Last reviewed on 23rd October 2023 by Martin Alexander (Mortgage Advisor)

The Right to Buy scheme allows public sector tenants to buy the home they’re renting for a discount. While the scheme is a great initiative, getting a mortgage can be difficult if you have bad credit.

In this guide, we’ll explain what you can do to get a Right to Buy mortgage with bad credit and how to apply.

Can I get a Right to Buy mortgage with bad credit?

You can get a mortgage using the Right to Buy scheme, even with bad credit. Surprisingly, only some lenders accept Right to Buy, and even fewer accept bad credit. You’ll need to ensure the lender you’ve applied with works with the scheme and, secondly, considers applicants with credit issues.

You’ll also need to meet the rest of a lender’s criteria to get a mortgage, such as income to repay the mortgage. A credit check is just one part of an assessment.

One huge advantage you have is that you can buy your home at a discount using the Right to Buy scheme. Usually, you’d need a larger deposit if you’re applying with bad credit, but you can use the discount you’re receiving towards your deposit, which can support your application.

How does poor credit affect a Right to Buy mortgage?

Now, not all lenders treat credit the same. For instance, some lenders are more strict than others and will only accept minor credit problems such as a late payment. In comparison, other lenders will consider more severe issues such as IVAs.

The dates of your credit issues will also affect your application. Your credit file typically shows the last six years of history, so anything beyond this won’t affect your mortgage. However, recent issues will have more of an impact on your assessment, especially during the past 12 months.

The sum of money involved will also have an impact on your mortgage. Smaller amounts will affect your application less than amounts over £1000.

Which credit issues are accepted for a mortgage?

It’s possible to get a Right to Buy mortgage with the following credit issues:

• Late payments – Missed or late payments on your credit file can still be enough to be refused a mortgage, although they are considered the least severe. Ensure you’ve caught up with any outstanding payments before applying for a mortgage.
• Arrears – Some lenders will accept arrears on your credit file, but it does depend on what you’re in arrears with and how much for. For instance, being in a lot of arrears can make mortgage approval difficult. It’s best to settle any outstanding debts before making an application.
• CCJs – Some lenders won’t accept CCJs, but others will. Lenders will assess the dates and values of your CCJs. Having a CCJ in the past 12 months will make it harder to get a mortgage, especially if the value exceeds £1000.
• Defaults – If you have defaulted on a payment, your creditor will record it on your credit report. Defaults over three years ago will only affect your application a little. On the other hand, defaults in the past two years will leave you with fewer lenders to apply with.
• DMP and IVA – A DMP or IVA is considered a severe form of adverse credit. Getting a mortgage is very difficult if you’re in an active DMP or IVA. Most lenders will consider applicants who have been discharged for over two years.
• Bankruptcy – Although a mortgage after bankruptcy is possible, you’ll have more options if you’ve been discharged for at least a year. A bankruptcy over three years ago won’t affect your assessment if you apply with a suitable lender.
• Repossession – If you’ve previously had your home repossessed, then getting a mortgage will be difficult. Only a few lenders will consider repossessions within the last 12 months. You’ll have more options if you were repossessed over three years ago.

Whether you have a CCJ or a default, our advisors can check your credit history and search for lenders that you’re eligible for.

Which lenders accept Right to buy mortgages with bad credit?

The following lenders accept Right to Buy with bad credit:

• Vida – Will consider applicants with CCJs, defaults or late payments over six months old.
• Bluestone – Won’t consider any ongoing bankruptcies but will accept applicants with CCJs and defaults under £300.
• Norton – Accepts the Right to Buy discount and applicants with CCJs over 12 months old. The lender also considers applicants with an active IVA.
• Chorley – Won’t accept applicants with an IVA or bankruptcy but will consider those with CCJs and defaults if less than £500.
• Reliance – Will lend to applicants using the Right to Buy discount. However, CCJs and defaults can’t exceed £100. Applicants with a bankruptcy or an IVA must be discharged for at least six years.

Many more lenders will consider adverse credit in addition to using the Right to Buy scheme. As you can see, the criteria for each lender vary considerably. Don’t reach out to a lender and apply yourself, as there are a lot of other eligibility checks you’ll have to meet. Speak to an advisor beforehand, and we’ll find a lender that meets your circumstances.

Should I repair my credit before applying for a mortgage?

Repairing your credit file before applying for a mortgage can help. That said, lenders are more concerned with the issues registered on your credit file than your credit rating.

You should first download a copy of your credit report, which will give you an idea of your credit issues over the past six years. It’s essential to check the accuracy of your credit file before applying for a mortgage. If you find anything that needs to be corrected, contact the credit agency. Inaccuracies on a credit file can be very problematic for a mortgage application.

You can speak to an advisor to check your credit history to give you a plan of action before applying. Each credit file varies, so we’ll have to assess your file before we can say whether trying to repair your credit file will be worth doing.

If you don’t quite yet qualify for a mortgage because of your credit rating, we’ll advise you on what to do next. We’ll provide you with tips on repairing your credit for a mortgage in the future. It may take less time than you think and is better than being declined.