Updated: December 10, 2021

A Guide to Bad Credit Mortgages

Looking for a mortgage with bad credit? The specialist brokers we work with can boost your chances of getting approved.

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No impact on your credit score

Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: December 10, 2021

It’s a popular misconception that you can’t get a mortgage if you have, or recently had, bad credit. Whilst it’s true most mortgage providers prefer applicants with a clean credit rating, it’s not impossible to secure finance if this isn’t the case. 

By following this guide you’ll have a better understanding of the steps you can take to improve your chances of getting a mortgage with bad credit, how lenders assess the more common types of credit problems and where to look for the right advice.

Can you get a mortgage with bad credit?

Yes, you can. But a lot will hinge upon the severity of the credit issue(s) you’ve had in the past and how long it’s been since this was resolved. Even for the most serious cases, such as bankruptcy or repossession, it’s not out of the question that you could secure a mortgage, if you follow certain steps before applying.

The reality is, a bad credit history will make it more difficult for you to qualify for the best mortgage deals available from mainstream lenders. So, as a consequence, if your application is successful, your mortgage will most likely be more expensive, with a higher interest rate and require a larger deposit.

The good news is there are lenders who specialise in mortgages for people with a bad credit history. Rather than approaching them directly – most don’t have a presence on the high street – the smart move is to speak with a broker who has experience arranging these types of home loans.

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What are bad credit mortgages?

This is simply the term used to define a mortgage needed by someone who has a bad or low credit score. In essence, they’re exactly the same as traditional mortgages, as is the application process.

Pretty much every lender will conduct their own credit checks when they begin vetting an application. The key difference is how a lender will judge your case, once in receipt of this information.

They will almost certainly want more details surrounding the circumstances of the credit issues showing against your name, such as when they occurred and how long since they were resolved.

Once in receipt of all the background a lender can then decide how, if at all, they wish to proceed with your application. In the most severe cases (see below) most lenders would want to see a clear credit record, stretching back a number of years since resolution of the credit issue, before they could consider approving your mortgage.

What’s the difference between a bad credit rating and a low credit rating?

A bad credit rating would signify some form of financial issue has occurred at some point in your life (usually over the last six years). This could range from missing a couple of mobile phone contract payments to having your property repossessed.

If you have a low credit rating – which is regarded as being less severe – this would indicate either a lack of evidence of you ever using credit facilities in the past or missing information.

So, for example, one key factor that can affect your rating and tends to catch a lot of people out is registering on the electoral roll at your current address or having all the utility bills registered in your partner’s name rather than jointly.

How to get a mortgage with bad credit

If you’re looking to get a mortgage, but concerned your credit history could hinder your chances, there’s a few simple steps you can take to give your application the best possible chance of success:

Step 1. Check your credit reports

First things first, you need to establish exactly how the issues you’ve had have affected your credit score. You can do this by downloading all of your reports and reviewing the information currently held on your record.

Whatever’s on your report it’s important to understand not all credit issues are treated in the same way by a lender. Some will have a much greater impact upon your record, and any subsequent mortgage application, than others.

So, for example, if your reports indicate a series of late payments which are now satisfied, then this would be seen as much less severe by lenders than having had a County Court Judgement (CCJ) secured against your property.

This is why knowing what type of credit issues are registered against your name is such a crucial first step in the process. You’ll also be able to check there are no historical inaccuracies or incorrect details on any of the reports. If there are, you can make sure they’re removed before a lender sees them.

