How To Get A Bad Credit Mortgage

Types of bad credit

Here’s a full list of the credit issue types that are acceptable, and links to the relevant articles that go into more detail on each one:

• Late payments
• Missed mortgage payments
• Defaults
• County Court Judgments (CCJs)
• Individual Voluntary Arrangements (IVAs)
• Debt management plans
• Payday Loan Usage
• Repossessions
• Bankruptcy
• Debt relief order

The main things bad credit lenders care about

The main eligibility criteria lenders will assess include:

• The type and severity of credit issues you have (less severe, like late payments or defaults, are more widely accepted than an IVA or Bankruptcy, for example).
• How many there are (more issues = fewer lenders)
• How old the credit issues are (the older the better)
• How much money they were for (the smaller the better, some ignore if under say £500)
• Whether they are repaid or still outstanding, and if so, when (settled can mean more lenders consider you, but this is not always important)
• The account type they were for (i.e. loan, credit card, phone bill)
• The reason for the credit problems (i.e. life event such as ill health, or just mismanagement)

There is always everything else to consider on top of your credit profile, such as your income and employment type, age, marital status, the property, how much you need to borrow, etc.

How to get a Pre-approval with bad credit

Getting an AIP (Agreement in Principle), A.K.A. DIP (decision in principle), A.K.A. Pre-approval is relatively straightforward; the process is just:

1. logging into the lender website
2. keying your info
3. giving consent
4. pressing the button (and crossing fingers).

As we mentioned in this article, though, most bad credit specialists are broker-only lenders, so you’ll need to use an expert to do this. With some lenders, it’s more involved, and they won’t offer an online pre-approval service, opting instead for a manual approach (one or two still have paper forms!).

If your advisor is doing it, then it’s not far off as simple, with a few other bits they have to cater for. The main consideration here is their knowing what they are doing and, in fact, even having a registration with the lender in the first place.

Brokers have to apply and register to do business. A generalist / average advisor who doesn’t do many mortgages like yours may not have applied before and will need to wait a while before they can actually log in and submit business.

🚩 THIS IS A RED FLAG—Be wary of a broker who has to wait to do the application. It can mean they don’t know the market and can make a mess either by applying to the wrong lender anyway or by not presenting the application in the best way possible.

The 2 ways to get a mortgage

There are 2 ways to get a mortgage: In general, borrowers can apply directly or through a broker.

Remember, whatever you do: On a normal day, about 30% of the market is broker-only, and for bad credit borrowers, this can be much higher. Without a broker (a good one!), who can access almost every lender in the market for you, you’ll severely limit your options (and chance of approval).

What deposit will I need?

Sometimes, lenders offer 95-100% mortgages, but whether you’d qualify depends entirely on your credit history and the rest of your situation—it could be 5% or 50%!

No website or calculator can give you an exact amount here (not even ours, and ours is awesome), so don’t believe it if you read it.

In general, the more severe and recent the issue, the higher the risk. This means fewer lenders will lend, and they typically want a higher deposit/equity to protect against this.

You can use our bad credit comparison tool here to get an idea of the lenders available and the deposit they’ll require by adding your own “filters” at the bottom of the data entry screen, but the best way to be certain is to chat with one of our team.

Can my income make up for it?

In general, no, but with some caveats

Some people with good incomes think they may have a better chance of being approved with bad credit, but in general this isn’t the case. The credit history is the main factor in the decision, and earning more doesn’t offset this.

Having an income that all lenders accept, and borrowing a low multiple (i.e. earning £250k and borrowing £500k is only 2x income = low when some lenders will do 5-6x income), does mean that you aren’t excluding any lenders because of your income, which means you have the maximum range possible to consider your credit issues.

It also means you may be able to generate a larger deposit quicker if needed, reducing your Loan To Value (LTV), which itself can bring more lenders into the mix.

Self-employed borrowers with bad credit

Business owners are also subject to the same logic, but it may be that the income they have taken from the business could have been higher. With some lenders, the net profit of the business can be taken into account. This could increase affordability and mean more lenders are willing to consider you (again, though, this won’t necessarily offset credit issues as standard practice).

High net worth individuals and bad credit

Another exception to this might be high-net-worth individuals. Private banks can have much more flexible rules when it comes to lending criteria for large mortgages, especially if you have a lot of equity/deposit and maybe a portfolio of other property or assets as additional security. All of this reduces the lender’s risk.

So, if you have credit issues and are looking for a bespoke service, our specialist high-net-worth team can discuss this.

What if my credit is REALLY bad?

Often, people fit into two camps here: it is pretty bad, or they think it is when it’s not.

