By Mark Dickety on

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Got bad credit? You can still get a mortgage!

Bad credit doesn’t have to be a roadblock to homeownership!

When you’re eyeing that perfect home but grappling with the ghost of bad credit, it’s natural to feel uncertain about your mortgage goals.

Even though getting a mortgage with bad credit might present challenges, it’s still possible. We’re here to shed light on this path and help you prepare for your mortgage journey.

Understanding the landscape of bad credit mortgages

Lenders look at your credit score when you apply for a mortgage. Your credit history is an indication of how likely you are to make repayments. Lenders view bad credit as a higher risk, which can limit your options and possibly lead to higher costs.

But here’s where things get promising. By working with an experienced mortgage adviser, you gain access to a network of specialist lenders and exclusive deals that aren’t readily available on the high street. The guidance of an expert can save you time, stress, and potentially money.

What is bad credit?

Bad credit refers to an individual’s history of not meeting financial obligations, such as failing to pay bills on time or defaulting on loans. It is assessed by credit reference agencies, and a low credit score indicates a higher risk of future payment defaults.

What causes bad credit?

Bad credit often stems from common factors, such as:

  • Late or missed payments.
  • Defaults (repeated missed payments).
  • High debt levels.
  • CCJs (County Court Judgements).
  • History of financial mismanagement.
  • Debt Management Plans (DMPs).
  • Individual Voluntary Arrangements (IVAs).

Each of these factors holds varying degrees of impact on your credit profile. Additionally, having little or no credit history can also work against you.

Having bad credit can impact a person’s ability to obtain credit, secure low interest rates, or even qualify for loans, mortgages, or credit cards. To improve a bad credit score, focus on paying your bills on time, reducing your debt, keeping your credit utilisation low (spending below 30% of your credit card limit) and making better financial decisions.

How do ‘adverse credit’ mortgages work?

‘Adverse credit’ mortgages are similar to regular mortgages but often carry higher interest rates and may have a lower borrowing limit. Lenders may require a larger deposit, typically 20-25% of the property value, instead of the usual 5-10%.

This stems from the perception that a lower credit score poses a higher risk to the lender. Generally, a higher credit score increases approval chances and can lead to more favourable interest rates.

There are two key things to consider when working out how much a mortgage with bad credit could cost you:

  • Borrowing capacity – bad credit may lead to a lower loan amount being offered to you.
  • Cost implications – You may encounter less favourable rates due to the perceived risk of bad credit.

The silver lining? A substantial deposit can enhance your appeal to lenders. A bigger deposit not only makes you a more attractive borrower but can also lead to a lower interest rate, easing the financial burden.

Can I get a mortgage with bad credit?

Yes, it is possible to get a mortgage with bad credit.

However, individuals with bad credit may encounter challenges, such as higher interest rates and the need for a larger deposit. Joint mortgages with one party having bad credit might result in higher interest rates. We can help you explore various lenders, understand available options, and ultimately find a suitable mortgage for you.

How can I check my credit score?

You can access your credit score through platforms like Experian, Equifax, or TransUnion. A credit score is a culmination of data from various sources, including mobile providers, credit card companies, and banks. The data ranges from payment history to public records like CCJs and bankruptcies.

Based on your credit score, lenders determine your eligibility for a mortgage. Depending on the score, they may approve you, offer terms with conditions, or decline your application.

Remember, adverse credit events fade after six years, and their impact diminishes with time.

Building a stronger credit foundation

Improving your credit score is achievable, and it can pave the way for a better mortgage rate.

Consider the following steps:

  • Register on the electoral roll.
  • Amend any mistakes on your credit report.
  • Check for fraud.
  • Cultivate a positive account history by paying off outstanding debt.
  • Avoid missed payments.
  • Cancel unused credit cards and bank accounts.

Check out our guide on improving your credit score for further insights. Keep in mind that this process takes time, so patience and perseverance are key.

Next steps on your journey

If you’re navigating the world of mortgages with a bad credit score, get in touch with us today for guidance. We have access to exclusive deals not found on the high street and can offer bespoke, tailored mortgage advice.

Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances.
The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.

Mark Dickety
Mark is an experienced Mortgage and Protection Adviser who has been providing mortgage advice since 2010. He thrives on finding the right solution for each of his clients' requirements ensuring they have the best experience possible.
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Very efficient service from start to finish. Good communication. Impressed all round.

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Kevin and Beccy have been extremely helpful - firstly in exploring viable options to suit my situation and secondly keeping me in the loop and dealing with queries that arose along the way. This is my second mortgage with them, both of which had possibly unusual elements and they were able to navigate me through them and find me good mortgages.

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