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Looking for a Bad Credit Mortgage?

Been told you can’t get a mortgage because of bad credit? Read our guide or get started with a bad credit mortgage specialist

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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: 22nd January 2020 *

People have adverse credit against their name for all kinds of reasons, from historical mortgage arrears to having a home repossessed. While these issues can make approval more difficult, they don't have to be a deal-breaker if you know where to turn.

If you're one of the many who have a history of adverse credit, the good news is that the market is vast and there are deals out there for all kinds of borrowers, not just those with a pristine credit report.

It doesn’t matter if you've been turned away in the past as, with the right advice, it may be possible for you to obtain a home loan.

The following topics are covered below…

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What is a bad credit mortgage?

A bad credit mortgage is for borrowers with adverse credit, a poor credit score or low credit rating. Specialist providers will provide loans to bad credit applicants, although the rates and payments offered might be higher than for customers with clean credit. If you have enough income or a healthy deposit, it may be possible to find a competitive deal.

Specialists who sell niche financial products like this tend to be more flexible in their lending and decisions will be based on the age, severity and cause of the credit issue in question, as well as how likely they are to reoccur.

What's bad credit?

When someone has 'bad credit' it means they have a history of failing to keep up with one or more previous credit agreements. This might be the result of failing to meet credit payments on time or failing to pay them at all. This information is held on your credit report and can make future applications for credit more difficult.

Can I get one with a bad credit history?

While it may not be easy to get a mortgage with bad credit, it doesn’t mean finding a favourable deal is impossible. How hard you find it may come down to the severity of your credit problems, how long they’ve been on your file, and how closely you meet the other criteria on the provider’s eligibility checklist.

Although some high-street providers will turn you away if you have financial problems such as adverse credit, specialist providers will base their lending decision on the severity of the credit problems, how long they’ve been in your credit history and how closely you meet their other eligibility and affordability requirements.

Your chances will likely depend on the severity of the credit issue(s), how long they’ve been on your record and how closely you meet the eligibility and affordability requirements.

Even if you have really bad credit, such as bankruptcy or repossession on your file, there are a minority of specialist lenders who may consider lending to you. Their decision will mostly come down to how long ago the issue was discharged.

You can improve your chances by approaching a whole-of-market broker, as they can find you the best deals to suit your circumstances.

What is a bad credit mortgage lender?

Simply put, they are providers who specialise in customers with adverse credit on their file. While some mainstream firms might turn away borrowers who've experienced financial difficulties, specialist ones base their decision on the severity of the issue, the age of the credit issue, and how closely the applicant meets their other eligibility requirements.

Some of the circumstances which providers specialise in are:

  • First-time homebuyers with bad credit
  • Customers with low/no credit score
  • Every other type of adverse credit

It may prove difficult to get the best rates on your mortgage if you have bad credit because getting a great rate usually depends on meeting all the criteria along with having a clean credit history. However, you can increase your chances of getting a great deal if you have enough income and a good deposit.

The brokers we work with are regulated by the Financial Conduct Authority (FCA) and are best-placed to offer you advice and find a provider who can help.

How do they determine eligibility?

There are two main things involved in assessments when bad/poor credit is a factor:

  1. The type and severity of the issue - missed payments on bills or loans are given more leniency than more serious problems such as recent bankruptcy
  2. The date it was registered - the older your adverse credit history, the better

Anyone who has experienced bankruptcy is unable to apply for a mortgage until they have been discharged (which usually takes around twelve months). Most firms will insist on a three or four year period following the bankruptcy discharge, as well as a good credit history during that time before they will consider a loan.

Similarly, interest rates for customers who have had a property repossessed within the last three years tend to be very high, but they should steadily decrease with every passing year. The longer the customer manages to maintain financial activity without incident, the lower the risk of lending.

What credit issues will be accepted?

