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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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 bad credit. While it is true that most mortgage providers prefer applicants with a nice clean credit rating, it’s not impossible to secure finance with various credit issues against your name.

In this article we’ll talk about how to apply for a mortgage with bad credit, the things you should and shouldn’t do, and the steps you can take to repair a bad credit rating.

Can you get a mortgage with bad credit?

Yes. Bad Credit mortgages are available for people with a bad or low credit score. Low credit scores are different to mortgages for bad credit and we’ll explain the difference in more detail further down.

The good news is that there are lenders who specialise in mortgages for people with a bad credit history. The downside is that you may have to pay a higher interest rate to reflect the higher risk to the lender.

A lot depends on how severe your adverse credit problems were in the first place, so getting the right advice from a mortgage broker who specialises in finding mortgage lenders for bad credit applicants, is essential.

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How to get a mortgage with bad credit.

Here are the steps to follow to get a bad credit mortgage…

  • Optimise your credit reports: You can do this here by downloading your credit files from the UK’s three main credit reference agencies. Comb through them for inaccuracies and have any outdated information removed.
  • Get your paperwork together: You’ll need to provide proof of ID, income and address, among other documents. You can find a complete list of the paperwork you will need in our complete guide to mortgage applications.
  • Speak to a bad credit mortgage broker: There are mortgage brokers who specialise in dealing with a range of credit issues. They have the knowledge and experience to help people with all kinds of adverse credit get approved for a mortgage and have deep working relationships with bad credit lenders across the market.

Through our free, broker-matching service we can pair you up with a broker who specialises in customers with the exact credit issues you have, and a strong track record of helping them get a great mortgage deal. Make an enquiry and we’ll set up a free, no-obligation chat between you and your ideal broker today.

Minimum deposit requirements

The minimum deposit you’ll need for a mortgage in the UK is at least 5% (or 15% for a buy to let). The main problem you’ll encounter is that if you have a bad credit history, you may be seen as a higher financial risk, so lenders will typically ask for a higher deposit than this.

An example might be, if you have been subject to a repossession, a specialist mortgage provider may ask for a minimum deposit of 25%, provided the incident is at least one to three years old.

If the credit problem is relatively minor, such as a mobile phone contract, then a specialist broker may be able to find you a mortgage with as little as 5-10% deposit.

Which credit issues will lenders accept?

It depends which lender we’re talking about, but generally speaking, there are mortgage lenders who can take a flexible stance on most types of bad credit.

This chart will give you an indication about whether a mortgage provider is likely to accept an application with an adverse credit mark, 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 depend on the age and severity of the credit issue.

But you will need to bear in mind that, depending on the exact nature of the credit issue, you may end up paying a higher interest rate, or you might be asked to have a higher deposit.

The table below shows some lenders and their criteria based on the severity of the credit 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.

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.

If you meet the mortgage providers criteria outlined above, then you have a better chance of finding a mortgage with a bad credit history.

But it is essential that you talk to an advisor or mortgage broker who is an expert in bad credit mortgages, someone who will provide the right advice and find you a mortgage 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 the bad credit mortgage 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.

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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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