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By Pete Mugleston | Mortgage Advisor

Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 28th October 2020*

Whether you defaulted on a credit card, were issued a county court junction (CCJ) or you were made bankrupt a few years ago, there are many types of adverse credit that could leave you with a bad credit record. 

You may be wondering what sort of mortgage you could get, or if you have any options at all. Lenders are keen to know if you can afford to repay the loan, but is it worth directly going to a bank or could you make some big savings by working with a specialist mortgage broker?

In this guide, we look at how a mortgage broker can help you secure a bad credit mortgage, the types of adverse they’ll accept, and how brokers find the best lenders for your credit rating and circumstances.

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Are there mortgage brokers who specialise in bad credit? 

Absolutely. Mortgage brokers can specialise in different areas of the market, so the ones who specialise in bad credit will have the knowledge and experience to find the most suitable lenders for your needs and circumstances. Bad credit mortgages can be more complex than standard ones, so a broker who understands the lending criteria could save you time, money and hassle. 

Unlike a bank where they may be restricted with what they can offer you, a mortgage broker works independently and has unlimited access to the UK mortgage market. This is a database of lenders who brokers use to find you the best deals from lenders – and they may even have access to deals that aren’t available to the general public. 

Brokers specialising in bad credit can help applicants find a provider who can accommodate the following credit issues:

If you’ve been turned down for a mortgage (or fear that you might be) due to any of the above, a specialist bad credit mortgage broker can introduce you to a provider who will take into account the severity of the credit issue, how long it has been on your file, and how closely you meet their other eligibility requirements. It is still therefore possible to get a mortgage with a CCJ, IVA or even a get a mortgage with defaults.

For example, if you have adverse with outstanding credit card debts that you intend to repay within three months, many lenders will ignore this (so long as there is a payment plan in place).

However, if you have a poor credit history with a current and unsatisfied debt management plan in place, it will have a larger impact on your application. Many lenders would require a confirmation/statement from your debt management provider that last 12 months payments have been made in full before they would consider you for a mortgage.

What to look for in a bad credit mortgage broker

The right mortgage brokers for people with bad credit should have these qualities…

  • Whole of market and independent
  • Reasonable and fair fee structure (should only charge on success)
  • Gives you access to direct deals
  • Has exclusive products
  • Has links with commercial finance
  • Is whole-of-market for insurance
  • Has years of experience 
  • Has plenty of happy customers

You should be wary of poor credit mortgage brokers where the following applies…

  • Is limited to a few lenders
  • Only offers broker products
  • Charges big non-refundable fees
  • Has no exclusive deals
  • Gives up if it’s not straightforward
  • Lacks market knowledge
  • Is restricted to one or two insurers

The mortgage companies for bad credit customers that we work with tick all of the boxes on the first list and none of them on the second. We are selective about the brokers we work with and require them to pass a professionally recognised, 25-module course before they gain our approval.

In other words, if you make an enquiry with us, you can rest assured that you will have access to the best mortgage brokers for bad credit in the UK.

Which mortgage lenders will work with bad credit?

Many lenders accept applicants with bad credit (including high street lenders), though bear in mind that each lender has different criteria which needs to be met before they can offer you a mortgage. Lenders will run a credit check against you using one of the three main UK credit report agencies: Callcredit, Equifax, and Experian.

Each of these credit agencies will score you differently, so you may get good rates with one lender and poorer rates from another, even if their criteria is similar.

As an example, Nationwide will run against all three credit agencies, whereas Coventry building society only runs a credit check with Equifax. Some lenders such as Kensington will not use full application scoring to make a decision and instead rely on experienced and fully trained underwriters to fully assess mortgage applications, so you may find some wriggle room with these lenders if you have poor credit.

What types of credit issues will mortgage lenders accept?

Lenders often base their decision on the severity, age and cause of the issue. Some adverse credit issues are more severe than others (e.g. a recent bankruptcy or recently registered IVA is more severe than a missed phone bill payment) and the longer it has been on your file, the better, although some providers are more flexible than others.

Those with multiple credit issues may be asked to put down more deposit to offset the risk, but it depends on what those issues are. The tables below will give you an idea of the types of adverse credit issues most UK lenders might accept and how long you will likely have to wait to apply for a home loan with them on your file.

