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Bad Credit Mortgage Lenders

Find out about lenders who will consider mortgages for people with bad credit

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By Pete Mugleston   Mortgage Advisor

Last updated: 23rd November 2018

With a growing number of bad credit mortgage lenders in 2018 there has never been a better time to find a bad credit mortgage.

We can connect you to a wide range of advisors and experts who know the best mortgage lenders for bad credit and have a proven track-record of helping customers to achieve a mortgage which best suits their circumstances.

In this guide we’ll cover

What types of bad credit can mortgage lenders accept?

There are a number of mortgage lenders for bad credit who specialise in mortgage deals for customers experiencing credit issues, such as:

  • No credit history
  • Low credit scores
  • Late payments
  • Missed mortgage payments
  • Defaults
  • CCJ’s
  • IVA’s
  • Debt management schemes
  • Repossessions
  • Bankruptcy
  • Payday loans
  • Multiple credit problems

From the point of view of the list of high street mortgage lenders, bad credit, as outlined by most (if not all) of these issues on an individual credit file, can make the difference between the choice to lend or not, with most high street banks or building societies dismissing any application that reflects averse financial dealings outright.

However, the brokers we work with have access to specialist mortgage lenders for bad credit history, who treat adverse credit borrowers with a great deal more flexibility than their mainstream counterparts.

Of course, it’s worth bearing in mind that the rates and fees which mortgage lenders for poor credit offer are often higher than for customers with clean credit scores and are priced to reflect the higher levels of risk that poor credit customers represent. Nevertheless, with more and more lenders entering this market, intensifying levels of competition means that customers can still access highly favourable (and even prime lending comparable) rates.

Which credit score and what credit checks do mortgage lenders use?

 Mortgage lenders use the UK’s three main credit reference agencies (Experian, Equifax and CallCredit) to determine credit scores for applications, although they may choose to use data provided by one, two or a combination of all three in order to reach an outcome.

These scores can go a long way towards deciding what type of mortgage lenders are prepared to sanction, although it’s also worth remembering that a high credit rating in and of itself is no guarantee of a mortgage offer while a poor score doesn’t necessarily mean there’s no possibility of securing a loan.

A lot of people ask us who the best mortgage lenders for low credit scores are. However, there are mortgage lenders who don’t credit score.

Moreover, there are a number of steps that can be taken to improve credit ratings.

These include:

Be an active borrower

By spending money on a credit card and maintaining a regular repayment schedule (specifically within the 30-day interest-free period if possible) you will be able to drive up credit scores (often over a matter of weeks or months) and simultaneously demonstrate your ability to borrow and repay to lenders.

Alternatively, if you have experienced severe credit issues over a lengthy period or have been refused a standard credit card because of recent financial difficulties, you could consider applying for an adverse specific credit card and following a similar spend and repayment structure as the net result will be the same.

Check all of your credit reports

Credit reference agencies invariably hold different sources of financial information in relation to individual borrowers, so it’s a good idea to get your credit rating from each of the three suppliers and check if one (or more) of them highlight a particular issue that might affect mortgage eligibility.

It is also important to challenge or dispute any changes which are untrue, unfair or which don’t make sense to you as these could also impact your ability to borrow.

One final thing to remember is that none of the credit agencies used by low credit score mortgage lenders to underwrite mortgage applications hold financial information for longer than six years, so customers who have maintained payments on loans or credit cards within that period should be able to apply for ‘conventional’ mortgages without too much of a problem.

Can I get a mortgage with no credit check?

Unfortunately not. However there are some mortgage lenders that don't credit score.

It is a standard market practice for every lender based within the UK to check credit before offering a mortgage, whether they’re a big high street name, a challenger bank or a specialist firm. We’re often asked if there are private lenders who conduct no credit check but that’s not the case.

However, it is be possible to find mortgage lenders that help people with bad credit who are prepared to offer a more flexible or responsive set of criteria to its customers, irrespective of a poor credit score the presence of credit issues.

Indeed, as we have discovered on numerous occasions, it is entirely possible for customers to achieve mortgage offers with bad credit or (even) no credit history at all, so don’t run away with the idea that credit checks represent the be-all and end-all of the application process.

It’s worth noting that there is a difference between a credit check and a credit score. All lenders will ‘check’ your credit history but not all lenders will use a credit score.

How do poor credit lenders determine eligibility?