Repossessions and bankruptcies are considered the most severe type of adverse credit you can have on your file, while things like missed phone bill payments are problems many providers may be willing to overlook. 

Specialist providers often take a more flexible approach than those on the high-street and can offer a lifeline to applicants with any of the following…

These providers often base their lending decision on the cause and severity of the adverse, the age of the credit issue, and how closely you meet their other eligibility and affordability requirements.

What else impacts eligibility besides my credit rating?

Although a provider will look at your credit history when assessing your application, they might also base their lending decision on the following variables…

  • Your income and employment status:
    The more you earn, the more you could borrow, but how you make your money will also be of interest to the provider when they're calculating the size of your mortgage. A specialist provider might be needed if you’re self-employed or make a significant amount through bonuses, overtime or commission.
  • Your deposit:
    The minimum deposit sum you’ll need for a residential property is 5% (although some providers will want more) or 15% for a buy-to-let. The more deposit you put down the more you minimise some of the perceived risk your bad credit creates.
  • Your age:
    Some providers won’t cater for borrowers over 75, others 85 and a minority will lend with no upper age limit, as long as they’re confident the borrower will be capable of repaying their loan debt in retirement.
  • Your outgoings:
    Other significant outgoings (such as outstanding loans or dependent children) may affect the amount you’re able to borrow.
  • The property type:
    Properties with non-standard construction (i.e. thatched roof, timber frame, etc) might require a specialist. 

Do high-street providers offer bad credit mortgages?

Not always, and the ones which do might offer you unfavourable rates.

The tables below will give you an idea of how likely you are to get a loan based on the type of credit issues you have and how long you might have to wait before pressing ahead.

  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)
Mortgage Arrears Yes (Usually max 3 late) Yes (Any number) Yes (Any number) Yes (Any number) Yes (Any number)
CCJs Yes (if good LTV) Maybe (If good LTV) Yes (Any value) Yes (Any value) Yes (Any value)
Defaults Yes (if good LTV) Maybe (If good LTV) Maybe (If good LTV) Yes (Any value) Yes (Any value)
Debt MGBT Unlikely Yes (If credit report is unaffected) Yes (If credit report is unaffected) Yes (If credit report is unaffected) Yes (If credit report is unaffected)
IVA Unlikely Possible with a 25% deposit Possible with a 20% deposit Possible with a 20% deposit Possible with a 10% deposit
Bankruptcy Unlikely Possible with 25% deposit Possible with 15% deposit Possible with 5% deposit Possible with 5% deposit
Repossessions Unlikely Yes (with 25% deposit) Yes (with 25% deposit) Yes Yes

Please note that these tables are for example purposes only and were correct at the time of creation (January 2020). Get in touch and an expert will go over any updates with you.

If you have any type of bad credit, the independent brokers we work with will search the entire market for the best deal based on your needs and circumstances.

How your salary could affect your chances

Because mortgage rates are always in flux and can change at any time, getting an average figure for a bad credit loan is often ineffective. However, as a borrower with poor credit, the key to finding the best rates is access to the entire market and meeting the eligibility and affordability requirements for as many lenders as possible.

Which is where your salary can go a long way to help your application...

High income

If you’re on a high wage and want the maximum loan possible, you will need to find a firm willing to offer the highest multiple of your wage. With bad credit on your file this can be tricky because some providers will see you as high risk, regardless of your healthy income.

Income specifics can be vital to an application because most providers cap the size of a residential home loan at x4.5 the borrower’s salary, others will go up to x5 and a minority will stretch to x6 under the right circumstances.

Low income

This can be trickier as low income and poor credit are considered niches in the world of borrowing, but with whole-of-market access, it may be possible to get a loan from a specialist who caters for both categories.

There are a number of options available for borrowers with low salaries, including guarantor mortgage products, supplementing income with things like benefits (some providers allow this) and government schemes such as Shared Ownership.

