How Do I Know if I Have Bad Credit?
Bad credit is a sweeping term and might apply to any number of scenarios. Generally, this means that someone has fallen behind or not kept up with repayments on credit agreements in the past.
This could range from being a few days late on a payment, to having fallen into arrears and not made repayments at all.
Your credit report collates information about your finances for the past six years, and if you have credit issues showing on the report, it can be challenging to find a mortgage provider who will lend to you.
Can I Get a Mortgage if I Have a Poor Credit History?
You can, yes, and while highstreet lenders might not be able to help, that doesn't mean that an experienced broker cannot find a great deal for you.
The right lender depends on lots of factors, including:
- How severe your credit problems are.
- How long credit issues have shown on your credit file.
- How closely you meet the lenders' affordability and eligibility criteria.
Bad credit mortgage brokers work with clients in all sets of circumstances, and Revolution Brokers specialise in finding mortgage lenders who will be able to approve your application.
How Do I Find a Reliable Bad Credit Mortgage Provider?
This sort of lender specialises in helping customers get mortgage borrowing, even when they have credit issues.
Many mainstream firms cannot help applicants who have had financial difficulties, and others will reject applications that fall outside of their lending policies.
Revolution Brokers work with respected lenders who support applications from:
- First-time buyers who have bad credit or no credit history.
- Applicants with low credit scores, or no score at all.
- People who have suffered adverse credit issues in the past.
It is essential to work with a broker to apply to a bad credit mortgage provider since the rates on offer will usually be higher than for people with a healthy score.
However, if you have a reasonable deposit and can demonstrate reliable income, Revolution Brokers can negotiate terms and rates on your behalf.
What are the Eligibility Requirements for a Bad Credit Mortgage?
Every lender is different, but all will consider two primary factors when deciding whether they can lend to an applicant with bad credit:
- What adverse credit you have experienced and how serious it was. Missing a bill payment is, of course, much less serious than having been bankrupt, so a lender will want to check what happened and how much borrowing was involved.
- How long ago, your credit issues occurred. Most credit checks for mortgage applications go back for six years. If your credit issues were at the start of this time and your finances have since recovered, the better terms you will achieve than if you have recently experienced severe credit problems.
If you have been bankrupt, you cannot apply for any mortgage until the bankruptcy has discharged, which is typically in a year.
Many lenders will not consider lending to anybody who has been bankrupt for three to four years and will also need to see good credit history since.
The interest rates available for applicants who have had a property repossessed in the past are also much higher than for people with good credit.
That means the longer ago your credit issues, the better a deal you will be able to achieve.
Who is the Best Bad Credit Mortgage Lender?
All sorts of lenders provide bad credit mortgages, although the rates and criteria will vary significantly between them.
Even some high street banks offer bad credit mortgages - however, that doesn't mean to say that they will be as competitive as specialist lenders who support applicants with bad credit.
We have summarised some of the larger lenders and what scope they offer for lending against bad credit:
Applicants with mild credit issues:
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Lender
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Potential to lend?
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Considers low credit score applicants?
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Accepts people with late payment history?
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Barclays
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Depends on the credit score and deposit available.
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Decided on a case-by-case basis.
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Yes.
|
|
Halifax
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Depends on the credit score and deposit available.
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Decided on a case-by-case basis.
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Yes.
|
|
NatWest
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Depends on the circumstances.
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Possibly and only if no arrears in the past year.
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Yes.
|
|
HSBC
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No.
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No.
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Yes.
|
|
Santander
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Depends on the circumstances.
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Possibly and only if no arrears in the past year.
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No.
|
|
Virgin Money
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No.
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Possibly and only if no arrears in the past six months.
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Yes.
|
|
Bluestone
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Yes.
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Possibly and only if no arrears in the past year.
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Yes.
|
|
Accord Mortgages
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Depends on the credit score and deposit available.
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Possibly and only if no more than one missed payment in the last two years.
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Yes.
|
Applicants with severe credit issues:
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Lender
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Payment defaults?
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CCJs?
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Debt management schemes?
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IVAs?
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Barclays
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Up to £200 if now paid.
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Up to £500 over 36 months ago.
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Yes, if repaid.
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Yes, if repaid after six years.
|
|
Halifax
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Yes.
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Yes.
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Yes, if repaid.
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Yes, if repaid after six years.
|
|
NatWest
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Yes, if repaid.
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Yes, if repaid.
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Yes, if repaid.
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Yes, if registered over six years ago.
|
|
HSBC
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Yes, if over 36 months ago.
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Yes, if over 36 months ago.
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Yes, if repaid.
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Yes, if repaid after three years.
|
|
Santander
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Yes, after one year.
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Yes, if repaid and over three months ago.
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Yes.
