complex when compared to straightforward cases.

You can remortgage with bad credit, and it can be easier as you already have a mortgage. The rates on offer will likely be cheaper than your lender’s SVR (Standard Variable Rate).

You’ll want to calculate whether a remortgage will save you money. Although it likely will, it’s important to remember you’ll be tied to your mortgage for several years. That’s why it’s sometimes worth improving your credit score before remortgaging.

Learn more: How to remortgage with bad credit

You’ll typically need a 15% deposit to get a mortgage with bad credit. This allows for equity in your property if you fall behind with your mortgage payments. You’ll access more lenders and better deals with a deposit of over 25%. So, saving as much as possible before applying for a mortgage is worthwhile.

If you need a buy to let mortgage with bad credit, you’ll need a 25% deposit at least. Aiming for a deposit of 40% should unlock some great deals.