Getting a mortgage with bad credit

Getting a mortgage with bad credit may still be possible. The options available to you will depend on the type of credit issue and how long ago it happened. Your deposit and wider finances will also affect what lenders may offer.

This guide explains how lenders assess bad credit, how it may affect your mortgage options and what you can do before applying.

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What does bad credit mean for a mortgage?

Bad credit means your credit record shows past money problems that a lender may want to check.

Your credit report may show missed payments, defaults or County Court Judgments (CCJs). More serious issues may include an Individual Voluntary Arrangement (IVA), a debt management plan, bankruptcy or repossession.

However, a bad credit mortgage is not a special type of mortgage. It usually means finding a lender whose rules are more suited to your credit history and current finances.

How bad credit affects mortgage options

Bad credit can change how lenders review your mortgage application.

You may have fewer lenders to choose from, need a larger deposit or receive a higher interest rate. Adverse credit can also affect how much you can borrow. Lenders may look at how you borrow money and manage your existing debts.

The impact will depend on the type of credit issue, how long ago it happened, and the amount involved. Lenders will also check whether you have paid off the debt. Lenders will also review your income, spending and debts to decide whether the monthly repayments look affordable.

Is there a minimum credit score for a mortgage?

Mortgage lenders do not use a single minimum credit score.

A good credit score may give you access to more lenders and mortgage options. However, lenders also consider your income, deposit, existing debts, property type and wider credit history.

A bad credit score does not automatically stop you from getting a mortgage. Missed payments, high balances and unpaid debts can affect your credit score and may limit the options available.

Lenders will usually look at what happened, how long ago it occurred and whether you have since repaid or settled the debt.

Check your credit report before applying

Before you apply, check your credit score and read your full credit report. You can get both from Experian, Equifax and TransUnion.

Each agency may hold different details about your credit history. Checking all three can help you spot errors, old information or accounts you do not recognise.

Lenders want to see that you manage debt well and make payments on time. A strong payment record can help them assess whether you could keep up with the repayments on your mortgage.

Paying credit cards, mobile phone contracts and household bills on time can support a stronger credit record.

However, every lender uses different criteria. They will consider your wider finances as well as your credit score when reviewing your mortgage application.

How lenders treat different types of credit

Lenders do not treat every credit issue in the same way. They usually look at what happened, how recent it was, the amount involved and whether you have settled the debt.

Credit issues they may assess include:

• Late or missed payments
• Defaults
• CCJs
• Debt management plans
• IVAs
• Bankruptcy
• Mortgage arrears

Mortgage rates, fees and monthly costs

Bad credit mortgages can cost more, especially if a lender sees the application as higher risk.

A higher interest rate can increase your monthly payment. It may also reduce how much you can borrow, as lenders still need to see that the mortgage fits with your other costs.

However, the rate is only one part of the cost. Product fees, valuation costs, legal fees and early repayment charges can all affect the full cost.

If your credit position improves, you may be able to review your options later when your current deal ends.

How to improve your chances before applying

Once you know what is on your credit reports, you can see what needs improving. Making these changes before you apply may help your mortgage application.

Check your credit information

• Correct errors on your credit reports as early as possible
• Consider registering to vote, as appearing on the electoral roll can help lenders confirm your address history
• Use eligibility checkers before making full applications, where available

Manage your borrowing carefully

• Keep credit commitments and household bills up to date
• Reduce credit card and personal loan balances where possible
• Avoid unnecessary borrowing when you apply for credit
• Manage your bank account carefully and limit repeated short-term borrowing

Strengthen your wider position

• Build a larger property deposit where possible
• Allow more time to pass if a credit issue happened recently

Before you apply for a mortgage, it is a good idea to review the full picture rather than focus only on your credit score.

The application process

Applying for a mortgage with bad credit follows the usual mortgage process. However, lenders may ask more questions or carry out extra checks.

A typical application may follow these steps:

1. Check your credit file
   Review your report so you understand what lenders may see.
2. Look at your income, debts and deposit
   Review how much you earn, what you owe and how much deposit you have saved. These details can give you a clearer idea of what you may be able to afford.
3. Speak to a mortgage adviser
   An adviser can review your position and identify lenders whose criteria may suit your credit history.
4. Get an Agreement in Principle
   An Agreement in Principle can give you an early idea of how much a lender may consider offering.
5. Submit your full application
   The lender may ask for payslips, bank statements, tax documents and proof of your deposit. You may also need to explain any past credit issues.

Avoid making several full applications at the same time. Each time you apply, the lender may record a check on your credit report. If the lender is not a good match for your situation, they may reject your application.

Remortgaging with bad credit

If you already have a mortgage, you may still be able to remortgage with bad credit. Keeping your monthly payments up to date can help show lenders that you are managing your mortgage reliably.

Lenders will also look at how much of your income goes towards the mortgage and how the repayments fit alongside your other monthly costs. They may also consider how much equity you have built up in your home.

Explore remortgage options →

Getting help with debt

Bad credit does not necessarily mean you need debt advice. However, if you are finding it hard to pay your mortgage, bills or other debts, ask for help early. A debt adviser can explain your options and help you decide what to do next.

MoneyHelper provides a Debt Advice Locator that can connect you with free, confidential debt advice. You can also contact organisations such as National Debtline or StepChange for specialist support.

How Muttuo Mortgages can help

Bad credit can make mortgage choices more complicated, but advice can help you see where you stand and what routes may still be open.

Muttuo Mortgages can help you:

With whole-of-market bad credit mortgage advice, Muttuo can help you move forward with a clearer view of what may be possible.