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Bad credit mortgages

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Can you get a mortgage with bad credit?

Getting a mortgage with bad credit is possible, but it’s much harder than if you have a perfect credit history. When you apply for a mortgage, lenders assess your credit score and use your credit history to determine your ability to make repayments.

Each lender will have its own criteria for what it considers to be bad or adverse credit. Credit problems could include anything from a missed bill payment to having your home repossessed.

Relatively minor credit problems like a single late credit card payment won’t stop you from getting a mortgage. But if you've been declared bankrupt or had a county court judgement (CCJ) in the last six years, you may struggle to find a mortgage lender who'll accept you.

There are lenders who might consider people who have been rejected for mortgages elsewhere. But you won’t have as much choice as those with no previous credit problems.

That means you’ll probably have to pay a higher interest rate and fees.

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What issues can impact my credit?

  1. Late or missed payments on credit arrangements
  2. Mortgage arrears
  3. Previous repossessions
  4. Bankruptcy
  5. Had a county court judgement (CCJ) in the last six years
  6. Debt management plans or Individual voluntary arrangement (IVA)

Applying for a mortgage with credit problems

When you apply for a mortgage the lender will ask whether you’ve had past credit problems, including any defaulted credit card and loan payments, or CCJs.

If you have missed repayments on bills, credit cards or loans in in the past, you’re likely to be asked for extra evidence that you can afford to pay a mortgage now.

The lender might want to see more payslips and bank statements than it would if you had no past credit problems.

You’ll also need to provide everything you would for a standard mortgage application, which includes:

  • Details of your salary and any other income
  • Details your partner’s income, if you’re buying with someone else
  • How much deposit you have
  • Details of all your outgoings

How to get a mortgage with bad credit

There are some steps you can take in the months before you apply for a new mortgage to increase your chances of being accepted if you have bad credit.

Sort your finances

Postpone buying a home until you're in a stronger financial position.

In the meantime, build your credit rating back up by making repayments for bills and credit cards on time. And save more for your deposit.

This is not a short-term solution; it could take months or even years. However, it’ll give you access to more competitive mortgage rates in the future, which will save you money in the long run.

Check your credit record

You can use free services like Experian or Credit Karma to look at your credit report and see when you’ve missed payments or had CCJs.

These services will also show you a credit score, although this is just to give you a general idea of your creditworthiness. Each lender will score you differently against their own criteria.

Rebuild your credit score

Once you’ve assessed your credit problems, you can work on fixing them.

Anything from a single missed payment to bankruptcy can affect your ability to get a mortgage. You should start pushing up your credit score well in advance of a mortgage application by making all repayments for bills and credit on time.

One way to do this is with a credit builder credit card, but only once you feel able to handle the responsibility and repayments.

Save for a bigger deposit

Low-deposit mortgages often have tighter acceptance criteria. The higher the deposit that you have, the better the chances you have of finding a mortgage you're eligible for.

Lenders might ask that you have a larger deposit if you have bad credit – for example around 20-30%, instead of 5-10%.

That will mean that the mortgage you need is lower, at around 70-80% loan to value (LTV), which may be easier to access.

Accept help from family

If saving that larger deposit is a struggle, most lenders will accept a deposit if it's 'gifted' from a family member. This can't be a loan and you must be under no obligation to repay the money.

In the future you might find you’re in a position to repay the money. There's nothing stopping you from 'gifting' the money back to them then.

Borrow with a loved one

If you're unable to get a mortgage because of bad credit, it’s worth considering borrowing alongside a loved one.

In recent years joint borrower sole proprietor (JBSP) mortgages have become more common, effectively replacing guarantor mortgages.

As the name suggests, with a JBSP mortgage you take out a joint mortgage with someone else, perhaps a parent, with both of you responsible for making sure repayments are made. However, only one of you is named as the owner of the property.

JBSP mortgages have taken off since borrowers may be able to access bigger loans, or simply a mortgage in the first place, compared with borrowing alone.

There are important downsides to consider though; if you don’t make your repayments, then the lender can pursue your loved one for the money owed. They could even have their house repossessed if they can’t.

You and your joint borrower will be tied to each other financially. Any missed repayments in the future will affect both your credit ratings.

Even if you opt to borrow together, you’ll still need to be credit checked to get a mortgage. You could still be turned down due to a poor credit rating.

Speak to an advisor

A mortgage advisor will help you find the right product for your needs and help you with your application. They could help you to find a deal you’re likely to be accepted for with past credit issues.

Mortgage brokers have access to lenders and products that you cannot get as a direct borrower, with some specialist mortgage lenders specifically targeting borrowers with bad credit.

Should I apply for a mortgage with bad credit?

A mortgage lender will credit score you as part of the process of deciding whether to offer you a mortgage and defaults within the last six years will show up on your credit report.

Because of this, it’s best to wait for credit problems to drop from your credit file, all while making payment for other bills and finance on time to strengthen your credit score.

But that could take months or years. If you’d rather apply immediately, there are a few advantages and disadvantages.

Advantages


  • Quicker – If you find a mortgage now you won’t have to wait years before moving to your new home

Disadvantages


  • Bigger deposit needed – lenders might be unwilling to lend as much as they would if you had no past credit problems
  • Higher interest rates – you’ll have less choice of mortgages so interest rates might be higher
  • Broker fees – a mortgage broker will help you apply to lenders that are more likely to accept you. But you’ll pay for their services

What’s the lowest credit score for a mortgage?

There’s no cut-off credit score you need to achieve to get a mortgage. That’s because there’s no such thing as a single credit score that all lenders use. When you apply for a mortgage, the lender will look at your credit record and apply its own credit scoring.

But there are some things you can do to improve your credit score with all lenders:

  • Pay utility bills on time
  • Don’t miss any repayments for loans or credit cards
  • Pay off loans and credit cards if you can – Close down unused credit, for example a credit card you no longer use
  • Get on the electoral register

Bad credit mortgages FAQs

In 2021, the government launched the mortgage guarantee scheme aimed at helping buyers who have only 5-9% deposit.

Not all lenders use the scheme. That means you’ll have less to choose from which might make it harder to find a lender that’s both on the scheme and able to lend to people who’ve had credit problems.

But the lenders that are on the scheme use the same affordability and eligibility criteria as a standard mortgage, which means some might still consider you if you’ve had credit problems.

It’s possible to remortgage with bad credit, especially if your credit problems are quite minor, like a single late payment.

As with any other mortgage applicant, you won’t be eligible for the lower interest rates and fees will be higher.

Use a free online credit report service. You’ll have to provide details about your banking and credit accounts to access your report.

It's likely you'll have to wait until your bankruptcy is removed from your credit record, which will be six years from the date of your bankruptcy.

If you've fallen behind on mortgage payments, or even had a home repossessed, finding a mortgage again can be quite difficult. But it's not impossible.

You’ll have to rebuild your credit score by paying all bills on time. And you’ll probably need to use a mortgage adviser[1] to apply to a lender that might accept you – despite having a past repossession.

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Page last reviewed: 14 September 2023

Page reviewed by John Fitzsimons

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

PLEASE NOTE: THE FCA DOES NOT REGULATE MOST BUY TO LET MORTGAGES

[1]For online mortgage comparison and advice Gocompare.com introduces customers to Koodoo which is the trading name of Mortgage Power Limited who are authorised and regulated by the Financial Conduct Authority (FRN 845978). Gocompare.com’s relationship with Koodoo is limited to that of a business partnership, no common ownership or control exists between us. Please note, we cannot be held responsible for the content of external websites and by using the links stated to access these separate websites you will be subject to the terms of use applying to those sites.