Adverse Credit
Bad credit mortgages: Can you get a mortgage with adverse credit?
If you’re looking to buy a property or remortgage soon but have faced financial difficulties in the past, you might be asking, “Can I get a mortgage with bad credit?”. Lenders consider your credit score when determining how much you can borrow or if you qualify for a mortgage, as it indicates the risk of lending to you.
The good news is that purchasing a property with bad credit is possible; you may just need some assistance. At The Mortgage Genie, our expert mortgage brokers have successfully helped many clients secure mortgages despite poor credit. Start with a free credit check (free for 30 days, then £14.99/month, cancel online anytime), and contact us today if your credit rating isn’t ideal but you’re ready to buy.
Below, we’ve addressed common questions about getting a mortgage with bad credit to help you prepare for potential challenges. We’ll cover:
- What is bad credit?
- Can you get a mortgage with bad credit?
- How do bad credit mortgages work?
- What is the minimum credit score for a mortgage in the UK?
- What can affect your credit score?
- Can you get a joint mortgage if one applicant has bad credit?
- How to improve your chances of getting a mortgage if you have bad credit
- What deposit do I need for a bad credit mortgage?
- Should I apply for a mortgage with bad credit?
- Pros and cons of bad credit mortgages
- Can I remortgage with bad credit?
- Can I get a mortgage with no credit score?
- Mortgage rates for poor credit
- Applying for a mortgage with bad credit
- How to get a mortgage with bad credit
What is bad credit?
Bad credit refers to a low credit score, often resulting from various financial issues. Common factors contributing to bad credit include missed loan or credit card repayments, late bill payments, and other negative credit events. Key reasons for a poor credit rating include high debt levels, insolvency, failure to meet payment obligations, and payment defaults.
In the United Kingdom, three major credit reference agencies (CRAs) - Experian, Equifax, and TransUnion - maintain individuals' credit reports. While each CRA may have slight variations in their data and scoring methods, they generally align in classifying credit as either good or bad.
Can you get a mortgage with bad credit?
Yes, you can get a mortgage with bad credit, but it may be more challenging and will take longer. Lenders will review your credit history to assess your ability to make repayments. For example, a history of missed loan payments may signal financial instability, making lenders hesitant to approve your application.
However, each mortgage provider has their own lending criteria and may evaluate risk differently. Some lenders might overlook minor issues, like a single late credit card payment, while serious problems - such as bankruptcy or a County Court Judgement (CCJ) within the last six years - can significantly reduce your chances of approval.
How do bad credit mortgages work?
Bad credit mortgages work similarly to regular mortgages, but these products usually come with higher interest rates and fees to compensate for the increased risk to the lender. Moreover, the amount you can borrow is often more limited compared to standard mortgages.
What is the minimum credit score for a mortgage in the UK?
There is no set minimum credit score for obtaining a mortgage in the UK. Instead, lenders evaluate applications based on their specific lending criteria, with your credit score being just one factor in their assessment.
That said, a higher credit score increases your chances of approval, as it indicates lower risk to the lender. A strong credit rating can also unlock some of the best mortgage deals available, saving you significant money over time.
What can affect your credit score?
If you’re unsure why your credit score is low or want to improve it before applying for a loan, it's essential to understand what impacts your credit history. Here are some common factors that can lead to a poor score:
Late or missed repayments on existing credit
Mortgage arrears
Bankruptcy
County Court Judgement (CCJ)
Enrollment in a debt management plan or Individual Voluntary Arrangement (IVA)
These issues typically remain on your credit file for six years, although this period can be extended in some cases, such as prolonged bankruptcy. If you’re looking to buy a property but face challenges due to credit issues, it may be worthwhile to wait until they are cleared from your record.
Can you get a joint mortgage if one applicant has bad credit?
Yes, it's possible to get a joint mortgage even if one applicant has bad credit, though again, it can be more challenging than if both applicants had strong credit scores. When reviewing your application, lenders will assess both credit histories together.
In most cases, lenders will consider the combined credit scores of both applicants. If one of you has a strong credit score, it may help offset the weaker score and increase your chances of approval. However, you'll still need to meet the lender’s minimum credit score requirements as a pair to qualify for the mortgage.
How to improve your chances of getting a mortgage if you have bad credit
If your credit history has no major issues, you can enhance your credit score to increase your approval chances and access better mortgage deals. Here are effective strategies to improve your credit rating:
Register on the electoral roll: This helps verify your identity and residency.
Make timely payments: Consistently paying bills on time demonstrates reliability. Consider setting up direct debits to automate payments.
Maintain low credit utilisation: Aim to use less than 30% of your credit limit. For example, if your credit card limit is £5,000, try to keep your balance under £1,500.
Stay in one place: Lenders prefer stable borrowers, so staying in the same location for a while can positively impact your application.
Keep old credit accounts open: A longer credit history shows your ability to manage multiple credit lines over time.
Monitor for errors or fraud: Regularly checking your credit report can help you catch mistakes or fraudulent activity.
