Bad Credit Mortgages

‘Bad credit’ is a phrase often used to mean you’ve got a low credit score. Your credit score is a number between 0-999, depending on which credit reference agency you use. The higher it is, the better your credit score is, the lower it is, the worse your score is. 

A low credit score means you’ve had credit issues in the past that have negatively affected your score. You can have a low credit score for loads of reasons. For example, missing a payment or paying it late. 

There are three main credit referencing agencies in the UK – Experian, Equifax and TransUnion. 

Each of these agencies can give you a credit report, but they may all show you different information. That’s why we recommend using checkmyfile because that gives you a report that shows the information from all three credit referencing agencies alongside each other. It’s the most thorough way to see what’s in your credit file. 

Each agency also has its own score system. For example: 

Experian gives a credit score out of 999. They class a 'good' credit score to be anywhere between 881 and 960. And a  'fair' or ‘average’ score is between 721 and 880.

Equifax gives a credit score out of 700. They class a ‘good’ credit score as anything that's 420 or above.

TransUnion gives a credit score out of 710.  Scores between 604-627 are considered ‘good’ and scores of 628 and above are considered ‘excellent’.

Yes, you absolutely can. When you make an application, lenders run a credit check against your name to decide your level of ‘risk’, which means the likelihood of you making your repayments every month.

If they decide you’re a ‘high-risk’ borrower because of bad credit, you could:

• Have your application rejected

• Need to put down a higher deposit (due to higher loan-to-value (LTV) being unavailable)

• Only have access to deals with a higher interest rate

But by working with a specialist broker who has proven experience working with people who have credit issues, you can find a lender who is more likely to approve your application. 

Some bad credit issues will have a bigger impact on your chances of getting approved than others. For example, a late payment to your mobile phone company won’t affect you as much as defaulting on a loan or going bankrupt.

You can end up with a bad credit history for many different reasons. It could be a missed or late credit card or loan repayment, a payday loan or applying for multiple credit cards. Sometimes these things can result in CCJs, IVAs, a debt management plan or even bankruptcy. All of these can affect your credit score. Having a bad credit history can make it more difficult to get approved for a mortgage, but it’s still possible. 

There isn’t a dedicated bad credit mortgage product – but there are specialist lenders who have more experience giving mortgages to people with bad credit than others. You just need the right specialist mortgage broker to get you the right lender.

The kind of deposit you’ll need will depend on your individual situation and the kind of bad credit you have. For example, if you’ve had a repossession in the last few years, you could be asked to put down a deposit of around 25-30%, depending on the details of your repossession. If your bad credit is due to something like being on an individual voluntary agreement (IVA), you could be asked to put a deposit down of around 15-25%. 

In the UK, the minimum deposit you can put down is 5% of your property’s value. If a lender considers you ‘risky’ – for example, you have a bad credit rating – they might want you to put down a higher deposit, but it will depend on your individual circumstances. 

Higher deposits often signal to a lender that you’re good for the money and it makes them a lot more likely to lend to you.

A higher deposit also means you can reduce your monthly repayments. So if you can afford a higher deposit, it’s often a benefit that will improve your chance of being accepted for a mortgage.

A poor credit score can mean that there are fewer mortgage lenders available to you. Always be prepared to discuss and explain your credit history with your mortgage broker who’ll explain the situation to lenders when they’re making an application for you. A lot of mainstream lenders don’t accept people with bad credit, but it just means you need to find the right, specialist lender instead. 

Depending on your specific situation, you might find that your interest rate is higher and that you’re asked to put down a larger deposit when buying your home. But speaking to a specialist mortgage broker who can find you a specialist lender means you’re likely to find the right mortgage for you.

Lenders all have different lending criteria. The other factors a lender will look at to decide if they will consider giving you a mortgage are things like:

• How old you are: Some lenders have age caps on who they’re willing to lend to. They might not want to lend to people who are young, or older. Some lenders don’t have any age caps as long as you can prove you’re able to pay the mortgage. 

• Your income and outgoings: Most lenders will want to know what your income is. They want to know you have a stable income so they can decide how much they’re willing to lend to you. 

The size of your deposit: If you have bad credit, most lenders will want to see a larger deposit on the property. That’s because they’ll want to reduce the perceived ‘risk’ of lending to you. A larger deposit means less risk to them.

Whether or not you have bad credit, your salary or earnings will always be a factor when you’re applying for a mortgage. That’s because all lenders will have criteria for checking you can afford the property you’re wanting to buy. 