There are two main things involved in lender assessments:

  1. The type / severity of the issue
  2. The date it was registered

The type of the bad credit issues

As you would expect, most lenders will take the severity of a credit issue into account when determining eligibility for a mortgage loan, meaning that missed payments on bills or loans are invariably dealt with a higher degree of leniency than more serious examples (such as a recent bankruptcy for example).

The date of the issue

Furthermore, many mortgage lenders for bad credit history tend to favour applications made by people with historically older examples of adverse credit issues (as opposed to more recent misdemeanours), while some will ask clients to reapply for a loan once a certain passage of time has elapsed.

For example, people who have experienced bankruptcy are unable to apply for a mortgage until they have been discharged (which usually takes around twelve months), although most lenders will insist on a three or four year period as well as a good credit history in that time before they will consider a loan.

Similarly, mortgage rates for customers who have had a property repossessed within the last three years tend to be sky high, but steadily decrease with every passing year. The thinking here, of course, is that the longer the customer has managed to maintain financial activity without incident, the lower the risk of lending.

What other issues could affect a bad credit mortgage application?

If the credit issues are acceptable, the borrower will still need to meet standard lending criteria with those lenders, which include:

  • Property type: Lenders are far more likely to lend against properties with a standard construction as opposed to ones that exhibit unconventional or period features (such as a listed building or a house with thatched roof, timber frame etc).
  • Age: Borrowers who are aged between 21 and 75 will inevitably command a wider choice of potential lenders than later-life applicants, while age-caps (of 75 or 85, depending on the lender) can also apply.
  • Income: The amount that you can borrow is typically determined by your level of income, so lenders tend to favour borrowers with secure or full-time sources of income as opposed to self-employed workers or borrowers with complex sources of income (such as bonuses, pensions, benefits etc). Lenders also need to make sure that customers can maintain mortgage payments over a sustained period, so the rule of thumb here is that the more income you have, the better.
  • Deposit size/type: Mortgage lenders for people with poor credit usually choose to mitigate the risks associated with bad credit mortgages by asking for higher deposits than conventional mortgages (typically between 15% and 35% of the value of the property (although both higher and lower deposits can also apply), while Loan to Value (LTV) ratios (which are used to define the percentage size of the mortgage loan against the overall value of the property) can also play a crucial role in assessing risk levels.That said there are lenders offering mortgages with just 5% deposit, to the right borrowers in the right circumstances.

Are there mortgage lenders for bad credit buy to let mortgages?

There are, although lending rules can be different for these mortgages, while minimum income requirements (often of around £20-25,000 per year) and LTV caps are often applied

Are there adverse credit mortgage lenders in the UK for second homes?

Yes, although obviously a history of bad credit in this instance could prove to be extremely restrictive, which is why getting advice from across the whole of the market to achieve the best deals is so important. Either way, deposits and income requirements are likely to be higher than for first charge residential mortgages with many lenders.

Are there low credit mortgage lenders for secured loans?

Yes, there are. Moreover, because these types of product require the borrower to pledge some form of asset (usually a property) as collateral against the loan, credit issues are less of a problem here, as some secured loan lenders are more flexible than first charge lenders and can accept more severe and recent issues.

However, some lenders may impose minimum income requirements on borrowers, while fees and rates can be higher than first charge mortgages in some cases. Loan to values can vary according to the amount borrowed.

Loan to value is how much a lender is prepared to offer in relation to the value of the property. Typically Loan to value (or LTV) range from 50% up to 95% - for instance, a borrower taking out a £95,000 mortgage on a property valued at £100,000 would have a LTV ratio of 95%.

Are there bad credit score mortgage lenders for large loans?

Yes, although specialist advice will undoubtedly be needed in these cases as adverse credit ratings or issues can affect the amounts which lenders will be prepared to offer. As a result, meanwhile, LTVs, income requirements and overall fees and costs seem to be offered on a ‘case-by-case’ basis.

 Speak to an expert on mortgage lenders for bad credit in the UK

If you have questions and want to speak to an expert for the right advice, call Online Mortgage Advisor today on 0800 304 7880 or make an enquiry here.

Then sit back and let us do all the hard work in finding the bad credit mortgage broker with the right expertise and knowledge of impaired credit mortgage lenders for your circumstances.  – We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

Updated: 23rd November 2018
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FCA disclaimer

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.

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.

Find out more about how we help people get mortgages with bad credit.

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