A joint owner, sole proprietor mortgage may be an option (especially for first-time borrowers), as this type allows a second party (typically a parent) to help the applicant buy a home without featuring on the title deeds. The additional security of extra capital and/or good credit rating could make it easier to get accepted.

How to improve your credit rating

It’s always a good idea to get your credit history into the best possible shape before you start applying, and these tips will help you do that.

1. Check all of your credit reports

Many providers will base your credit history on data from one or more of the UK’s three main credit reference agencies: Experian, Equifax and Callcredit.

It’s a good idea to check your report with each of these agencies to make sure it’s up-to-date. It’s important to scrutinise your files and challenge anything that might be inaccurate and dispute it if so, for example:

  • Outdated bills
  • Wrong address
  • Missing electoral register information
  • An outdated financial association (such a family member/partner)
  • Bank/credit accounts no longer in use

Also, keep in mind that not all of the agencies store the same data on you, and not every provider checks the same one. Therefore, just because one agency lists credit issues against your name, that doesn’t mean finding a favourable deal is impossible.

2. Be an active borrower

There are steps that you can take to make sure you have at least some borrowing on your credit history. There are adverse-specific credit cards available on the market to help. If you spend on a credit card and repay the balance in full each month, this will help prove that you can borrow and live within your means. Your credit will likely improve in a matter of months.

Can I get a mortgage with a low credit score?

Yes. While there isn’t one universal credit score, some providers will run a credit check and score you based on how well you meet their lending requirements. For low credit lending, some may have more lenient requirements, while others will base their decision on an underwriter’s approval without focusing too much on your credit report.

Your credit score is based on data from the UK’s three main credit reference agencies:

  • Experian – score out of 900, a good score is 700+ and 800+ is considered excellent
  • Equifax – score out of 700, anything above 475 is considered excellent
  • Callcredit – score out of 700 and then assign you a rating between 1 and 5 (1 being the lowest and 5 is outstanding)

Most firms who have an appetite for adverse credit are more concerned with the substance of your credit history and the overall strength of your case, so even if one of the credit reference agencies is giving you a very low score, that doesn’t necessarily mean you can’t get approved.

Remember, these agencies only see your credit history, they don’t have access to things like your income, which lenders will always look at when they assess your application.

Some mortgage companies will lend up to 95%, meaning you’d only require a 5% deposit, but you would need to meet other strict criteria. For example, lots of first-time buyers can have low credit scores because they’ve never had credit before and yet it’s still possible to get 95% loans. However, this is based purely on a low credit score, not necessarily because of bad credit on your history.

Some of the expert brokers we work with have helped clients with close to zero credit scores. Each specialist provider has different criteria and affordability requirements so to find out what sort of terms you might be able to get your best bet is to talk to a specialist whole-of-market broker. They will be able to advise you about what sort of term you might qualify for, even if you have a low credit score or poor credit history.

How much deposit do I need?

The minimum deposit requirement for a residential property in the UK is 5% or 15% for a buy-to-let, but if you have adverse credit, some providers will only offer you a mortgage if you put down more deposit, depending on the age and severity of the issue.

For example, those with a repossession on their credit file may be able to get a property loan from specialist firms within 1–3 years if they put down a 25% deposit.

Those with an individual voluntary arrangement (IVA) will need between 10-25% deposit, depending on how long is left to run on the debt, and those with a bankruptcy will need between 15-25% in the first three years.

5 - 10% deposit

With the help of a specialist broker who has access to every provider, it may be possible to get an LTV (loan-to-value) between 90 and 95% with minor bad credit, as long as you meet the provider’s other eligibility requirements.

However, you might struggle to get a loan with severe adverse, such as bankruptcy or repossession, history as these issues usually call for a larger deposit amount to offset the risk, especially if they’re less than three years old.

That isn’t to say it’s impossible to get a great loan-to-value with these issues against your name, but specialist advice will be essential.