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No.
|
|
Virgin Money
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Up to two if over six months ago.
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Up to £2,000 if now repaid.
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Up to £500.
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Yes, if repaid.
|
|
Bluestone
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Up to four in the last 36 months.
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Up to three in the last 36 months.
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Yes.
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Yes, if repaid after three years.
|
|
Accord Mortgages
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Up to £500.
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Yes, if repaid after 36 months.
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Yes, if repaid.
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Yes, if repaid after six years.
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Applicants with very severe credit issues:
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Lender
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Bankruptcy
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Repossession
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Debt management schemes?
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Multiple issues?
|
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Barclays
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Yes if discharged over six years.
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No.
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Yes, if repaid.
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Yes.
|
|
Halifax
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Yes if discharged over five years.
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Yes, after six years.
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Yes, if repaid.
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Yes.
|
|
NatWest
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Yes if discharged over six years.
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Yes, after six years.
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Yes, if repaid.
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Case-by-case basis.
|
|
HSBC
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No.
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No.
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Yes, if repaid.
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No.
|
|
Santander
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No.
|
No.
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Yes.
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Yes.
|
|
Virgin Money
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No.
|
No.
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Up to £500.
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Yes.
|
|
Bluestone
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Yes if discharged over three years.
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Yes, after two years.
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Yes.
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Yes.
|
|
Accord Mortgages
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Yes if discharged over six years.
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Yes, after six years.
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Yes, if repaid.
|
Yes.
|
These are indicative rates on the last published tables and will be subject to changes and individual lender criteria.
For current rates and to select the best mortgage provider for your circumstances, give the Revolution Brokers team on 0330 304 3040.
Will I Still Be Able to Get a Mortgage with my Credit Issues?
Your chance of securing lending depends on how serious the adverse credit issues are. Less serious problems such as missing a phone bill are not going to have as much of an impact as a bankruptcy or property repossession.
Specialist lenders are more flexible when it comes to considering bad credit applicants, and can be the best option for applicants with a range of credit issues:
- Low credit score or no credit history.
- Late payments and missed mortgage repayments.
- Defaults, CCJs and IVAs.
- Debt management schemes.
- Repossessions and bankruptcy.
- Payday loan history.
- A combination of multiple credit issues.
Mortgage lenders who are experienced in bad credit applicants will look at the reason for the issues, how serious they are, how long ago they occurred, and whether you meet other criteria outside of your credit file.
What Eligibility Criteria are Important Aside from my Credit Score?
Your credit score is one of many factors a mortgage lender will consider. Other important areas include:
- Employment status and income: regular employment and a higher salary all make it easier to borrow. If you are self-employed or have a non-regular income pattern, a specialist provider is more likely to be able to lend to you.
- Deposit available. The higher the deposit, the better the terms offered - usually you'll need at least a 5% deposit for a residential property, and from 15% and above for a buy-to-let.
- Your age. Some lenders have no age limits, whereas others will cap lending on applications over 75 or 85.
- Expenses and outgoings. If you have other loans, debt, dependants or commitments, these will be used as part of the affordability calculation.
- The value and type of property. The higher the value of the property against the mortgage requirement, the better. Non-standard properties such as those with a thatched roof or a timber frame are best mortgaged through a specialist lender.
Can You Get a Mortgage With Poor Credit From a High Street Bank?
Possibly - some mainstream banks do offer bad credit mortgages, but often the rates and terms offered are less competitive than those from specialist bad credit lenders.
Below is an indicative summary of how long must typically have passed since your bad credit issues for a high street lender to be able to consider your application:
|
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Up to One Year
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1-2 Years
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2-3 Years
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3-4 Years
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Over 4 Years
|
|
Missed payments
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Yes.
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Yes.
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Yes.
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Yes.
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Yes.
|
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Mortgage arrears
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Yes - three maximum.
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Yes.
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Yes.
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Yes.
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Yes.
|
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CCJs
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Possibly - if a low LTV.
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Possibly - if a low LTV.
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Yes.
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Yes.
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Yes.
|
|
Defaults
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Possibly - if a low LTV.
|
Possibly - if a low LTV.
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Possibly - if a low LTV.
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Yes.
|
Yes.
|
|
Debt management plans
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Probably not.
|
Yes - depending on credit score.
|
Yes - depending on credit score.
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Yes - depending on credit score.
|
Yes - depending on credit score.
|
|
IVAs
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Probably not.
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Possible with 25%+ deposit.
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Possible with 20%+ deposit.
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Possible with 20%+ deposit.
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Possible with 10%+ deposit.
|
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Bankruptcy
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Probably not.
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Possible with 25%+ deposit.
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Possible with 15%+ deposit.
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Possible with 5%+ deposit.
