Bad credit mortgages
How to get a mortgage or remortgage with bad credit, calculate how much you could borrow, and learn where to get free advice
In this guide:
A bit of context
The 2008 financial crisis led to banks adopting stricter lending criteria. With house prices rising, the gap between average incomes and property values increased. This made it harder for many people to borrow enough to buy a home.
Traditionally, you’d need a 10% deposit to get on the housing ladder, and lenders would lend around four times your annual income.(1)
Now that house prices have risen faster than most people’s salaries, that’s no longer the case in most parts of the UK. And getting a mortgage with poor credit is even more challenging.
What is a bad credit mortgage?
There’s no such thing as a ‘bad credit mortgage’. Lenders simply assess your credit score when you apply for one of their mortgage deals. Therefore, you could still be able to get a mortgage if you have bad credit (or ‘adverse credit’, as it’s sometimes called).
There are, however, specialist lenders that provide mortgages to those with bad credit. The interest rates on their mortgages tend to be higher as they consider borrowers with a poor credit history to be higher risk.
But it’s not all about the interest rate. There are fees and incentives to consider too. Read our True Cost guide to find out why a lower rate doesn’t always mean a more competitive deal.
Can I get a mortgage with bad credit?
Lenders conduct credit checks to assess the likelihood of a borrower being able to meet future mortgage payments.
If your mortgage application shows a poor credit history...
Some lenders won’t accept you
Some will ask you to provide a larger deposit
Some might only lend to you at higher interest rates.
The extent your mortgage application is affected by your credit rating depends on the credit issue that shows up on your credit report, the amount involved, and when it happened.
Some issues have more impact than others. A late mobile phone payment or a missed utility bill payment may not be viewed quite as seriously as a missed mortgage payment or going bankrupt, which would stay on your credit report for six years.
Some lenders will only accept applicants with bad credit that use a mortgage broker, so you may find more lenders are available to you using one. This includes specialist lenders who are more likely to accept you and offer you a more flexible deal, especially if you’ve faced illness, divorce, or other adversities.
How can I get a mortgage with bad credit?
Getting a mortgage with bad credit can be challenging, so it’s worth checking your credit report so that you can address any issues before applying.
Building a strong credit history can improve your chances of securing the most competitive mortgage deal.
Bear in mind that they may ask you to sign up for a free 30-day trial to access your report, so remember to cancel it within the promotional time period if you don’t want to be subscribed to their monthly paid plan.
Honesty is the best policy
Talking about personal finances can sometimes feel difficult or uncomfortable, particularly if you’re applying for a mortgage with a partner for the first time. But it's important to be aware and honest about any issues upfront to avoid any surprises later on.
It’s particularly important to be honest with your mortgage broker. This will ensure they approach the most suitable lenders and provide the most suitable advice for your circumstances.
How do I check my credit rating?
The main credit reference agencies let you check your score for free online. It doesn’t take long to find out what your score is, and they’ll also provide a report flagging any issues such as records of missed payments.
If you suspect any details are incorrect or are the result of fraud, you can inform the credit agency and provide them with extra information. They’ll then look into this for you, and could remove the offending detail from your record. This process can take anywhere from days to months, so it’s worth looking at your report sooner than later.
How to improve your credit score
Struggling to get a mortgage due to a poor credit score? Here are some things you can do to improve your rating.
1. Stop applying for credit
The lender will usually check your credit score when you apply for a loan. Lots of credit checks over a short period can negatively impact your credit score, so wait before applying for credit again, and take other measures to improve your credit score first.
2. Check your own credit score
You can get a hard copy of your credit report for a small fee (no more than £2) or you may be able to get an online version for free.
As well as your credit score, your credit report should show you the things that are having an impact on your score, and may offer some tips for improving it.
If you think you’ve spotted a mistake on your credit report, let the rating agency know so they can investigate and amend your record if they agree that something’s amiss.
3. Pay off debts
It’s easier said than done, but try to pay down your debt as much as possible. Although it’s always a good idea to have some savings in case an unexpected cost comes up, using your savings to pay off debt may be a good move.
Setting up direct debits to avoid missing future instalments is wise as missing a payment is bad news for credit scores.