Secured Finance (where your debt is secured against a property/asset)

Credit Issue Mortgage approval after 0-12 months likely? Mortgage approval after 1-2 years likely? Mortgage approval after 2-3 years likely? Mortgage approval after 3-4 years likely? Mortgage approval after 4+ years likely?
Mortgage Arrears Yes (Usually max 3 late) Yes (Any number) Yes (Any number) Yes (Any number) Yes (Any number)
CCJs Unlikely Maybe (If good LTV) Yes (Any value) Yes (Any value) Yes (Any value)
Defaults Unlikely Maybe (If good LTV) Maybe (If good LTV) Yes (Any value) Yes (Any value)
Repossessions Unlikely Yes (With 25% deposit) Yes (With 25% deposit) Yes Yes

Unsecured Finance (where debt is not secured against a property/finance)

  0-12 Months 1-2 Years 2-3 Years 3-4 Years 4+ Years
Late Payments Yes (any number) Yes (Any number) Yes (Any number) Yes (Any number) Yes (Any number)
CCJs Yes (any value) Yes (any value) Yes (Any value) Yes (Any value) Yes (Any value)
Defaults Yes (any value) Yes (any value) Yes (any value) Yes (Any value) Yes (Any value)
Debt MGBT Yes (If credit file is unaffected) Yes (If credit file is unaffected) Yes (If credit file is unaffected) Yes (If credit file is unaffected) Yes (If credit file is unaffected)
IVA Possible with 25% Deposit Possible with 25% Deposit Possible with 20% Deposit Possible with 20% Deposit Possible with 10% Deposit
Bankruptcy Possible with 25% Deposit Possible with 25% Deposit Possible with 15% Deposit Possible with 5% Deposit Possible with 5% Deposit

Can a broker help me if I have bad credit and no deposit?

While you cannot borrow the total value of the property you wish to purchase (known as a 100% loan-to-value), you can get a ‘no deposit’ mortgage. A broker can establish your eligibility and recommend/find you a different type of mortgage to suit your needs, for example, a guarantor mortgage with a gifted deposit, or a scheme like Help to Buy or Shared Ownership

What fees do bad credit mortgage brokers charge?

The maximum justifiable charge a broker will ask for their services is 3% of the loan amount. For example, if you were borrowing £100,000, your broker fees would amount to £3,000, though you won’t necessarily be hit with the highest rates. Deals with rates of 1% and under are available for some customers.

The percentage you’re billed at may increase or go down depending on how complex the deal is. For instance, if you have multiple adverse credit issues, it will likely take the broker longer to find a favourable deal, and they will, therefore, charge more for their services.

The typical amount charged by the mortgage brokers for borrowers with a bad credit history could be around £499, due upon completion.

Mortgage brokers should only be paid upon success, so be wary of deals with high upfront fees. 

Can a credit repair company help me to get a mortgage?

Credit repair companies can be complicated, in the sense that some are known to act unethically and put their own interests first. With this in mind, those with adverse credit are best seeking specialist insight from an independent mortgage broker who caters to bad credit applicants. They can offer advice for building, repairing and improving your credit for a mortgage application. 

However, you can take action now. We’ve listed just some of the ways that can help improve your credit rating. 

  • Get an adverse specific credit card – this will help if you have no credit history
  • Check your credit file and ensure it’s up-to-date and have any errors corrected
  • Register on the electoral roll
  • Make sure all your monthly payments go out on time
  • Avoid having too many ‘hard’ credit checks on your file
  • Settle your debts and control your spending
  • Avoid payday loans. Find out how payday loan use can make it more difficult to get a mortgage
  • Have one, well-run bank account

Mortgage brokers who work with bad credit customers can give you further details about each of the above and help you get your credit report into the best possible state before putting your mortgage application forward.

You can find more information about checking and optimising your credit file in our guide.

Can a mortgage broker help me remortgage with bad credit?

Yes, some brokers could help applicants remortgage their property even if they have bad credit. Technically speaking, the deals available to remortgage customers are often the same as those for house buyers, the lenders will still take into account the same factors.

If you’re looking to borrow against the equity in your property (a debt consolidation remortgage, for example), it’s certainly possible, depending on the loan-to-value (LTV) ratio.

Getting the best remortgage deal is a case of finding the lender best positioned to cater for a borrower with your needs, circumstances and specific credit issue(s). Lenders will also want to know how you’ll go about repaying the loan over a specific period, for example, if you’re remortgaging into your retirement. 

For more information on how to remortgage with bad credit, read through our in-depth guide. 

How do mortgage brokers check a borrower’s creditworthiness?

