Can I get a mortgage if I have bad credit?

illustration of Can I get a mortgage if I have bad credit?

Lenders will carry out credit checks when you apply for a mortgage. Credit issues like CCJs and defaults will carry more weight on your credit history than others, like a missed or late mortgage payment. Also, the circumstances around your credit issues will affect how seriously mortgage lenders take a credit issue. For example, they’ll look at the amount of money involved and also how long ago it was. 

If you want to find out if you have a bad credit score, read our Guide on what is a bad credit score. If you have bad credit and want to find out how much you can borrow, then use our Bad Credit Calculator.

In this Guide, you’ll find out information about CCJs and defaults and what impacts they have when you’re applying for a mortgage. You’ll also find out about Individual voluntary arrangements (IVAs) and if they can be removed from your credit report. There’s also links to other helpful guides and resources about how your bad credit can affect your mortgage application. 

Can I get a mortgage if I have had a default?

Yes, you can get a mortgage with a default. Most lenders prefer applicants with cleaner credit. But there’s plenty of other mortgage lenders who’ll approve applicants with defaults.

Often, the lenders who will be most appropriate for you if you have credit issues like a default are specialist lenders. Most specialist lenders are only available through specialist brokers. For example, Bluestone Mortgages help people with bad credit get a mortgage and can be more flexible with their lending criteria because they consider applicants on a case-by-case basis. 

Vida Home Loans and Kensington are flexible lenders who also help people with defaults get mortgages. Kensington accepts those with defaults older than 36 months. Vida Home Loans will consider applicants with different levels of defaults.

What is a default?

A default on your credit report can be a defaulted bill or a defaulted payment. Your account goes into ‘default when you don’t pay a bill. Your account going into default happens when you agree to pay a certain amount of money for something, for example, a phone bill or energy bill, and then you don’t pay it.

When a lender sends you a notification to catch up with your payments, that is a default notice. If you don’t catch up with your payments then your account will be closed. A default notice is your chance to stop the default from happening altogether. The best thing to do is to pay the amount owed immediately.  

If you want to know the definition of other mortgage terms, then check out our Glossary.

How long does a default stay on your credit report?  

A default will stay on your credit report for six years, even if you’ve paid off your debt in full. After six years, your default will disappear and won’t show up on your credit file – even if you haven’t paid it off in full.

Having a default on your credit file can make it more challenging to get a mortgage. A default on your credit file makes lenders think there might be a greater risk of you not paying your mortgage repayments.

Can you remove a default?

If you don’t want to wait six years for your default to be removed from your credit file, then it might be possible to have your default removed. However, a default can only be removed from your credit file by the lender. 

If you check your credit score and see there’s a default that should not be there, then you should contact the company that the default is registered with and ask for it to be removed. For example, if you can see that you have a default registered by Vodafone, get in touch with them.

If you don’t have any luck with the company, you can contact your credit agency, and explain why the mark is incorrect and why it needs to be changed. The agency will then contact the lender and look into the default and see if it should be on your credit file. When your default is being looked into, a notice will be made alongside the default to let other lenders know its being looked into.

If the lender agrees with you that the default is incorrect, it will be taken off your credit file. If the lender doesn’t agree, then you can take the complaint directly to the lender. If after eight weeks, the lender still doesn’t agree then you can contact the Financial Ombudsman.

How does a default affect your credit rating?

A default bill does negatively affect your credit score, but it doesn’t mean you’ll always be refused credit. A default can set your credit score back up to around 350 points but this effect lessens over time. For example, a default that is more than 2 years old will have a negative effect of around 250 points. Whereas a default over 4 years old will make your credit score drop by around 200 points. The longer you have the default, the less it’ll affect your credit score. 

Some mortgage lenders will reject people with defaults even if they’ve been repaid. Other mortgage lenders may offer reasonable interest rates if your defaults are old and have been settled for a while. All lenders have their own lending criteria, some have a blanket policy not to lend to people with any kind of adverse credit, whereas others are way more lenient. 

If you’ve been turned down for a mortgage because of having a default, then you’re in the right place. We’re experts in bad credit mortgages so get in touch. Or check out our Mortgages with a Default page for more information on your options.

How to improve your credit score after getting a default?

Your credit score will improve gradually over time as a default gets older.

Here are five things you can do to improve your credit score after getting a default:

  1. Pay your bills on time every month. Setting up a direct debit can help you with this as you don’t have to remember to pay the bills yourself, the money will automatically be taken from your account.

  2. Check your credit report and score regularly. You won’t know if your credit is improving if you don’t monitor your credit report. 

  3. Pay off your debts. It’s better if you can pay off outstanding debts in full, but if not do what you can.

  4. Make sure you’re on the electoral roll. Being on the electoral roll makes you easily identifiable and therefore you look more trustworthy to lenders.

  5. Use your credit responsibly. It will look good to lenders if you make small payments and pay the balance off each month. Using your credit sparingly and paying off the balance shows you can make repayments on time.

Read our Guide on how to check your credit report to make sure that your credit report is correct and up to date. 

How long does a CCJ stay on my credit file?

