Last reviewed on 20th November 2023 by Martin Alexander (Mortgage Advisor)
Remortgaging with bad credit can be difficult, as most lenders require a good credit score when switching mortgages. Lenders will check if you’re eligible to remortgage, but having bad credit can raise concerns.
The good news is that remortgaging can allow you to switch to a better rate. A better deal can boost your finances and help your credit file.
As you already have a mortgage, lenders will check whether you’ve repaid your mortgage on time. Doing so can help your application, and you may even be able to remortgage with severe credit problems.
Key takeaways from this article:
- You can remortgage with bad credit
- Remortgaging can allow you to get a better deal
- Rebuilding your credit file before remortgaging can make it easier
- Speak to an advisor to find an eligible lender that accepts your credit issues
Can I remortgage with bad credit?
You can remortgage with bad credit, even with severe credit issues. You’ll need to find a suitable lender, but you may be charged higher rates than usual.
Not all lenders will accept poor credit, and the lenders that do will consider some credit issues and not others. The best thing you can do is to speak with an advisor who can check which lenders you’re eligible for.
Getting approval for a remortgage is often easier than getting a new mortgage on a different property, especially with bad credit. You’re likely to have equity in your home and a record of mortgage payments, which will support your application.
Will equity help me to remortgage?
Having equity in your home can boost your borrowing power, but it does depend on the lender you’ve applied with. A lender that’s not suitable can decline your mortgage, no matter how much equity you have.
On the other hand, if you’ve accumulated debt, you can remortgage to release equity to pay off your debt. Clearing outstanding debts can also boost your credit score and make it easier to remortgage.
Read more: How to remortgage to pay off debt
Which credit issues can I remortgage with?
A poor credit rating can affect your remortgage in different ways. For instance, severe credit issues like bankruptcy will affect your remortgage more than lighter credit issues such as late payments.
Each credit file tells a different story and is just one of many factors lenders will assess.
Late payments and mortgage arrears
Lenders view missed or late payments as minor credit issues, especially related to phone or other household bills. But paying your mortgage late is considered severe, so remortgaging with mortgage arrears can be challenging.
Most lenders will hesitate to offer you a remortgage because you need to catch up on your current mortgage. Mortgage arrears also indicate that you’re struggling financially.
Some lenders may consider you if you’ve had mortgage arrears but have since caught up with your payments. You’ll still be required to explain why you fell into arrears. Having ample equity can also help you in this situation.
Although it’s possible to remortgage with defaults, you’ll need to tread carefully. Some lenders specialise in mortgages with defaults, but you’ll still need to meet the rest of their criteria.
In addition to the rest of your application, lenders will require details around your defaults, such as:
- The type and number of defaults you have
- How recent your defaults are
- Whether you’ve satisfied your defaults
You can get a remortgage, even if you’ve not yet satisfied your defaults. Lenders will be more concerned with your recent defaults, as any in the past 12 months can make it harder to remortgage.
County Court Judgments (CCJs)
Some lenders will allow you to remortgage with a CCJ. Lenders will assess the details of your CCJs and whether you have other credit problems.
Lenders will require details of your CCJs, such as:
- The dates and amounts of your CCJs
- The number of CCJs you have
- Whether you’ve satisfied your CCJs
CCJs in the past 12 months will make it harder to remortgage. In comparison, CCJs over two years old should have little impact on your application, especially if you’ve satisfied them.
CCJs for smaller amounts will also have less effect on your mortgage. However, some lenders don’t accept CCJs at all.
Remortgaging with an IVA
You can remortgage with an IVA, but it can be better to complete your IVA before applying. Waiting until after you’ve been discharged will give you a much better choice of lenders.
Some lenders will allow you to remortgage your home to pay off part or all of your IVA. Lenders will check whether you’ve made your IVA payments on time, which you’ll need to provide evidence of.
An IVA is a severe credit issue usually involving other credit problems, such as CCJs and defaults. Remortgaging will be much easier if you were discharged over three years ago.
Learn more: Can I get a mortgage with an IVA?
Debt management plan (DMP)
Remortgaging with a DMP is possible. Your affordability check will be more relevant as you pay a fixed amount for your DMP each month. You’ll need to show lenders you can pay your DMP and the new mortgage you’ve applied for.
Completing your DMP will make it easier to remortgage. The longer you’ve been discharged, the better, as you’ll have more lenders to approach.
Bankruptcy is one of the most severe forms of adverse credit. It’s not possible to remortgage during bankruptcy. You can apply for a remortgage once discharged.
Remortgaging will be difficult if you’ve been discharged for under three years. You’ll have many more lenders to apply with once three years have passed from your bankruptcy discharge date.
It’s important to note that some lenders won’t accept applicants who have had a bankruptcy, past or present. So, you’ll need to check which lenders accept bankruptcies as part of their criteria.
If you are offered a remortgage after bankruptcy, you’ll have to pay higher rates and fees.
How can I improve my credit score before remortgaging?
Improving your credit score is easier than most people think. You can take the following steps to improve your credit score before remortgaging:
- Check the electoral roll to ensure your address details are up to date. Having an old address registered can knock your credit score.
- Using your credit card rather than a debit card can help build your credit score. You’d repay your entire credit card balance monthly using a direct debit to ensure no missed payments.
- Repaying your bills on time can improve your credit score. You’d need to be careful to make your payments on time, as late payments will damage your credit score.
- Minimise your debt by staying below 50% of your available credit limit. While you should be using credit to improve your score, using too much can hurt your credit score.
- Check your credit file to ensure it’s correct. Any errors can bring your credit score down, especially if there are issues you’re unaware of. You can download your reports online, which won’t affect your credit score.
Read more: How to improve your credit score
Can I remortgage without a credit check?
It’s possible to remortgage without a credit check, but there are a few caveats. It would help if you remortgage with your existing lender. Still, there are no guarantees that you can remortgage without a credit check.
Each lender has a unique policy and may still carry out credit checks with existing borrowers. If you remortgage with an entirely new lender, you will undergo a credit check.
What is considered a bad credit score to remortgage?
Each credit referencing agency uses different credit scores. As a result, there isn’t one universal credit score that guarantees your remortgage will be successful. For instance, Experian would suggest you have a poor credit rating if you score below 560. A poor credit score with Equifax would be below 379 and TransUnion below 550.
With this in mind, don’t let your credit score dictate your mortgage chances. Some lenders accept those with poor credit, but there’s still much to assess regarding a remortgage application.
Remortgage with bad credit FAQs
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.