Getting a mortgage with bad credit

How to buy a home despite having a poor credit history

Don’t be disheartened if you have been turned away by high street banks and lenders. It may be possible to get a mortgage with bad credit, although you’ll probably pay higher interest rates and you may need to come up with a larger deposit.

Different lenders have different criteria for lending money, and some lenders may see you more positively than others. There are mortgages designed for people with poor credit, and some lenders specialise in offering these. These are known as bad credit mortgages, adverse credit mortgages, or sub-prime mortgages.

When you apply for a mortgage, your mortgage provider will always look at your credit history. For people who’ve had financial problems in the past, this can be a worry. But while it’s true that certain things will count against you, it is often still possible to get a mortgage with bad credit.

Which financial issues can affect your mortgage application?

Typically some of the major mortgage providers may reject applications if a credit check reveals:

  • Recent late or missed payments
  • Defaults, i.e. accounts that have been closed because you failed to make payments
  • County court judgements (CCJs), i.e. court action taken against you by a creditor
  • Individual voluntary arrangements (IVAs), i.e. a formal arrangement you’ve made with creditors to pay back overdue debts
  • Bankruptcy or insolvency

How long will financial issues remain on your record?

Reference agencies will provide your credit history for the past six years, so any defaults, CCJs, IVAs, etc., before this will no longer be a problem.

A late or missed payment within the last six years will not necessarily damage your mortgage application. Mortgage providers are looking for recent issues, serious issues, or a pattern of issues, rather than singular instances.

What can you do about bad credit?

No matter what the problem is, you still have options. You can:

Explain the issue

While some mortgage providers might dismiss you immediately, others might consider you based on an explanation of why you were in financial trouble, and what action you’ve taken. This will depend on the severity of the situation and the time that’s passed since.

Improve your habits

If you can avoid missing any payments and getting into debt from now on, your credit rating will gradually improve. Once you can show evidence of this improvement, mortgage providers will look on you more favourably. Two years of good financial habits can be enough to make them overlook late payments or defaults.

Correct errors

If your credit history has been linked to someone in error (for example, someone that you have previously shared an address with but are not financially connected to) you can contact specific lenders to have the error corrected.

Apply alone

When buying a home with a partner, its possible that your mortgage application will be refused because of a problem with their credit history rather than yours. Applying on your own could give you a greater chance of success, although you might be able to borrow less than you hoped.

Save more

If you can get together a big enough deposit (relative to the value of the property you want to buy), mortgage providers will consider you to be less of a risk and will be more willing to lend you money.

Wait it out

Another option is to simply wait until certain issues are no longer on your record, or until enough time has passed that mortgage providers don’t consider them significant.

Apply for a bad-credit mortgage 

Certain mortgage providers may consider you, even with recent CCJs or IVAs. The rates available to you are typically higher than for other mortgages, and the deal that you’re able to get will depend on the severity of your financial issues. Speak to a mortgage broker if you’d like help comparing your available mortgage options.

All Rights Reserved. Information contained in this article and on our website does not constitute advice and is provided for information purposes only. Recipients should not act upon it, but should seek professional advice relevant to their own situation.