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Bad credit mortgages

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What is bad credit?

There are no universally accepted criteria for what counts as having bad credit. But there are credit problems that can fall into minor and more serious cases.

A minor case would be a one-off late credit card payment. This shouldn’t affect your chances of getting a mortgage.

A serious case would be if you’ve been declared bankrupt or had a county court judgment (CCJ) in the last few years. UK mortgage lenders will consider this and may not accept your application.

Credit problems are recorded on your credit history. Lenders can view your credit report to see how you’ve handled your credit in the past and decide whether or not to lend to you.

Can you get a mortgage with bad credit?

In short, yes – if you can meet specialist lenders’ criteria. These are lenders who can offer a bad credit mortgage (also known as a subprime mortgage or an adverse credit mortgage).

Having a poor credit rating can make being accepted for a mortgage more difficult, but it’s not impossible to get a bad credit mortgage.

Specialist bad credit mortgage lenders tend to have stricter criteria, including:

  • Lower Loan to Value (LTV) than a standard mortgage
  • A larger deposit of at least a 20% or 25% as the LTV offered could be around 75% or 80%
  • Higher interest rates than standard mortgages

How to get a mortgage with bad credit

  • Improve your credit history
  • Register to vote
  • Look at past shared financial history
  • Check your credit report
  • Take your time
  • Appeal to lenders
  • Gifted money from family for a deposit
  • Have a family member become a guarantor
  • Speak to a mortgage or financial advisor

Improve your credit history by borrowing responsibly and making your repayments on time. This can be as simple as spending on a credit card and making sure you clear the balance on time, every month.

Register to vote at your current address as a simple way to improve your credit score.

Look at past shared financial history. It’s important to consider who you’ve shared financial payments with in the past. This could be an old housemate or a partner that you used to share an account with.

Check your credit report with a free credit service. Credit check companies like Experian and Clearscore can give you a general idea of how lenders see you. They can also give you tips on how to rebuild your score.

Take your time. Depending on the credit problem, some marks on your credit history may disappear over time. This means certain lenders might consider your mortgage application even after you’ve gone through bankruptcy, an individual voluntary arrangement (IVA) or a CCJ.

Appeal to lenders by applying when you’ve got yourself into the best financial position you can be in. A regular, stable income is always a big plus, as is a big deposit. If you do have some credit issues from the past, lenders like to be able to see you’ve made efforts to fix them.

Gifted money from family can be used for a deposit. Some lenders will accept a deposit if it’s ‘gifted’ from a member of your family. But the lender won’t accept a gifted deposit that’s a loan, so you must be under no obligation to pay the money back.

Having a family member become a guarantor could be a great option if you find yourself unable to get a mortgage. A guarantor is someone such as a parent who agrees to cover the mortgage repayments if you can't.

Speak to a mortgage or financial advisor if you have concerns about how your bad credit could affect your getting a mortgage.

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The pros and cons of a bad credit mortgage

  • If you’ve been rejected by the big high-street lenders, you could still find a deal through a specialist lender. They can help secure bad credit mortgages. Make sure to shop around to find the right deal for your financial situation.
  • Getting on the property ladder is a big plus. If you’ve found the perfect property and the right mortgage deal, successfully making monthly repayments can help improve your credit history.
  • In the right situation, like when the housing market has slowed down, you may have a better chance of negotiating a better price for a property you want.
  • Getting a bad credit mortgage now means you have less time to build up your credit score. If you wait and work on improving your credit report, you may be able to shop around for better deals on a wider choice of mortgages.
  • Less time to save for a deposit. The larger your deposit, the more likely you are to be accepted by a lender, as it shows you can handle your finances.
  • A bad credit mortgage usually means higher interest rates, which means you’ll pay more back over time. If you wait and improve your credit score and financial situation, you may find a better deal with better rates.

How do I compare bad credit mortgages?

Working with our mortgage partner, Koodoo, we can help you compare and find our best deals for bad credit mortgages. To see what offers are available to you, simply go through the application process and you’ll be able to compare a range of specialist lenders.

What do I need before comparing bad credit mortgages?

To compare bad credit mortgages, you'll need:

  • Details of your salary and any other income you earn. If you’re buying with a partner, have details of their salary and any additional income, too
  • Details of your regular monthly outgoings
  • The amount you want to borrow from the lender and how much your deposit will be
  • To know if you’re going to live in the property you’re buying or let it out
  • To tell us if you’re getting help from a government buying scheme

See how much your future monthly repayments could be with our calculator

Who can I speak to for financial support or advice?

If you find yourself in financial difficulty or want to speak to someone about your financial situation, MoneyHelper can help. It’s a free, impartial service set up by the UK government to provide advice and support, online and over the phone.

Visit the Money Advice Service to find out more about the services they offer.

What our expert says

Don't feel too defeated if you have a bad credit rating and are considering purchasing a property or remortgaging. There could still be plenty of options available to you depending on your circumstances.

If you have bad credit, comparing mortgages is a good way to find out what your options are.

Louise Thomas mortgage expert signature

Louise Thomas

Personal finance expert

Need any more help?

Can I get a joint mortgage with bad credit?

Yes, and it can sometimes help. If, for example, you have a poor credit record but your partner has a good record, you might be seen as lower risk than if you were to apply for a mortgage by yourself.

There are lenders who specialise in joint mortgages involving only one bad credit applicant. But you're still unlikely to get as good a deal as if you both had excellent credit histories.

Can I get a mortgage if I’ve been made bankrupt?

You won’t be able to apply for a mortgage until you have been discharged from your bankruptcy, which usually takes a year.

But even though you can then apply for a home loan, it’ll be hard to find a lender who’ll do business with you for a few more years.

Some lenders will wait until the bankruptcy has been removed from your credit file, which normally takes 6 years. But some lenders will consider you for a bad credit mortgage before that. They're just likely to want to see proof that you’ve successfully managed your credit in the years since the bankruptcy.

Can I get a mortgage if my house was repossessed?

Technically, yes you can, but it can be hard. Lenders may not want to accept someone who has fallen into serious arrears with repayments before.

But if you’ve rebuilt your credit score, a bad credit mortgage lender might consider you – although you’re unlikely to qualify for the most competitive deals as you’ll be considered high-risk. You'll probably only be offered rates considerably higher than the Bank of England base rate.

Can I remortgage with bad credit?

Yes, but you're unlikely to get the best deal with a new lender if you have a poor credit record. That's unless you want to stay with the same lender and don't want to increase your borrowing. Then, your credit history might not be a factor when it comes to remortgaging.

What’s the lowest credit score you can have for a bad credit mortgage?

There isn’t one. Credit reference agencies use different methods of scoring consumers, and lenders use different ways of analysing this information. Each lender will use a different scoring method.

Will interest rates be higher on a bad credit mortgage?

As a rule, yes. Lenders will consider you to be a higher risk, so they’ll price that into their products.

You’ll also have a smaller choice of providers who are prepared to take you on. This means the market is less competitive than it is for borrowers with perfect credit records.

You should think carefully before securing debt against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
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