Some perspective for those who think it’s worse than it is

Some people think missing a payment is the end of the world, and it’s not. In fact, if you have a load of late payments, maybe defaults, and a debt management plan, but you’ve been pretty good the last 6-12 months, then there are likely plenty of lenders that can consider you at decent rates, too. This is something we do every day and is incredibly common (we’ve helped over 180,000 people with bad credit!).

Some hope for those who actually have really bad credit

If you think you have a terrible credit history, and it is actually pretty severe, then there is reason for hope, regardless. Some people worry this means you’ll never get approved, and it’s not the case. Moreover, we often get mortgages for people in active IVAS or who were made bankrupt a year ago, so if your situation is there or better, then it’s worth reaching out to chat with one of the team who can show you your options.

Policy exceptions & appealing declined applications

If you’ve been declined for a mortgage, it can be uncertain as to what the next step is.

There are 2 options: take it on the chin and go to the next-best lender, or appeal.

We would REALLY recommend you don’t appeal on your own, even if you’d rather not use a broker, because it takes special knowledge and experience to package up cases for review and to request a policy exception from the lender’s underwriter (decision maker).

Successful appeals are intricate and take a lot of reasoning and evidence to convince a lender to overturn a decision when they have already refused you once, but it is certainly possible and something we do a lot of.

In fact, we often rescue failed mortgage applications from brokers and get them approved with the same lender.

There is obviously a reason you went to that lender in the first place; they offered the best deal you thought you could get. So, if there’s a chance it could be overturned, we would certainly try this route.

If, however, we are inheriting your application from another inexperienced broker who has got it wrong, it may be that:

1. They have gone to the wrong lender in the first place (and they would never have accepted)
2. They went to the wrong lender because we can get you a better deal somewhere else (so no point in appealing it, we’ll just make the new application)
3. They went to the right lender in the wrong way, and it’s too late to get them to overturn it

This is usually a great example of why it’s so important to get the right advice from an expert who knows the field, the lenders, and the policy, has great relationships with the lender, and arranges the type of mortgage you need every day.

How to find the right broker

Not all brokers are created equally

Our MD, Pete, talks openly and often evangelistically about this.

The range in quality advisors is huge. It’s like GPs vs. specialists—you wouldn’t want your GP to crack your chest open for your heart surgery; you’d want the guy who’s done it well, time after time.

Mortgages are much the same—most brokers who never encounter someone with credit issues or a particular set of complex circumstances will often be out of their depth, and whilst they are nice and “have a go,” this often leads to disaster.

It’s why we work in specialist departments as a business, and bad credit customers will always ALWAYS speak to a bad credit expert with the experience and knowledge of successfully doing this a lot, like hundreds/thousands of times.

So please don’t chance it! Even if you don’t work with us, have your broker contact us so we can make sure they are doing the right thing. We’re happy to help!

Bad Credit Lenders & Rates

Who are the Specialist Lenders?

Several specialist lenders and some mainstream lenders, such as high street banks, can offer bad credit mortgages – it really depends on what the credit issues are. You’ll rarely find a lender on the high street lending to someone in an IVA, but they might consider the odd late payment from a while ago.

It’s important to know, though, that all lenders in the UK are fully authorised and regulated by the FCA, so they all have to adopt fair and safe practices. You’re protected by things like the Financial Service Compensation Scheme and the Ombudsman, regardless. So don’t be put off if it’s a lender you’ve never heard of; they’ll have been established and likely offered thousands of mortgages like the one you’re looking at.

There are lots of lenders out there, and pretty much all the Bad credit lenders are found in our tool here, and here’s a list of a few of them if you need it:

• Bluestone Mortgages
• Pepper Money
• Kensington Mortgages
• MBS Lending
• Vida Homeloans
• The Mortgage Lender
• Foundation Home Loans
• Aldermore
• Buckingham Building Society
• Darlington Building Society
• Kent Reliance

What interest rate to expect

This can vary completely depending on the lender and the rates at the time, but often you’ll be surprised that the rates for bad credit mortgages are not as expensive as you expect, often actually really competitive, and you might find comparable or if not, perhaps 1-2% higher than a regular mortgage.

Check out our tool for the latest deals that you might qualify for, or a quick view of examples of interest rates is here:

Bad Credit Mortgage Calculator

Use our amazing OMA® Engine

Use our state-of-the-art bad credit mortgage calculator.

It’s not just any calculator—it’s a unique tool we developed to provide bespoke mortgage comparisons, with rates, costs, and payments from lenders who’ll consider your specific situation.

Go here for our other calculators (affordability, repayment, stamp duty, etc.)