And here are some financial behaviours you should avoid or keep to a minimum if you don’t want to cause further damage to your credit score before your application:
Missing or late payments: This signals financial instability and can hurt your credit score.
Opening multiple new accounts: Frequent account openings can temporarily lower your score and hinder recovery time.
Maxing out credit limits: Using all available credit suggests financial trouble.
Making numerous credit applications: Each application results in a hard inquiry, negatively impacting your score.
Borrowing beyond your means: Failing to repay debts can lead to severe consequences, including CCJs or bankruptcy, which can hinder borrowing for six years.
What deposit do I need for a bad credit mortgage?
The deposit required for a bad credit mortgage typically ranges from 20% to 25%, depending on the severity of your credit issues and the lender’s criteria. For instance, if you've experienced significant financial setbacks like repossession, bankruptcy, or an IVA, you may need to provide a 25% deposit for a specialist bad credit mortgage.
Yet, if your credit problems are relatively minor, such as a few late payments, you might still qualify for a mortgage with a lower deposit - sometimes as little as 10%, provided you meet the lender's other eligibility requirements.
Should I apply for a mortgage with bad credit?
Deciding whether to apply for a mortgage with bad credit or wait for issues to clear from your report depends on your individual circumstances. Ideally, having a strong credit rating will help you access better deals and save money over time, but that’s not always feasible. To assist you in making the best choice, here are the pros and cons of applying now with bad credit:
Pros and cons of bad credit mortgages
Pros
Buy a home sooner: Secure your dream property without delay.
Seize current market conditions: Take advantage of existing house prices and avoid potential future increases.
Cons
Higher deposit required: You may need to save a larger deposit of 20-25%.
Increased interest rates: You could face higher rates, leading to greater long-term costs.
Additional fees: Some lenders may impose extra fees for bad credit mortgages.
Ultimately, weigh these advantages and disadvantages carefully. A bad credit mortgage broker can help you set realistic expectations and guide you toward the best decision for your situation.
Can I remortgage with bad credit?
If you own your home and are considering remortgaging for a better deal or to release equity, it is possible to remortgage with bad credit. However, similar to applying for a mortgage, you may not qualify for the best rates, as lenders often view you as a high-risk borrower.
If your goal is to save money through remortgaging, it might be wise to wait until your credit score improves before applying for a new product.
Can I get a mortgage with no credit score?
Yes, it is possible to obtain a mortgage without a credit score, although relatively few lenders offer such loans. To secure one, you’ll need to put in significant effort to demonstrate your ability to repay the mortgage.
Many individuals lack a credit score for various reasons, often due to insufficient recent financial activity to generate one. It’s important to note that having no credit is very different from having bad credit.
Mortgage rates for poor credit
If you opt for an adverse credit mortgage, you can expect higher interest rates than usual. Most lenders don’t advertise specific rates for bad credit, as they assess each application on a case-by-case basis.
Several factors will influence your interest rate, including:
The types of credit problems you’ve experienced.
How recent those issues are.
Whether you have any outstanding credit problems.
The amount you wish to borrow.
Additionally, current market rates and the Bank of England’s base rate will also play a role. A mortgage broker can help you assess whether now is a good time to buy based on your circumstances and their expertise in the mortgage market.
Applying for a mortgage with bad credit
Applying for a mortgage with bad credit typically requires more time and effort. Lenders often ask more questions and may need additional proof of your current financial situation. Be prepared to be transparent about your credit history, including any defaults or CCJs.
If you've had late or missed payments, you'll likely need to provide extra documentation to demonstrate your ability to make monthly mortgage repayments. Lenders may also request more payslips and bank statements than they would for applicants with good credit.
Alongside this, you’ll need to submit all standard documentation required for a mortgage application. For more information, check out our guide on how to get a mortgage.
How to get a mortgage with bad credit
While securing a mortgage with bad credit is possible, it generally requires more time and effort, often resulting in higher costs due to increased fees, deposits, and interest rates. Consequently, some prospective homeowners opt to wait until they can improve their credit before buying.
If you’re eager to purchase a home, here are some strategies to enhance your chances of mortgage approval:
Save for a larger deposit: A bigger deposit can improve your chances.
Seek assistance from family: Consider asking close family members for help.
Use a guarantor: Having a trustworthy person as a guarantor can strengthen your application.
Consult a bad credit mortgage broker: An expert can guide you through the process.
At The Mortgage Genie, our specialist advisors are trained to assist with adverse credit mortgages. We provide access to products not available from traditional banks and high street lenders. Whether you’ve struggled to secure a mortgage before or are nervous about your first application, we’re here to help.
As your adverse credit mortgage broker, we offer personalised advice, a free initial consultation and indicative quote, as well as ongoing support. If you need help, don’t hesitate to contact us. We look forward to supporting you on your property-buying journey. And why not see how much you could borrow up to today by using our mortgage calculator?
This information is a guide only and should not be relied on as a recommendation or advice that any particular mortgage is suitable for you. All mortgages are subject to the applicant(s) meeting the eligibility criteria of the specific lender. You should make an appointment to receive mortgage advice which will based on your needs and circumstances.