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Possible with 5%+ deposit.
|
|
Repossession
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Probably not.
|
Possible with 25%+ deposit.
|
Possible with 25%+ deposit.
|
Yes.
|
Yes.
|
These are rough indications of how likely a high street lender is to be able to consider an application within each timeframe of experiencing a bad credit problem.
There is no assurance that a mainstream lender will consider or approve your application.
The best action in any of these scenarios is to work with an experienced bad debt mortgage broker who can recommend the best lenders for you.
Income Factors When Getting a Mortgage With Poor Credit?
Mortgage terms and rates change frequently, so it is impossible to give average interest rates for a bad credit mortgage. However, if you have a low credit score, the interest rates likely offered will be higher.
The higher and more stable your salary, the easier it is to demonstrate affordability and assure a lender that you will be able to keep up with repayments.
High-income applicants - lenders usually offer a multiple of your annual salary. If you have bad credit, this can be difficult as no matter how much you earn, you are still considered a high-risk applicant.
It is therefore vital to apply to the right lenders who offer higher multiple salary calculations - some will lend up to 4.5 x your income, and others can lend as high as 6 x your salary.
Low-income applicants - the combination of a low income and bad credit means that you will need to use a specialist broker to find a competitive mortgage.
Niche lenders have different options to help you get the lending you need; such as having a guarantor in place, using benefit income to back-up the affordability calculation, or recommending a government scheme such as Shared Ownership.
You may be eligible for mortgages such as a Joint Owner Sole Proprietor mortgage, which is often an option for first-time buyers and means that a family member can help you purchase your home, without taking away any proportion of ownership.
Improving Your Credit Score to Help With Getting a Mortgage With Poor Credit
There are lots of ways to improve your credit score, and if you've had issues in the past this is well worth doing as it may make a big difference to securing a mortgage, and the rates you are offered.
Here are some ways to improve your credit score:
- Review your credit reports for errors. Most lenders use a credit referencing agency like Equifax, TransUnion or Experian, and you can usually access your credit report for free. If you find any out of date information, errors or inaccuracies you can query this and have your credit file updated.
- Take out small amounts of borrowing. If you have no credit history, it can be as challenging to borrow as if you have unfavourable credit ratings. You can take out an adverse-specific credit card, borrow small amounts and repay the balance in full every month. Over a few months, this will improve your credit score.
Can I Get a Mortgage With Poor Credit?
You can, yes. Most lenders will run a credit check, but the importance of your credit score depends on their policy and how well you fit other criteria.
Specialist low credit lenders are usually more flexible, whereas traditional mortgage providers will leave it to their underwriter to decide whether they can make an offer.
Credit scores are calculated by combining information from the largest UK credit referencing agencies - Equifax, Experian and TransUnion. Each uses a different scoring system, so they are not easy to compare.
- Equifax gives credit scores out of 700, with 475 and above 'excellent'.
- Experian scores credit out of 900, with 700+ being 'good' and 800+ being 'excellent'.
- TransUnion assigns a score out of 700, and then allocates a rating of 1-5, with five being outstanding.
Niche lenders are less interested in your credit score than in your credit history, and how well you have managed your finances since adverse credit issues.
You will also need to provide information about your income, as this will not show on your credit file.
Some lenders can offer up to a 95% LTV, which means needing a 5% deposit. Others will offer a much lower LTV and thus require a higher deposit.
Revolution Brokers work with specialist lenders who can even support applicants with zero credit scores, so there are always options no matter how severe your previous credit issues may have been.
In this case, the most critical factors will be around demonstrating you can afford to keep up with repayments and meet the lending criteria - and so it is essential to work with a broker who can help compile your application to meet these points.
What Deposit Do I Need for a Bad Credit Mortgage?
Typically, UK residential mortgage providers look for a deposit of at least 5% for a home, or 15% for a buy-to-let property. If you have bad credit, you will usually be asked for a higher deposit, which increases with the severity of the issues.
If you have a repossession on your credit file, you might be able to secure a mortgage within a year of the issue, provided you have a 25% deposit available.
Should you have an IVA, you will likely need a deposit of 10-25%, and if you have been bankrupt will often need a 15-25% deposit if you are looking for a new mortgage within three years of bankruptcy.
Can I Get a Mortgage With Poor Credit History and a 5-10% Deposit?
Specialist brokers like the Revolution team can secure lending of up to 95% LTV if you have minor bad credit issues, and as long as you fit the other criteria.
If you have very serious or recent credit issues, such as repossession, you will usually need a higher deposit, particularly if this has happened within the last three years.
It is never impossible to get a higher LTV when you have experienced severe credit issues, but usually, the rates offered will be higher.
Can You Get a Mortgage With Very Poor Credit and a 50% Deposit?
