But if one or both of you has bad credit, that doesn’t mean you can’t still find your dream home.
In this Guide, we’ll explain everything you need to know when applying for a joint mortgage with a bad credit score. We’ll explain how credit scores are calculated, what different lenders will be looking for in order to approve your application, and what you and your co-applicant can do to help make the process run more smoothly.
A credit score is a number that lenders use to gauge the overall health of your financial history. It represents factors like the number of open accounts you have, your total amount of debt, any late or missed payments, and county-court judgements (CCJs).
Lenders and banks use credit scores to judge how likely it is that you can repay loans on time. The definition of what constitutes a ‘bad’ credit score varies. But generally speaking if your score is less than 560, you may find it harder to get a mortgage application approved.
Here’s a table of how the three largest credit reference agencies in the UK categorise different levels of credit score:
Different credit reference agencies will each work out your credit score in their own way. This means that your score may go up or down depending on which agency you check with.
Some lenders will refuse a joint mortgage application if one or more parties have a bad credit score. But that doesn’t mean that all lenders will feel the same.
We work with a number of specialist mortgage brokers who will consider a wider view of your circumstances, not just one number on a computer screen.
Find out your credit score by reading our Guide: How To Check Your Credit Score.
It’s not just your credit score that matters. Any time you submit a joint mortgage application, the lender will consider the following information before they make their decision:
The total size of your deposit
This amount can be provided by one or more of the applicants, and would ideally be between 15-35% of the price of the property. Mortgage applications can still be approved with lower deposits, but higher ones will certainly increase your chances.
Whether or not the joint applicants are married
Traditionally, most mortgage brokers believe that married couples are more financially secure, and less likely to break up or require a mortgage transfer. More recently this idea is becoming less common, and there are some lenders who are perfectly happy to consider joint applications from unmarried couples, family-members, business partners, or even friends.
Whether you’re working, self-employed, temporarily employed, or unemployed
Your employment status is seen as a reflection of your financial stability. To find out how you can increase your chances of getting a mortgage if you are self-employed, read our Guide: The Self Employed Mortgage Guide.
Lenders will most likely assess the income of each individual applicant, rather than the combined total. In some cases, they may only be interested in the applicant with the lowest income, which can cause issues. If this has happened to you, you might instead consider a sole mortgage application for the person with the higher income. Or, you could consider getting the help of a guarantor.
The credit history of each applicant
A mortgage lender will always want to get a good overview of your credit history so they can assess how likely you are to make your monthly mortgage repayments. So they’ll always take a good look into the past six years of what’s in your credit file. If you want to see what’s in yours before they start looking, we recommend checkmyfile, because it’s the most thorough overview of your credit history available in the UK. Read our Guide to checkmyfile to understand how it can help your mortgage application.
As soon as the mortgage review process begins, any potential lender will conduct a credit search on all applicants.
If they find any of the above after conducting the search, it will make it more difficult to have your application approved — even if one of the joint applicants still has a good credit score.
For this reason, it’s always a good idea to let your mortgage broker know anything you’re aware of in your credit history that could affect your mortgage application. If you let them know, they can make sure you have the chance to properly discuss your options.
If the issues are considerably older, perhaps from a decade ago or more, then lenders may be more likely to overlook them. But it’s still a good idea to chat to your broker about them, they’ll advise you on how much an adverse credit issue will affect your application.
If you and all of your co-applicants all have bad credit scores, you are more likely to have trouble getting your application approved.
However, if only one of you has a bad credit score, and the other has a particularly good score, some lenders may calculate an average score, or even be prepared to ignore the bad score entirely.
It really depends on the lender, your income, and what issues caused your low credit score. For example, a lender will see a missed payment as less of an issue than if you’ve been bankrupt in the past, or had a repossession.
If you have a bad credit score, the first thing you should do is...don’t panic!
The path to your new home might be more complicated, but you can still get there. A bad credit score doesn’t guarantee that your mortgage application will be rejected. It could just require you to pay a higher interest rate, or provide a larger deposit. We can put you in touch with specialist brokers who are used to helping people with bad credit ratings.
If you think your credit score is lower than it should be, you can use checkmyfile to take a closer look at the information on file and make sure it’s all correct.
Another good idea is to check that you’re enrolled in the electoral register. This can help credit reference agencies during the credit search process, and could potentially improve your score.
You can also improve a bad credit score by making regular credit repayments, being extra diligent about paying your taxes, and ensuring you settle all bills on time.
For more helpful information on improving your credit score, read our Guide: How to improve your credit score before you apply for a mortgage
It can be sad, but sometimes separations happen. If you’re parting ways with a co-holder of your joint mortgage, whether due to divorce or any other reason, you have a number of options available.
The simplest is to sell the home in question. This would effectively eliminate your financial partnership in regards to the joint mortgage, enabling you to take out separate, sole mortgages for your new homes.
Alternatively, another option is for one of you to buy the other co-holder’s share of the property. This would require sole ownership to be transferred to the purchaser. If you are able to come to an amicable agreement on an approach like this, it can create a mutually beneficial result for both parties and ultimately make the best of an otherwise difficult situation. Read our Guide: Can a Joint Mortgage be Transferred to One Person? For more information about this.
For more information on how to approach buying out your ex-partner’s mortgage share, see our Guide: How can you buy a partner out after separation?
Over 50% of mortgages for people who are self-employed or have bad credit aren’t available directly to you. They’re only available through specialist brokers. Using our platform guarantees you’ll be matched with a broker who has a proven track record of making mortgages possible for people like you. Less processing, more understanding.
Applying for a mortgage or understanding your options shouldn't be confusing, yet there are just so many myths doing the rounds and it's not easy to know where to turn to get the right advice.
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