A CCJ or a County Court Judgement will stay on your credit report for 6 years, but your credit report will show that you’ve paid the debt. A CCJ is a legal decision handed down by the County Court. A CCJ isn’t a criminal offence but it happens when you owe somebody money and get the courts involved.

CCJs can affect your credit rating and make it harder for you to get credit. Having a CCJ can make it harder to take out a mobile phone contract, loan and credit cards. It’s always a good idea to sort out a CCJ immediately. For example, if you pay the CCJ off in full within a month from receiving it, you can apply to the court to have your entry in the Register of Judgements removed. It’s easier to be approved for credit or a mortgage if you don’t have a CCJ on your file. 

What is a CCJ?

A CCJ stands for County Court Judgement. A CCJ happens when you owe someone money and they take court action against you. You’ll get a CCJ when the court confirms that you owe money. To find out the meaning of more mortgage and finance related terms, then check out our Glossary.

Can I remove a CCJ from my credit history?

In some circumstances, yes, you can. If you think a CCJ has been registered on your account by mistake, or unfairly, contact the three credit reference agencies; Experian, Equifax and TransUnion to remove a CCJ from your credit profile. 

You need to be able to prove that:

  • You paid the full amount within one month of the CCJ being issued

  • It’s been six years since you received the CCJ

  •  An insurance company was responsible for the debt

  • You disputed the CCJ and it was cancelled or ‘set aside’ by the court

Can I get a mortgage with a CCJ? 

Yes, you can get a mortgage with a CCJ. Applying for a mortgage with a CCJ can seem difficult but it’s all about finding the right specialist lender. Some lenders will consider and accept you even if you have a CCJ. When your CCJ has been paid in full AKA ‘satisfied’ lenders will offer you a mortgage but there are some who will consider you even if you still have money left to repay.

Getting approved with a CCJ will depend on a few things. A recent CCJ can make a mortgage application harder. For example, if the CCJ was issued five years ago that will impact the lender’s decision less than one served two weeks ago. Having multiple CCJs can also make it harder to get a mortgage. Most lenders won’t want to see more than two CCJs in the last two years. The amount of money the CCJ was over will also be a factor. The lower the value of your CCJ, the less impact it will have on your mortgage application. 

Your loan-to-value (LTV) ratio will differ between lenders. If a CCJ is just one of many bad credit issues you have, it can impact the lender’s decision. Check out our Mortgage with A CCJ Guide to find out the options available to you.

A CCJ will make you look ‘high-risk’ to a lender because it suggests to them you haven’t been able to keep up with payments. A CCJ can mean you might not get the most competitive rates and you can’t borrow as much which can mean needing to put a bigger deposit on your home.

Working with a specialist broker is a great idea if you have a CCJ because they’ll know what options are available to you. Get in touch with us, and we’ll match you to the perfect specialist broker – someone who has plenty of experience in getting mortgages for people with CCJs.

Can I remove an IVA from my credit report? 

Yes, you can ask for an IVA to be removed or you can wait for it to be removed. After six years, your IVA will be removed from your credit report. You can ask for it to be removed by contacting your credit reference agency and explaining why it is inaccurate. 

What is an IVA?

IVA stands for ‘Individual Voluntary Arrangement’. An IVA is a legally binding agreement between you and your creditors (the people you owe money to). IVAs are put in place so you can repay your debts over an agreed period. IVAs usually last between 5 and 6 years. You can get an IVA for lots of different reasons. The most common reasons are:

  • Bank overdrafts

  • Personal loans

  • Credit cards and store cards

  • Catalogue debts

  • Council tax arrears

  • Hire purchase debts

  • Funds owed to HMRC

An insolvency practitioner will arrange your IVA. When your IVA is arranged, then you and your creditors will agree on a payment plan. The payment plan will take into consideration your current financial situation and how much you can afford to pay. IVAs can be very useful as they stop you from falling into more debt.

Repayments under an IVA tend to be made monthly but can also be paid off in a lump sum. Once the agreement is over, you will no longer owe any more money to your creditors. The benefits An IVA will show up on your credit file, and will negatively affect your credit score. Check out our Mortgages with an IVA Guide, to understand the options available to you.

How long will an IVA stay on my credit report?

When the IVA is completed, your details will be removed from the Individual Insolvency Register after three months. Details of the IVA will be held onto your credit file for six years from the date the IVA was issued. So, even when your IVA is completed it’ll still be visible to lenders on your credit file.

How to remove an IVA from my credit report?

An IVA will be added, marked ‘completed’ and removed without you needing to do anything. If you think the record is inaccurate then you can ask your credit reference agency to update it. You will need to provide evidence such as a letter from your insolvency practitioner.

You can also ask for a note to be added onto your report, explaining to lenders why you got into debt and needed to set up an IVA. For example, you could add a note saying you were redundant or suffered from a long-term illness.

How long does it take until you can get a mortgage with an IVA?

Most lenders will want your IVA to have left your credit file before they offer you a mortgage. That will happen after six years of the start date of the IVA. Specialist lenders are more likely to offer you a mortgage whilst your IVA is still on your credit file. 

Specialist lenders will prefer the IVA not to be recent, and the less recent the better your chances of securing a mortgage are. We can find a specialist lender who won’t be put off by your IVA, get in touch with us to find out your options.

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