You might struggle more if you have severe adverse, such as a recent bankruptcy, repossession or IVA. The specialist banks and other niche agencies who offer products to borrowers with these credit issues usually need around 25% deposit, if the credit problem is less than three years old.

50% deposit

It may be possible to find a provider willing to offer you a 50% loan-to-value with bad credit, as a deposit this substantial will offset the risk involved in the deal.

You will still need to pass all of the standard eligibility and affordability checks, but a deposit of this size will certainly help your cause.

100% mortgage / no deposit

This will prove difficult as 100% mortgages are not typically offered to customers with bad credit, or anyone else, for that matter. One of the only ways to get a residential loan with no deposit whatsoever is by having a family member or close friend act as a guarantor.

With a bad credit guarantor mortgage (also known as bad credit family springboard products), the lender will secure the loan against a property your guarantor owns or against their savings, as this security can serve as an alternative to a deposit.

The process for securing this loan with bad credit is the same as applying for any other kind of property loan under these circumstances. If a provider considers you too high risk due to your adverse, having a guarantor is unlikely to change their mind on that.

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 amount you’re offered. As a result, LTVs, income requirements and overall fees and costs tend to be offered on a ‘case-by-case’ basis.

Borrowing a deposit

Another option might be to borrow a deposit. However, you should be aware that many providers will frown upon customers using personal loans to cover the deposit and going down this path could jeopardise your application.

A more viable option might be to borrow the funds from your family. Gifted deposits are viewed more favourably, as long as the borrower is under no legal obligation to repay the money.

Other types of bad credit mortgages

In addition to lenders who specialise in standard bad credit customers, the brokers we work with also have access to adverse credit providers who welcome customers who fall into all kinds of other niches too, such as...

  • Expats
  • Second home buyers
  • Secured loan customers
  • Those in the market for large loans
  • And many other niches

Expats

Bad credit is a common issue for expatriates since living abroad means that lenders might not be able to trace any credit history. Anyone who falls into this category can be considered a larger risk in the eyes of some providers, and any additional adverse that might be on their credit history only ramps this risk up further. 

If you are living abroad for more than 3-6 months a year, then it’s likely you’ll be considered an expat, and therefore only eligible with expat providers. If your property is abroad and you are in the UK, then you’ll only be eligible with overseas/international agencies, and the info in this article is more than likely not applicable. There are, however, specialist lenders who deal with expat borrowers every day.

Are there low credit mortgage lenders for secured loans?

Yes, there are. Secured loans allow you to borrow money by using any available equity in your home (e.g. what percentage of your home you own outright). Because this then acts as collateral against your new loan, your credit issues may be classed as less of a problem by providers, so they could accept more severe and recent issues.

However, some providers may impose minimum salary 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 the size of the loan offered 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 home loan on a property valued at £100,000 would have an LTV ratio of 95%.

Second charge loan

A second charge loan (or a homeowner loan) is secured against a property you own, which basically functions as a second mortgage.

They’re available to customers with credit problems (as long as they pass the eligibility checks) and might be a viable option if you need funds for consolidating outstanding debts, house improvements or any other legal purpose, and have been turned down for remortgage deals.

Loan-to-value ratios and affordability can be more flexible on second charge agreements compared to first charge ones. It might even be possible to borrow up to x10 your earnings, and adverse credit is typically less of an issue than with primary finance. 

How do I get a mortgage with bad credit?