A Basic Understanding of Bad Credit Mortgages

To see all our content on this topic or find articles related to your specific issue, visit our dedicated bad credit mortgages Hub page.

This section covers all the basics: what a bad credit mortgage is and how it might differ from a standard mortgage, as well as a dive into the different credit issues that can impact the mortgages you qualify for, what lenders care most about, and how the market works.

What is a bad credit mortgage?

There’s no difference

First, note that “Bad credit mortgages” are not actually a different type of mortgage from regular mortgages. They are the same, but they are offered by lenders who are more flexible with their policies and are happy to consider people who have had credit issues or a low credit score.

Navigating Lender Policy

So every lender is basically different in what they do and don’t accept for a whole host of reasons. There are actually hundreds of criteria points, not just about credit, but everything (your age, marital status, income type, property construction, etc.).

They will set out their policy for all of these factors based on their appetite for risk, cost to lend, and the corner of the market they are targeting. Some lenders are better for expats, some for NHS workers, some for concrete houses, and, of course, some for different types of credit history.

Because of this, most comparison tables are useless (apart from ours!), and finding the lenders that fit you can be really tough – this is basically why mortgage experts exist.

Understanding your credit report

In a nutshell, your credit report is a collection of data about you from all the providers with whom you have entered into a credit agreement, as well as public information like the electoral register, fraud notices, and court judgements.

The data is collated by three main private organisations (Experian, Equifax, and TransUnion), and the lenders are obliged to report your monthly account conduct to them (although they don’t have to report to all three, which leads to blind spots. Something many customers and inexperienced brokers are confused about and tripped up about).

So if you’ve taken a new credit card, missed any payments, exceeded your overdraft limit, had a CCJ or bankruptcy, it’ll all be there (most of the time), and a new mortgage lender will use this information to determine if you are within their risk profile to lend to.

Don’t be fooled by your credit score either. Most lenders don’t use the credit score at all; they just use the information in your report to come up with their own. Many bad credit lenders don’t score anyway; they just see if you meet their policy or not.

More on this in our credit report guide.

How Bad Credit Can Impact Different Mortgage Types

First-time buyers and bad credit

If you’re a first-time buyer with bad credit, the only major difference would be you don’t have a property with equity in it already, and the average equity in property across the UK is generally higher than the average deposit.

Also, if you are not earning a high wage, it can make passing affordability more challenging, as many bad credit lenders have minimum income requirements, and tend not to be quite as generous on the maximum mortgage they’ll lend you.

The other thing to note here is that as a first-time buyer, you might be considering purchasing through a scheme. While plenty of government schemes exist to help first-time buyers, not all lenders offer these to people with bad credit, and not all bad-credit lenders offer them.

Remortgaging with bad credit

If you’re about to remortgage and have bad credit, you have a few options – it really depends on what you need to refinance for.

• Deal expiring and need a new rate – If your current mortgage lender is a table topper, and perhaps your credit issues have happened since you took that mortgage, it’s definitely worth looking at sticking with them (your broker can still usually sort this), as they are usually obliged to offer you a new rate from their product transfer range. Your credit profile is usually irrelevant and not assessed for like-for-like product transfers like this, whereas for remortgages to a new lender, it would be.
• Want to borrow more money – If you want to borrow more, your existing lender might not offer it, but others might. You have the choice of moving the whole mortgage to a new lender or perhaps taking a second-charge mortgage for the extra (this can be better if your existing mortgage is tied in or has a great rate you don’t want to lose).

Equity release and bad credit

Equity release is an interesting subject. First, to be clear, we are talking about later-life mortgages for the over-55s, NOT the process of releasing equity by borrowing a bit more on your normal mortgage.

The main thing to know about equity release is that, because of how these mortgages are done, the interest is generally added to the mortgage and taken from the equity in the property. So, unless the borrower is making monthly payments, their income and credit history have far less impact, often no impact, on mortgage eligibility.

We used to have a whole section of the site about this, but really, they are much the same thing. Your best bet if you’re over 55 and want to chat equity release is to read our guides here and get in touch with one of the experts!

Info on other mortgage types and bad credit

We used to have a lot of content about bad credit, buy-to-let mortgages, right-to-buy mortgages, Shared ownership, and Commercial mortgages, but honestly, it was a bit unhelpful.

Generally, most other mortgage types are much the same as standard mortgages, with nothing else to say about it!

The main thing to remember is that all lenders are different, so the number of them offering mortgages for your credit profile AND the mortgage type can be reduced. For example, it may be that there are no lenders for you for a scheme like shared ownership, but there might be for standard properties on the open market.

Just have a chat with one of the experts who will be able to help you determine the best property / mortgage type for you.

Watch for more on how bad credit mortgages work