Step 2. Begin to rebuild your credit score

Once you know the depth of the issues that have blighted your credit history, you can start to rebuild your record. There’s a number of steps you can take, such as:

  • Make sure all outstanding debts relating to any specific credit issue highlighted on your report has now been repaid and satisfied in the eyes of the creditor
  • Keep up to date with all your regular outgoings – rent, utility bills etc. Basically anything that could have a negative affect on your record if you fall behind
  • Apply for low-level credit facilities, such as mobile phones, store credit or credit cards – whatever you apply for, be sure and stay up to date with any payments as this will have a positive affect on your score
  • Remove or cancel any old bank accounts or credit facilities you no longer use. Keep it down to the bare minimum – active accounts only
  • Be prepared for a full – honest – discussion of why these issues occurred with a lender. There may be a perfectly legitimate (one-off) explanation why you suffered financial difficulty – prolonged illness, unexpected redundancy, divorce. Keep hold of all the relevant documentation relating to the specific credit problem so this can also be presented, when the time comes
  • Be patient. Your credit rating will need time to improve, depending on the type of issue involved. The longer some of the actions suggested here are in place, the better your chances are of achieving your overall objective and getting the mortgage approval you need.

In addition to all of the above, now is also the time to start trying to put aside as much money as you’re able towards a deposit. It’s highly likely the amount you’ll need will be larger (see below), due to the additional risk that accompanies a bad credit record. So, it’s better to start saving as soon as you can.

Step 3. Speak to an experienced bad credit mortgage broker

Once you’ve reconciled with your credit history and started to rebuild your profile, the next step is to seek the advice of a mortgage broker who specialises in securing finance for people who’ve had credit issues in the past.

An experienced broker will not only be empathetic to your situation, they’ll also have a firm understanding of which lenders will be able to help, based on the specific credit issues highlighted on your report.

The brokers we work with will be able to assess your circumstances and then identify the right lender. They’ll then manage your application, help prepare all the necessary documentation and offer support throughout the process.

Applying to lenders directly will only increase the risk of being declined as most will have strict criteria for someone with bad credit. This could impact negatively upon your credit record, setting your plans back even further.

If you get in touch, we’ll arrange for a specialist to contact you straight away.

Minimum deposit requirements

The actual deposit you’ll need will largely be based on the depth of the bad credit issues evident on your records. So, for example, if you’ve been subject to a property repossession, most specialist providers will need at least a 25% deposit. Some may even ask for higher.

If the credit problem you’ve had is more minor, such as missed or late payments, then most lenders will take a more lenient view and ask for between 10%-15%.

Can you get a mortgage with nil deposit if you have bad credit?

Whilst not completely out of the question, this would be extremely difficult. The main problem you’ll encounter is that if you have a bad credit history, you’re seen as a higher financial risk, so lenders will typically ask for a higher deposit in order to cover themselves.

The only way this would usually be possible is if you’re applying with a guarantor or using a government scheme such as Shared Ownership or Right to Buy.

Which credit issues will lenders accept?

In general, there’s a high number of mortgage lenders willing to take a fairly flexible stance on most types of bad credit.

This chart gives an indication of whether a mortgage provider is likely to accept an application with adverse credit, depending on the severity of the issue. You’ll notice that the likelihood of getting a mortgage increases the older the bad credit mark becomes…

0-12 Months 1-2 Years 2-3 Years 3-4 Years 4+ Years
Late Payments Yes Yes Yes Yes Yes
Mortgage arrears Yes (but usually a maximum of 3 late) Yes Yes Yes Yes
CCJ’s Maybe (If a good LTV) Yes (If a good LTV) Yes Yes Yes
Defaults Maybe (If a good LTV) Yes (If a good LTV) Yes (If a good LTV) Yes Yes
IVA Unlikely Possible with 25% deposit Possible with 20% deposit Possible with 20% deposit Possible with 10% deposit
Bankruptcy Unlikely Possible with 25% deposit Possible with 15% deposit Possible with 5% deposit Possible with 5% deposit
Repossessions Unlikely Possible with 25% deposit Possible with 25% deposit Yes Yes

The above is an indication only, so you should talk with a mortgage broker with experience in bad credit mortgages. LTV = Loan to Value. 

Mortgage providers who are more likely to accept you

There are mortgage providers who will accept applicants with bad credit, but the deal you get will generally depend on the age and severity of the issue.