Most mortgage lenders tend to not offer anything much higher than 4.5x your annual salary or income, and this will depend on your own affordability and individual circumstances. And they tend to not offer anything much higher than 4.5x your income or salary.

Usually, having a larger income will mean you will have access to more mortgage options, but if you have bad credit and you want the highest loan possible, you’ll have to find a lender who is willing to give you the highest multiple of your income. 

Having a low income and bad credit can make it seem impossible to get a mortgage, but there's still plenty of options open to you. You could get a guarantor mortgage, take a look at the government’s shared ownership scheme or joint ownership with someone else.

Sadly not. If you have a bad credit history, many lenders just aren’t set up to deal with bad credit mortgages. So some just won’t consider you. But there are plenty of lenders who will consider you. Some lenders are specialists, and they don’t offer mortgages directly to borrowers. Some mainstream lenders like highstreet banks will consider you, but not all of them. 

Automated online mortgage advisors will usually decline you as soon as they detect your bad credit. So it’s always best to speak to a real person. 

Working with a specialist bad credit mortgage broker is always a good idea because they’ll do two things: they’ll look at your unique situation in detail to understand your bad credit history and they’ll know the specialist lenders who will consider your application.

There’s plenty of lenders who’ll consider you if you have bad credit. It’s a myth that you can’t get a mortgage with bad credit. All elders will want to know the details of your credit history – the reason for your bad credit, the age of the issues and the severity. They’ll use that information to decide what kind of mortgage rates to offer you. 

We work with specialist lenders who’ll consider you if you have bad credit. Some you’ll know, some you won’t.

There isn’t a specific score you need to be able to get a mortgage. That’s because you have a different credit score depending on where you check it. For example, if you check your score with Experian, your score will be out of 999, but if you check with Equifax, it’ll be out of 700. 

Read more in our Guide: What credit score do I need to get a mortgage?

When a lender looks at your credit history, they’ll decide based on the information they have what kind of mortgage rate they want to offer you. They’ll decide the rate based on how likely they think you are to pay late or miss payments. 

If they think you’re likely to miss payments or pay late, they’re likely to put you on a higher interest rate (APR) and this will increase the cost of your monthly mortgage repayments. 

You can use our repayments calculator to see how a higher interest rate could change how much your mortgage costs each month.

A bad credit score depends on which credit reference agency you check your score with. A bad credit score is classed as being in the category ‘Very Poor’, or ‘Poor’. But scores and categories differ from credit agency to credit agency. Use the table below to see how they can be different depending on which agency you use. 

Read our Guide What is a bad credit score? for lots of information on bad credit scores, good credit scores and everything in between.

To get a thorough and full report you should use checkmyfile. 

There are three main credit reference agencies in the UK. Each of these major credit checkers will show you slightly different information. That’s because it depends on who they have affiliations with. 

1. Experian

2. Equifax

3. TransUnion

For example, if you have a utility account with British Gas and miss a payment, British Gas might have an affiliation with Experian but not TransUnion. So your credit score would be lower when you check on Experian than if you checked on TransUnion. 

We partner with checkmyfile because it’s the only credit report that shows you all three of these credit checkers in one report. So you get a complete view of your entire credit history.

Sign up by following this link to checkmyfile and get a 30 day free trial so you can download the most thorough credit check available to you, for free.

If you notice anything that looks to be inaccurate or that you feel should be disputed, this allows you to put things right. 

It’s a good idea to get a copy of your credit before you make a mortgage application, or get a Decision in Principle (DIP). Your broker will chat you through your report and explain what will help or hinder your mortgage application and give you your options.

Here are some top tips for improving your score:

• Get a full credit check from checkmyfile and go through it with your mortgage broker. They’ll help you understand your credit history and advise you on what will help your individual situation. 

• Pay off any outstanding debt in full (including credit cards, loans, and similar). If that’s not possible, just pay as much as you can.

• Make sure you’re listed on the electoral roll.

• Consider reviewing the number of credit cards and accounts you’ve got open. Even if they don’t have outstanding balances. 

• Use your available credit in a sensible way. For example, make small purchases on your credit card and pay off the balance in full each month. That can help build your score because it shows that you’re making repayments on time.

• Another option is to wait until bad credit issues like CCJS or IVAs are removed from your file.

It’s absolutely possible to get a mortgage with a score of 550. You can get a mortgage even with a very low credit score. The lower your score, the less options you could have, but it’s still possible to get a mortgage. 

Read more in our Guide: What credit score do I need to get a mortgage?