Brokers can check your credit history from the main three credit reference agencies in order to determine what kind of deals you’re eligible for. Providing a credit report to a broker won’t leave a ‘hard’ credit check on your credit file – this will usually only happen when an application for credit is made with the lender.

However, you can also check your own credit scores from these three agencies before you even speak with a broker. You’ll be able to see your scores, spot any negatives, and even request to change any inaccuracies. By doing this, you could speed up your mortgage application by presenting these to a broker first so they know which lenders to approach from the get-go.

It’s important to note that not all lenders take your credit ‘score’ into account when assessing you for a mortgage. Some of them simply credit ‘check’ to see if there is any adverse against your name. A specialist low credit score mortgage company may consider pairing you with a lender that will do a credit check for a mortgage rather than ‘scores’.

What else will a mortgage specialist want to know?

Many other factors can impact whether you will qualify for mortgage approval, and the more of them that are going in your favour, the better chance you’ll stand of landing a favourable deal despite your adverse credit history.

To establish which mortgages you could qualify for, the broker will want to know…

  • How much income you have and how you’re employed: Typically, the more you earn the better, and some lenders prefer customers to be employed in a full-time, permanent position. A specialist lender may be required for self-employed mortgages and those who supplement their earnings with other sources.
  • Your deposit: The minimum deposit requirement you will find for a residential property in the UK is 5% or 15% for a buy to let. However, putting down more than the minimum can often yield better rates, and the lender might even insist on this if you have bad credit on your file.
  • Your age: Some lenders won’t lend to anyone over 75, others go up to 85, and a minority lend to customers of any seniority, as long as they are confident they can pay the mortgage during retirement.
  • The property type: A specialist lender may be needed if the property you’re seeking a mortgage for includes any non-standard construction elements (i.e. thatched roof, timber frame).
  • Your outgoings: Other significant outgoings such as loans or dependent children could affect the amount you’re eligible to borrow.
  • How many applicants there are: Bad credit mortgages aren’t limited to solo applicants. It may be possible to get a joint mortgage with one bad credit applicant,  though speaking to a broker is recommended as the presence of any adverse credit could affect the overall strength of the application.

FAQs

Here, you’ll find some of the most frequently asked questions we hear regarding mortgage brokers who specialise in bad credit.

What’s the difference between low, poor and bad credit brokers?

Not much. The vast majority of bad credit brokers will also be able to help applicants with a range of different credit issues, including those with a low credit score. This is because a low score is often a reflection of their bad credit. So, the lower the score is, the more severe the adverse on their file(s) could be. 

Some bad credit brokers may treat ‘poor credit’ applicants differently because, unlike bad credit, a person may have a ‘poor’ credit score because they do not have a history of borrowing, therefore the lender won’t be able to see how well they handled the debt. 

Which credit referencing agencies do mortgage lenders use?

It will depend on the lender as they may use all, some, or none. Bad credit mortgage brokers in the UK will be keen to know how each of the main reference agencies (Experian, Equifax and Callcredit) rates your credit, to give them a clear idea of which lenders you will meet the eligibility and affordability requirements with.

Because the main reference agencies will rate your credit differently, and because mortgage brokers will know the agencies each lender uses, they could match you with a lender you’ve scored the best with. 

That said, some lenders don’t use all three agencies and your credit rating may differ across them all. It’s also important to remember that some mortgage providers aren’t concerned about your credit ‘score’ – they simply ‘check’ for any adverse credit on your file.

Can a bad credit mortgage broker help me if I have an IVA?

Yes, an IVA is just one of the credit problems a broker could help you with if you’re wanting a mortgage. Although some mortgage providers may turn you away if you have an IVA, there are others who will consider your application if you’re able to stump up some extra deposit, which is why it is so important to get expert advice.

Why seeking bad credit mortgage advice is so important

If you need help getting a mortgage with bad credit, it’s important that the broker you turn to has access to the entire market and specific knowledge of adverse.

The key to getting the best rates and deals is finding the mortgage companies for poor credit borrowers that are best positioned to offer a mortgage to a borrower with your needs, circumstances and credit specifics, and the bad credit mortgage loan companies we work with can help you find the right provider for someone in your niche situation.

Speak to an expert bad credit mortgage broker

If you have questions and want to speak to an adverse credit mortgage advisor, call us on 0808 189 2301 or make an enquiry. We’ll then match you with an expert, independent broker for a free, no-obligation chat about your circumstances and bad credit mortgage options. 

Updated: 28th October 2020
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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of 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 who 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.