The following tables – grouped into minor, severe and very severe credit problems – provide an indication, based on a select number of mainstream lenders, of how they will assess each issue.

Minor Credit Problems

Mortgage Provider Applicants with no credit history Applicants with low credit score Applicants with history of late payments
Accord Mortgage Case by case Possible Yes
Barclays Case by case Case by case Yes
Halifax Case by case Case by case Yes
HSBC No No Yes
Natwest Case by case Case by case Yes
Santander Case by case Case by case No
Virgin Money No Possible Yes

Severe Credit Problems

Mortgage Provider Missed mortgage payments Default payments CCJs Debt Management Schemes IVA’s
Accord Mortgage Maximum one in last 24 months Up to max £500 If satisfied after 36 months Yes, if satisfied Yes after 6 years if satisfied
Barclays Maximum three in last 24 months Up to max. £200 and satisfied Max £200 OK after 36 months Yes, if satisfied Yes after 6 years if satisfied
Halifax Yes Yes Yes Yes, if satisfied Yes after 6 years if satisfied
HSBC No OK after 36 months OK after 36 months and satisfied Yes, if satisfied Yes after 3 years if satisfied
Natwest Yes – unless occurred in last 12 months Yes, if satisfied Yes, if satisfied Yes, if satisfied Yes after 6 years if satisfied
Santander Yes – after 12 months. OK after 12 months Yes, if not within 3 months and satisfied Yes, if satisfied No
Virgin Money Max two. Ignored after 6 months. Max value £2000 if satisfied Yes, if max value £500 Yes, if satisfied No

Very Severe Credit Problems

Mortgage Provider Bankruptcy Repossession Multiple credit problems
Accord Mortgage Yes, if discharged after 6 years Yes after 6 years Yes
Barclays Yes, if discharged after 6 years No Yes
Halifax Yes, if discharged after 5 years Yes after 6 years Yes
HSBC No No No
NatWest Yes, if discharged after 6 years Yes after 6 years Possible depending on severity and time frame
Santander No No Yes
Virgin Money No No Yes

The tables above are indicative only and can be changed by the lender at any time. Please talk with an expert mortgage broker for the most up to date information that suits your unique financial circumstances.

Can you remortgage if you have bad credit?

Yes, it’s possible. But, it will still all depend upon the severity of any credit issues showing on your report. This would particularly be the case if these problems have arisen since you first applied for a mortgage.

What may help your case with a remortgage is the amount of equity you have in your property and having a clean record with regards to your mortgage payments since you first bought it.

If the credit issues relate to other areas of your finances, you should still take steps to improve your record prior to applying.

Talk with a specialist bad credit mortgage broker

As you can see, there are some obstacles to overcome when applying for a mortgage with bad credit, but it’s not impossible. As long as you follow the steps outlined in this guide, you’ll have a far better chance of success.

One essential step is talking to a broker who is an expert in bad credit mortgages, someone who will provide the right advice and find you the best deal that suits your own individual financial circumstances.

We offer a free broker-matching service that will take your needs, circumstances and the condition of your credit report into account to pair you with a broker who’s best placed to help you. Call 0808 189 0463 or make an enquiry and we’ll arrange a free, no-obligation chat between you and them today.

FAQs

Would a guarantor improve my chances of getting a bad credit mortgage?

Yes, it could. It would certainly give a lender more confidence if you have the support of a family member, as a guarantor, providing assurance if you begin to struggle with your repayments.

Can I get a joint mortgage with my partner if I have bad credit?

Yes, it’s possible. In this case, you should still follow the first step outlined in the guide above but this time download both of your credit reports to see how they compare. 

If your partner has a stronger score and a clean credit record, there’s certainly a stronger case applying for a joint mortgage.

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We can help! We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in bad credit mortgages. Ask us a question and we'll get the best expert to help.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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