4. Make sure you’re on the electoral roll
It’s important that you’re registered to vote at your current address as this can impact your credit score. It’s also used by lenders to confirm your name and address. You can register to vote online. If you’re not eligible to vote (because you’re not a British citizen, for example) you can send proof of address documents to the credit rating agencies as an alternative way of confirming your address.
5. Review your accounts
Having lots of open accounts (several credit cards, for example) can negatively impact your score, as it makes it look like you have lots of credit available. However, if closing some accounts means maxing out your remaining credit, this could also have a negative impact.
Review your situation carefully and decide whether it makes sense to close some accounts that you don’t use. If you do this, bear in mind that you need to contact the lenders to close the accounts rather than just cutting up your cards!
6. Use credit wisely
Lenders look at your credit rating to make sure you have a history of managing debt responsibly, which means they may turn you down if you don’t have much of a credit history.
As a result, using small amounts of credit like a planned overdraft or a credit card can help to build your credit rating and improve your chances of being accepted for bigger loans in the future.
However, it’s very important that you manage this debt sensibly and make your repayments on time, otherwise you could end up paying high interest rates and doing more damage to your credit rating than good.
If you’re struggling to get accepted for a credit card, you could try applying for a special ‘credit builder’ card, but you should repay in full each month as the interest rates for these cards are usually very high.
7. Be consistent
Using different phone numbers and different job titles across credit applications can mean that you fail fraud checks, so try to be as consistent as possible. Moving house often or changing banks a lot can also take a toll on your credit score.
8. Wait it out
Serious financial issues like CCJs and loan defaults will stay on your report for six years. If you’re nearing the end of that period, it’s probably best to wait before applying for a mortgage. If you had a good reason for defaulting on a loan - for example you were seriously ill or lost your job - you can ask the credit agency to add a note to your file.
Which lenders will consider people with bad credit?
Specialist lenders like Pepper Home Loans or Precise Mortgages currently provide mortgages for those with poor credit. Some mortgage brokers also focus on getting mortgages for bad credit applicants.
However, you don't always need to go to a specialist lender to get a mortgage if you have bad credit. Many high street banks and building societies may be able to help, depending on what the adverse is related to.
How much can I borrow if I have bad credit?
Lenders conduct affordability assessments, checking income and outgoings to assess your ability to meet your monthly payments, and what impact future interest rate rises might have on your ability to repay.
If you’re accepted for a mortgage with a bad credit rating, lending amounts are determined in the same way as a standard mortgage - by your individual or joint income multiplied by an agreed number which varies between lenders (often up to 4.5), and by taking into consideration any debts or commitments you hold.
Should I use a mortgage broker?
A mortgage broker understands the market and the criteria to meet to get a mortgage with a poor credit score.
As a mortgage applicant, you should consider using a mortgage broker if you’re having difficulty getting a mortgage. They’ll consider a wider range of options than if you went directly to a lender, increasing your chances of getting the right deal for you.
Online mortgage brokers such as Trussle can conveniently manage your entire application online, saving you from lengthy paperwork and having to take time out to visit an office.
Watch out for fees
This area of the market is unfortunately unfairly targeted by some brokers who charge extra fees to help those with bad credit.
A quick Google search will find some brokers charging fees of up to £1,995, or a staggering 10% of the loan amount.(2)
At Trussle, we don’t believe you should have to pay for advice to own your own home - no matter your credit history. That’s why our service is completely free.
Can Trussle help you if you have bad credit?
Because we’re able to search for mortgages from a wide range of lenders, we can often find mortgages for those who’ve been rejected for a mortgage previously.
At the moment we can generally help those who fulfil the following criteria:
In the last 6 years you haven’t:
had any late payments, defaults, or County Court Judgements (CCJs) on your mortgage
had your home repossessed
had an Individual Voluntary Agreement (IVA) or Debt Management Plan (unless it was discharged more than three years ago, and you have a mortgage deposit of at least 20%)
declared bankruptcy (unless the bankruptcy was discharged more than three years ago, and you have a mortgage deposit of at least 20%)
And in the last 3 years you haven’t:
had any defaults or CCJs on an unsecured loan (unless they’re less than £500 and have been settled, and you have a mortgage deposit of at least 15%)
If you use Trussle to apply for a mortgage, your credit score will only be checked once your application has been submitted to the lender. We’ll only submit your application if we think it has a good chance of being accepted, and we’ll always ask you before checking your credit score.
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