Here are some steps you can take:

  1. Get your credit reports
    The should be your first port of call, as checking which credit issues are showing up on your Experian, Equifax and Callcredit reports will give you a good idea of the mortgage providers you’re able to approach. They'll show your past loans, credit cards, overdrafts and even some utility bills. Remember, all three files can differ in terms of what they include, so it may be possible to find a favourable deal even if one or more of the agencies reports issues. By obtaining data from the three agencies, you can also make sure they’re up-to-date and challenge any potential mistakes.
  2. Raise as much deposit as possible and carry out credit repair
    Next, you should optimise your credit rating in preparation for your application, to minimise any risk your adverse might create. See the section titled ‘How to improve your credit rating for a mortgage’ for tips on how to do this. It may also be a good idea to raise as much extra deposit as you can at this stage, because putting down extra can also offset some of the risk involved in the deal.
  3. Avoid multiple searches
    Making multiple applications online or approaching a mainstream bank for a bad credit loan comes with the risk of being turned away. This is because not all customers with adverse are catered for, and having a number of ‘hard’ credit searches on your credit profile can further jeopardise your chances of getting approved.
  4. Find a whole-of-market broker
    The best way for someone with a poor credit history to get a loan  is through a broker with access to the whole market. That way, you can rest assured that the most favourable deals you’re eligible for will be within reach. Here’s what you should look for in a broker…

  • Whole of market & independent
  • Reasonable and fair fee structure – they should only bill you 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

The advisors we work with have been hand-picked to ensure they have all of the above qualities, and they have a strong track record of finding the best deals for people with poor credit history.

How to apply

As we mentioned above, the best way to apply is through a whole-of-market broker. This way you can be sure you have access to all of the best deals you’re eligible for.

Fees and charges

Typical charges may include…

  • Arrangement fees
  • Booking fees
  • Valuation fees
  • Legal fees
  • Stamp Duty
  • Early repayment charges and exit fees

You should note that you may not have to pay all of the above, as some lenders offer inclusive deals and things like Stamp Duty may not be payable in certain scenarios.

Bad credit borrowers should also bear in mind that the additional fees they’re asked to pay might be somewhat higher than a customer with pristine credit, but that doesn’t mean finding a favourable deal is impossible.

Frequently asked questions

Here you will find additional information about how bad credit can affect an application, based on the questions we’re most frequently asked.

Can I get a mortgage with no credit check?

Not exactly. While it’s impossible to get a property loan with no credit check in the UK, lenders aren’t generally interested in your credit ‘score’ – they’re interested in how your specific history fits in with their lending criteria.

In the UK, there is no set minimum credit score to qualify for a property loan, but if yours is particularly low, it may be possible to find a provider that ‘checks’ rather than ‘scores’.

Can I get a second mortgage with bad credit?

As long as you can pass the affordability checks, your application for a second loan is likely to be approved, even if you have poor credit. The application process will typically be similar to your first, though if you’re still paying off your first one, the main concern will be whether you can afford to meet both monthly payments at the same time.

Whether you qualify for one will depend on the severity of your credit problems, how long they’ve been on your file and how closely you meet the criteria. You’ll also need to meet the deposit requirements, and if you have poor credit, you may need to put down a larger deposit.

To ensure that you get the right deal, speak with an expert. The independent advisors we work with have whole-of-market access, meaning that they can find you the best deals even if you have bad credit.

Do I need to pass a credit check to get an agreement in principle approved?

No lender in the UK can offer a guaranteed mortgage approval if you have bad credit. All of them will perform some kind of credit check before offering you a decision in principle, and whether this will leave a mark on your report depends on the provider.

Some only perform a ‘soft’ search at this stage, while others perform a ‘hard’ credit check. You should avoid having too many hard searches in your credit history, where possible.

Can first-time buyers with a bad credit history get a mortgage?

Yes, though seeking specialist advice is highly advisable because first-time buyers could be considered higher risk to some providers, and your adverse won’t help with that.

Not all providers will allow you to use one of the government’s first-time buyer initiatives (such as Help to Buy). However, a more flexible firm might permit it, as long as you meet their other requirements.

Another thing to consider is that they tend to come with larger deposit requirements, which some first-time buyers might struggle to meet. The advisors we work with will help you find the best deals for a first-time buyer with your needs, circumstances and credit history.

Can I get more than one mortgage with bad credit?

