Can you get a mortgage with bad credit?

Can you get a mortgage with bad credit? 

Yes, it’s absolutely possible to get a mortgage with a bad credit score, but your options may be somewhat limited. Due to the perceived risk involved for the lender, the interest rates you’re offered are likely to be higher.

What mortgage options are available to people with bad credit?

Each mortgage provider uses their own criteria. Some are more flexible than others, so there are still options available for people with a bad credit history.

Your credit score is only one of the factors looked at. Other important considerations include your affordability, the size of your deposit, your stability and how much existing debt you have. If these are all strong, but you have a low credit score, you may have a better chance than you think.

Affordability is key because if you fall behind with your repayments on your mortgage, then the lender could repossess your home, in the worst-case scenario. Also bear in mind that the more you borrow and the longer your mortgage term, the more interest you’ll pay in total. 

Consider contacting an Independent Financial Advisor. Or speak to a broker, like Ocean Finance, to discuss the best solution depending on your individual situation.

Bear in mind that making formal applications will show on your credit file and any rejections will damage your credit score. So we suggest that you use an eligibility calculator, or get an agreement in principle, to discover your chance of approval before you apply.

That way, you can focus on the lenders that are most likely to accept your mortgage application. An eligibility calculator only performs a ‘soft search’ on your credit file, so it won’t affect your credit score. This means you can use this tool as many times as you need to.

Can you get a mortgage with a CCJ?

A County Court Judgement (CCJ) will stay on your credit report for six years, and may impact your ability to get a mortgage.

Again, each lender will have their own criteria. Some mortgage providers may view a CCJ as a red flag, and will reject your application as being too high risk in their eyes. Whilst others may be more lenient and focus on your recent financial behaviour instead. However high-interest rates may still apply.

What steps can you take to improve your approval chances?

There’s no quick fix for bad credit and each lender will use their own discretion when it comes to approving and rejecting mortgage applications. There are, however, several steps you can take to improve your chances. 

For example, you could work on rebuilding your credit score, clearing your debts, registering to vote, maintaining your bill repayments (on time, every time) and saving a large deposit.

There’s no guarantee of acceptance, but if you make improvements to your financial situation over time, you should increase the likelihood of approval (depending on the lender). It will also show lenders that you are a responsible borrower.

Lenders want to see that you are in a stable position and can afford the mortgage payments - both now, and in the future.

Sometimes it can pay off to take a step back and review your finances before applying.

What credit score do you need for a mortgage?

There’s no one credit score you need to qualify for a mortgage. However, the higher your credit score is, the better your chances of approval.

Before you apply for a mortgage, it’s worth checking your credit report with one of the three main credit reference agencies in the UK: (Experian, Equifax or TransUnion). You can also check your Equifax credit report for free (for life) through our member-only platform, CredAbility. It’s a good idea to check the information held is accurate and up-to-date, as even small errors can impact your credit score.

Your score will differ from one credit reference agency to the next because each agency uses its own scoring system. Find out what is considered a good credit score in the UK.

As you may be aware, there’s the option of building your credit history before applying for a mortgage. For example, by maintaining your bill repayments on time, every time, or by paying off defaulted debts in full so they’re updated to ‘satisfied’. These actions should give the impression to lenders that you are a responsible borrower.

Mortgages are secured against your property. This means your home may be at risk if you fall behind with your mortgage repayments.

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