Having a bad credit history can make getting a mortgage more challenging, but it doesn’t make it impossible. Many lenders offer specialised mortgage products for those with poor credit, though the terms may not be as favourable as for borrowers with good credit. In this guide, we’ll explore how bad credit affects mortgage applications, the options available, and tips to improve your chances of getting approved.
How Does Bad Credit Affect Mortgage Applications?
Mortgage lenders assess your credit history to determine how risky it is to lend to you. If you have a history of missed payments, defaults, County Court Judgements (CCJs), or bankruptcy, lenders may see you as a higher risk, which could result in:
Higher interest rates
Lower loan amounts
Larger deposit requirements
Stricter lending criteria
However, there are specialist lenders who offer bad credit mortgages designed to help people in this situation.
Can You Still Get a Mortgage with Bad Credit?
Yes, you can still get a mortgage with bad credit, but the process may be more complicated. Here are some key factors that affect your chances:
The severity of your credit issues – Minor late payments are viewed more favourably than CCJs or bankruptcies.
How recent the credit issues are – Older issues have less impact than recent ones.
Your deposit size – The larger the deposit, the lower the lender’s risk.
Your income and affordability – A stable income can improve your chances of approval.
The lender’s criteria – Some lenders specialise in mortgages for those with poor credit.
Types of Mortgages Available for Bad Credit Applicants
1. Specialist Bad Credit Mortgages
Some lenders specifically cater to borrowers with poor credit histories. These lenders consider individual circumstances rather than relying solely on credit scores.
2. Guarantor Mortgages
A guarantor mortgage allows a family member or close friend to guarantee the loan. If you fail to make repayments, the guarantor is responsible for covering them.
3. Joint Mortgages
Applying with a partner or family member with a strong credit history can increase your chances of approval and help secure better terms.
4. Higher Deposit Mortgages
If you can save a larger deposit (typically 15–30%), lenders may be more willing to approve your application despite your credit history.
5. Shared Ownership Mortgages
This scheme allows you to buy a percentage of a property (usually between 25% and 75%) and pay rent on the remaining portion, making it more accessible if you have a low credit score.
Tips to Improve Your Chances of Getting a Mortgage with Bad Credit
1. Check and Improve Your Credit Score
Before applying for a mortgage, review your credit report from agencies like Experian, Equifax, or TransUnion. Ensure all information is correct and take steps to improve your score, such as:
Paying off outstanding debts.
Making all future payments on time.
Registering on the electoral roll.
Reducing credit card balances.
2. Save for a Larger Deposit
A higher deposit (15% or more) reduces lender risk and can improve your chances of approval, as well as potentially securing better interest rates.
3. Use a Mortgage Broker
A specialist mortgage broker can help you find lenders who are more likely to accept applicants with bad credit, saving you time and increasing your chances of success.
4. Avoid Multiple Applications
Each mortgage application leaves a mark on your credit file. Too many applications in a short time can negatively impact your credit score. Instead, use pre-qualification tools or speak to a broker before applying.
5. Consider a Joint or Guarantor Mortgage
If you have a close family member with a strong credit history, applying for a joint mortgage or using a guarantor could improve your chances of approval.
6. Show Proof of Financial Stability
Lenders look at more than just your credit score. Having stable employment, a steady income, and low debt-to-income ratios can work in your favour.
7. Pay Off Outstanding CCJs or Defaults
If you have unpaid County Court Judgements (CCJs) or defaults, paying them off before applying can significantly improve your chances of getting a mortgage.
Alternative Options If You’re Rejected
If you’re unable to get a mortgage due to bad credit, consider these alternatives:
Wait and rebuild your credit score before applying again.
Look at government schemes like Help to Buy or Shared Ownership.
Consider renting longer while saving for a larger deposit.
Seek professional financial advice for personalised mortgage solutions.
Final Thoughts
Getting a mortgage with a bad credit history in the UK is possible, but it requires careful planning and the right approach. By improving your credit score, saving for a larger deposit, and working with specialist lenders or brokers, you can increase your chances of securing a mortgage. If you're unsure where to start, seeking advice from a mortgage specialist can help you find the best options available for your situation.
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