It may be possible, as there are second loans aimed at bad credit customers.. However, it is often harder to get second and third homes though due to credit history

Even applicants with better credit will have to overcome factors including the loan-to-value ratio, income requirements and affordability assessments being more heavily scrutinised, so those with bad credit may struggle due to the extra financial pressure.

With the help of a whole-of-market broker, you may be able to find a lender with a high appetite for risk who’s willing to offer a deal to a second or third home buyer with poor credit.

How far back do mortgage lenders look at credit history?

Many will typically look at the last six years, as six years is the maximum amount of time most credit issues can remain on your file.

Even if you have active adverse within this time frame, it may still be possible to get a loan, depending on the severity of the issue and when it was registered.

Can I get an interest-only mortgage?

Yes, it may be possible if you can prove that you have a viable repayment vehicle to settle up at the end of term.

Residential interest-only mortgages are less common than capital repayment ones, and your bad credit will almost certainly make one harder to obtain by reducing the number of approachable lenders.

If you're interested in taking out an interest-only product, getting specialist advice before you dive in is essential.

Can I get a self-build mortgage?

It might prove difficult to get one of these products with bad credit, but by no means impossible.

Self-build mortgages are designed for those who have the expertise to build their own property (or at least oversee the construction of it). This is often professional builders, but these products are not exclusively aimed at tradesmen.

They are harder to secure than regular residential deals because the borrower must prove they are capable of seeing the project through and that the final build value will line up with the original valuation.

With this in mind, the level of risk is often higher compared with a conventional loan and, as a result, not all providers offer self-build loans. With bad credit against your name, the number of approachable providers will be even smaller.

That said, getting a self-build mortgage with poor credit isn’t out of the question if you have whole-of-market access.

Can I get a contractor mortgage with bad credit?

Possibly, yes. There are specialist mortgage providers who cater to the type of contractors listed below:

  • Self-employed contractors with an adequate history of accounts
  • Employed fixed/short-term contractors
  • Contractors/employees of umbrella companies
  • Zero hours contracts with 6-months' working history
  • Agency workers

Whether you’re offered a deal might come down to factors such as how long you’ve been employed in that capacity, whether your contract has been renewed before, as well as the severity of your adverse credit.

Can I port my mortgage?

Mortgage porting (transferring a debt from one property to another) is theoretically possible if you have bad credit.

The process isn’t too different to applying for a regular residential loan, so whether you’re successful will depend on the lender’s criteria,  the severity of your credit problems and how long they’ve been on your report.

Are there small loans for customers with bad credit?

Yes, the size of the loan you will get is all about affordability, offset against factors such as your credit rating. What’s ‘small’ to a borrower with high income might be substantial to somebody on a relatively low salary, but the amount a provider is willing to offer you will be capped based on multiples of your salary.

Can I get a commercial mortgage with bad credit?

Yes, this is certainly possible as commercial mortgage lenders operate on an unregulated basis, so they have a degree of flexibility when it comes to who they offer finance to and under what circumstances. A specialist provider could help you attain one.

You can find out more in our guide to bad credit commercial mortgages.

Looking for a mortgage with bad credit?

Save time and money with an expert mortgage broker who specialises in cases like yours

  • We've helped over 100,000 people get the right advice
  • Our form only takes a minute, then let us do the hard work
  • Save up to £400 per year with the right advice (source: FCA)
  • Over half of our customers had been declined elsewhere

Speak to an expert

A specialist bad credit mortgage broker will be able to help you find the deals available by carrying out a comparison across the entire market on your behalf. The brokers we work with are whole-of-market experts. With access to the whole market, they can narrow down all the deals that you qualify for based on your needs and financial situation.

Call 0808 189 2301 or make an enquiry for a free, no-obligation chat and we’ll match you with a broker experienced in helping other customers in similar circumstances.

Updated: 22nd January 2020
OnlineMortgageAdvisor 2020 ©

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 info 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.

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

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