Last reviewed on 3rd September 2023 by Martin Alexander (Mortgage Advisor)
Getting a bridging loan with bad credit is typically easier than getting other forms of finance with a poor credit history. For instance, if you’re struggling to get a mortgage with bad credit, a bridging loan could be a suitable alternative.
If you’ve already been declined a mortgage or even a credit card, you may still be eligible for a bridging loan. The primary purpose of your credit file is to give lenders an indication of your borrowing conduct. Of course, a poor credit score doesn’t give you the best chance of approval but it’s still possible.
If you’re unsure of what a bridging loan is, first read our article on bridging loans here. It’s important to understand the risks involved with certain products before applying.
- What is a bad credit bridging loan?
- Can I get a bridging loan with bad credit?
- Can I get a bridging loan with bad credit?
- What type of credit problems do bridging lenders accept?
- Why are bridging lenders more open to bad credit?
- Can I get a bridging loan without a credit check?
- How can I improve my chances of getting a bridging loan?
- Should I try to improve my credit score before applying?
- Contact a bridging loans expert
What is a bad credit bridging loan?
A bad credit bridging loan is a loan that is secured against a property. The reason for taking a bridging loan can vary, but the main reason is to bridge a financial gap between selling, buying, or refurbing a property. Bridging loans typically need to be repaid within 18 months and be approved much faster than mortgages.
Whether you have bad credit or not, bridging loans work in the exact same way. The only difference is that having bad credit can make it harder to gain approval. Furthermore, you may be charged slightly higher rates depending on your credit circumstances.
Can I get a bridging loan with bad credit?
Yes, it’s possible to get a bridging loan with credit problems. Bridging loans are a form of short-term finance that will require an exit plan on how you’ll repay the loan. Lenders can therefore assess your proposal and can make a quick decision on whether your application is suitable.
Not all bridging lenders will accept applicants with bad credit, so it’s important to approach a suitable lender. Furthermore, your exit strategy can also have an impact on whether you’re approved. For instance, an exit plan to remortgage can be deemed high risk as you’ll need a mortgage lender willing to approve you based on your credit. As you have credit issues, a remortgage may be difficult.
You’ll also need a strong proposal as failing to repay the bridging loan will result in further credit issues.
What type of credit problems do bridging lenders accept?
A bridging loan is possible with the following credit issues:
- County court judgement (CCJ)
- Previous bankruptcy
- Defaults and late payments
- Debt management plan (DMP)
- Debt relief order (DRO)
- Home repossession
- History of payday loans
That being said, you’ll still require a viable exit plan to repay your bridging loan. Furthermore, you’ll need to meet the criteria of your bridging lender.
Why are bridging lenders more open to bad credit?
Although it’s possible to get a mortgage with bad credit, it’s often still difficult. Furthermore, it’s likely to be more difficult to get a mortgage than it is a bridging loan. There are a number of reasons for this.
A bridging loan is short-term whereas a mortgage is typically long-term. Approving short-term loans is a lot less risky for lenders. This is because bridging loans are typically repaid in full within a year. Mortgages, on the other hand, are usually repaid monthly over a term that can exceed decades.
A shorter timeframe leaves little chance of things going wrong. Whereas a lot can happen during a term of ten or twenty years. Lenders also have the incentive that their loans will be repaid a lot faster.
The second point is that both mortgage and bridging lenders will place a charge on your property. The good news for bridging lenders is that your asset isn’t likely to fluctuate much in the time given for the loan. In comparison, there is a chance your property could plummet in price given the long-term nature of a mortgage. This can leave lenders with an asset worth less than the mortgage.
Risk is even more important when bad credit is involved. This is because it makes lending a lot riskier than it already is. As bridging loans often pose less risk to lenders, they’re likely to be approved, even with bad credit.
Can I get a bridging loan without a credit check?
Unfortunately, a bridging loan isn’t possible without a credit check. This is because a credit check is a key part of any assessment for finance and bridging loans are no different. That being said, lenders will assess each case in-depth and won’t just check your credit score to determine whether they’re going to lend.
Lenders will also assess the strength of your proposal in addition to the income you already earn. This is why a strong application can override serious credit problems with suitable lenders. Applicants with good credit will generally find it easier to gain approval, but if the application itself lacks clarity, it too can be declined.
A credit check is very easy for lenders to do, so it makes absolute sense for them to carry out this part of their assessment.
How can I improve my chances of getting a bridging loan?
You can improve your chances with the following:
- Speak to an experienced bridging advisor
- A strong exit plan
- A suitable property
- A sizeable deposit or adequate security
- Your proposal must be viable
- Experience in property investment
Speaking to an experienced advisor will greatly improve your chances of approval. This is because we’ll find lenders that are likely to say yes.
Approaching lenders at random is an almost certain way to be declined. Furthermore, being declined will have a negative impact on your credit score. Using an advisor is the single most important thing you can do to improve your chances of getting a bridging loan.
Bad credit also has many variables that an advisor will have to assess before you can apply. Depending on the severity of your credit issues, some lenders may be unsuitable.
The credit problems you have will also guide us to lenders who are likely to say yes. Downloading your credit file is a great place to start. You can then assess the severity of your credit issues and present them to your advisor. Your advisor will assess your credit file, along with the nature of your loan to calculate what’s possible.
Providing adequate security and an exit plan
You’ll also need to think about the security you’ll use for your bridging loan. This may be your own home or even an investment property.
Our advisors will check if the security is adequate for the loan you’re applying for. This will help to avoid any potential problems during your assessment.
Having your exit strategy prepared will also improve your chances of being approved. For instance, if you aim to sell a property to repay your bridging loan, the proceeds of the sale will need to be adequate.
Should I try to improve my credit score before applying?
There are ways to improve your credit score. That being said, it can take time for your credit score to show any improvements. Furthermore, lenders will still check your credit file. If you have a recent CCJ for instance, lenders will see this on your credit file and may question your application.
Bridging loans are often used when purchases require fast turnarounds. For instance, you may be buying at an auction and need finance to finalise the deal. If you’re in this situation, trying to improve your credit score before applying is very unlikely.
Contact a bridging loans expert
Once you’ve spoken to your advisor, we’ll inform you of whether your application is likely to be accepted. In the worst-case scenario, we’ll guide you on how to improve your credit file, so you’re able to apply in the near future. This approach is better than applying and being declined.
If you are approved, repaying your bridging loan on time can help to improve your credit score. It can also help you to secure further loans from the same lender.
Failing to repay the loan will damage your credit file further. This is a risk you’ll need to think about. Your advisor will also assess your finances to ensure a bridging loan is viable.
About the author
Martin is a senior mortgage advisor and has held a CeMAP qualification for over 15 years while also completing an MBA in Global Banking & Finance.