If you need a smaller mortgage of around 50% of the property value, this presents a much lower risk to a mortgage lender, and it is easier to negotiate better rates and terms.
Lenders will still need to check you meet their other criteria, but having a large deposit makes the prospect a simpler one.
Can You Still Get a Mortgage With Poor Credit and No Deposit?
Some lenders can offer 100% mortgage to applicants who have no deposit - but this is extremely hard to come by if you have adverse credit. There are solutions to this problem, such as using a guarantor to offer security to the lender.
Bad credit guarantor mortgages secure the loan against a property owned by your guarantor, which acts as a replacement for the deposit, and is also known as a bad credit family springboard mortgage.
Large Loans: How to Get a Mortgage With Poor Credit Rating History?
You can, yes - however, as with any type of lending if you have bad credit than the LTV offered is likely to be lower, fees and rates higher, and the application will be assessed on other eligibility criteria.
Can I Get a Mortgage With Poor Credit and a Borrowed Deposit?
Sometimes, you can borrow a deposit to secure the mortgage you would like.
However, most lenders will be reluctant to consider an application where the deposit is provided through a personal loan.
If there is an option to borrow deposit funds from family or friends, your chances of success are higher.
Alternative Bad Credit Mortgage Products
Revolution Brokers work with clients who are looking for alternative mortgages for any number of reasons, with adverse credit being just one scenario. These include:
- Expat mortgages
- Mortgages for second homes
- Secured loan applicants
- Large loan applicants
How to Get a Mortgage With Poor Credit Rating as an Expat
Many expats have a bad credit rating, simply because they live abroad and therefore often have no UK credit history for a lender to look at. This makes an expat a high-risk applicant.
Expats who have lived abroad for a proportion of the year are best advised to apply for lending through an experienced broker who can negotiate with expat mortgage lenders on their behalf.
Secured Loans for Low Credit Applicants
A secured loan is very similar to a mortgage in that it is a way of borrowing money by releasing equity from your home.
In some cases, the amount you can borrow will be subject to minimum income thresholds, and fees and rates might be higher if you already have a mortgage on your property. The value will also depend on the equity in your property.
Secured loan LTVs depend on how much your home is worth. Usually, you will find lenders offering an LTV of between 50% and up to 95%, but this is dependent on meeting other criteria and using a low credit specialist.
Taking Out a Second Charge Loan
Second charge loans are like a second mortgage and are an option for bad credit applicants provided they meet other criteria.
This can be a good option if you need to consolidate debts or have large expenses to cover and is often more viable than a remortgage.
The terms offered on second charge loans are usually more flexible than on first mortgages, and can even be as much as 10 x your annual salary. Credit checks are still required but are less important than for primary mortgage lending.
How Can I Get a Mortgage With Poor Credit Rating Reports?
You can - and there are several things you can do to improve your chances of making a successful application:
- Check your credit reports - you can access credit files from all the major credit references agencies (Experian, Equifax and TransUnion) and should check all three as they do sometimes contain variances. Any queries, out of date or incorrect information, can be queried.
- Maximise your deposit - the bigger a deposit you have, the better your chances of being offered attractive mortgage rates.
- Use a broker to make fewer applications - if you apply to multiple lenders 'on the off chance' you run a risk that numerous hard credit searches will be run, all of which will appear on your credit file and exacerbate the problem. It is best to work with a specialist broker who will ensure they only apply to lenders who are very likely to approve your mortgage.
How Can I Get a Mortgage With Poor Credit Through an Independent Broker?
Specialist brokers like the team at Revolution offer multiple benefits and make the process of securing a bad credit mortgage much less stressful. We offer:
- Independent advice
- Access to all lenders in the market
- Clear, reasonable fee structures
- Access to direct contact details
- Exclusive products and offers
- Commercial finance options
- Comprehensive insurance recommendations
- Outstanding experience
Applying for a Mortgage With Poor Credit
The first step is to get in contact with our mortgages team - we are available on 0330 304 3040 or via [email protected].
Fees for a Mortgage With Poor Credit Score
All mortgages will carry associated fees and charges, and you should always be aware of these before agreeing to any applications. Typical fees include:
- Mortgage arrangement fees
- Booking fees
- Property valuation fees
- Legal fees
- Stamp Duty (if applicable)
- Early repayment charges (if applicable)
Many of these costs are rolled up into the mortgage, and some are not required since they are included in the deal offered by the lender.
Are Bad Credit Mortgages Available Online?
Many people apply for a mortgage online; however, if you have adverse credit, it is strongly advisable to work with a broker rather than submitting applications online that may be rejected.
In the post-pandemic era, much of our work and meetings can be conducted remotely, and having expert advice is the best possible way of securing the most competitive mortgage rates.
Here are some of the most commonly asked questions the Revolution Finance team received about bad credit mortgages:
