Getting a mortgage with bad credit is certainly possible but may prove more challenging than it should be as most mortgage lenders may prefer borrowers to have good credit scores.

Mortgage lenders will usually conduct a soft credit check before they give you a mortgage agreement in principle.

This credit check is a basic one and may not give them your full credit report but rather will give them a pass or fail indicator.

With a soft credit check, you should be the only one who is able to see it and hence it does not affect your credit score.

The mortgage lender will then go on to perform a full credit check when you make a mortgage application and before they give you a mortgage offer.

This credit check will be a full one and the mortgage lender ill be able to see everything on your credit report.

This means you could get an agreement in principle and still be declined a mortgage.

Most high street mortgage lenders may not offer mortgages for bad credit but a bad credit mortgage broker may be able to advise you on specialist bad credit mortgage lenders who may be able to offer you a mortgage.

Most bad credit mortgage lenders will likely offer a reduced loan to value in order to reduce their risk.

A list of mortgage lenders who may offer mortgages for bad credit

Accord MortgagesNoUp to £500Yes, if paid off more than three years agoYes, if discharged at least three years ago
AldermoreYesConsidered if at least six months ago; max three in the past three yearsNoNo
Bank of China (UK)NoUp to £300NoNo
Buckinghamshire BSYes (on selected products)One CCJ up to £500 if at least six months agoYes, if paid off more than five years agoYes, if discharged at least five years ago
Cambridge BSYesUp to £5,000NoNo
Darlington BSNoOne CCJ up to £500Yes, if paid off more than three years agoYes, if discharged at least three years ago
Digital Mortgages by Atom BankNoUp to £250, max three in the last three years and one in last yeaNoNo
Foundation Home LoansYesUp to £2,000, max two in last two yearsNoYes, if discharged at least three years ago
Hanley Economic BSYes (on selected products)Up to £1,500NoNo
Ipswich BSNoUp to £500NoNo
KensingtonNoOne CCJ up to £1,000 if at least six months agoNoNo
Kent RelianceNoOne CCJ up to £300 if at least six months agoYes, if paid off more than three years agoYes, if discharged at least three years ago
Marsden BSYesUp to £2,500 max, at least a year agoNoNo
Masthaven BankYesUnlimited, max three in last three yearsNoNo
MBS Lending LtdYesUp to £6,000 if at least six months agoYesConsidered
Metro BankNoUp to £500NoConsidered
Pepper MoneyYes (on selected products)Yes, if more than six months oldNoNo
Precise MortgagesYes (on selected products)Unlimited, max three in last two yearsNoNo
Royal Bank of Scotland*ConsideredConsideredConsideredConsidered
Skipton BSNoOne CCJ up to £500 if at least a year agoYes, if paid off more than four years agoYes, if discharged at least four years ago
The Mortgage LenderNoUp to three CCJs per application if at least six months ago, five max in the last two yearsNoNo
TogetherNoNone in the last two yearsNoNo
Vernon BSNoNoNoNo
Vida HomeloansYesUp to four in last two years if all at least six months agoYes, if paid off more than six years agoYes, if discharged at least six years ago
Virgin MoneyNoUp to £500NoNo

Source: Moneyfacts, March 2019. The information above may not be consistent across the whole of a lender’s range of products. *Lender does not offer specific products for people with bad credit history but they review individuals on a case-by-case basis

So what does bad credit mean for mortgages?

Bad credit could include:

  • County court judgements A CCJ
  • An Individual voluntary agreement (IVA)
  • A debt management plan (DMP)
  • A default
  • A bankruptcy
  • A home reposession

The implication of mortgages for bad credit

The implications of getting a mortgage with bad credit could be that you have to pay a higher APR or that you have to make an increased mortgage deposit so that the mortgage lenders loan to value remains low and their exposure to you remains low.

Remortgaging with bad credit

Whilst remortgaging with bad credit may be much easier than getting an initial mortgage with bad credit due to the equity you will have now built in your home you may still find that your options of mortgage lenders aren’t that much.

You may also find that mortgage lenders may offer you a higher APR than you currently have to remortgage.

When you have bad credit, the easiest thing you may be able to do is to build credit by changing your current credit behaviour and following tips on how to improve your credit score.

Getting a buy to let mortgage with bad credit

Buy to let mortgages may be harder to et with bad credit as the mortgage lender will place more scrutiny on your creditworthiness and your income.

If you have had bad credit in the past then you may find very few buy to let mortgage lenders may offer you a mortgage.

You may also find that you will need to put a much bigger mortgage deposit of 20% plus to get a mortgage lender to provide you with a mortgage offer.

Buy to let APRs are already much higher than residential APRs but with a bad credit history, you may find that the APRs on offer for a buy to let mortgage with bad credit could be much higher.

What sort of rates can you expect with mortgages for bad credit?

For 2 year mortgage deals:

Providerinitial rateAPRCMay accept
Marsden Building Society2.695.6CCJs, poor credit
Yorkshire Building Society2.794.5CCJs, arrears
Skipton Building Society2.834.7CCJs, arrears, IVAs, bankruptcy
Marsden Building Society2.895.6CCJs, poor credit
Skipton Building Society2.934.7CCJs, arrears, IVAs, bankruptcy

Government home buying schemes for mortgages with bad credit

You may be able to get some home buying government schemes for first-time buyers and home movers which could increase your mortgage deposit or reduce the total cost of purchasing the property.

They are:

  • Lifetime ISA- gives you a government bonus of £1,000 if you save the maximum £4,000 a year.
  • Help to buy ISA- gives a maximum bonus us £3,000 if you save the maximum allowed of £12,000. Before you get either you should consider which is better. Lifetime ISA vs Help to buy ISA.
  • Help to buy equity loan- gives you up to 40% as a 5-year interest-free equity loan. You begin to pay interest at 1.75 % after the fifth year and 1% plus RPI for every year thereafter.
  • Shared ownership- You can buy between 25% to 75% of the property initially with a shared ownership mortgage and then buy more using a staircasing mortgage.
  • Armed forces help to buy- similar to the help to buy equity loan but specific for the armed forces personnel giving them an increased chance of acceptance.
  • Rent to buy- This is the right to buy scheme on which this guide is currently discussing. A different marketing name is just used. Watch out for this when shopping to avoid missing out on eligible properties due to confusion.
  • Right to buy- allows you to buy your home at a discount price.
  • Preserved right to buy- same as above.
  • Right to acquire- same as above.

You may also be able to use a host of mortgages with the help of your family.

They are a certain type of mortgage known as a family springboard mortgage, they include mortgages from lenders such as the Barclays family springboard mortgage, the lloyds lend a hand mortgage or the post office family link mortgage.

How to improve your credit score for mortgages?

Improving your credit score will ensure you stand a better chance of getting a mortgage with bad credit.

In some cases such as bankruptcy or a debt management plan, the mortgage lenders may want to wait 12 months before they offer you a mortgage with bad credit but you may find some mortgage lenders who may be willing to offer you a mortgage with bad credit before 12 months have elapsed.

Get your credit score:

The first step here should be to get your credit score from one of the credit bureaus to see what it contains.

If there are any errors then you should report this to the credit bureau and they should investigate and then rectify the error.

Get your credit report from all 3 bureaus:

You should then look to get your credit report from all credit bureaus. The reasons why this step is important is because not all mortgage lenders use the same credit bureau.

They may each use different ones and not all will use every credit bureau when generating your credit report to see if you may be eligible for a mortgage.

This means that you may have a mortgage lender who uses equifax and another mortgage lender who uses experian

If there is incorrect information or missing information in one of your credit report then this may be preventing you from being offered a mortgage but you will never know this if you don’t get your credit report from all three credit bureaus and compare them.

Ensure you are on the electoral roll:

Mortgage lenders like to see that you have some registered address on the electoral roll.

They will also like to see that you don’t move about a lot and you have very few addresses on your credit report.

If you have too many addresses on your credit report then this could indicate that you may be involved in something fraudulent.

Avoid missing payments:

It goes without saying, if you want to build your credit score for a mortgage and get away from bad credit then you simply cannot be missing payments or defaulting on your credit agreement.

If you miss your credit repayments this will get noted on your credit report and will give it a negative mark.

Clear all balances:

If you have outstanding balances on your credit report then the mortgage lender may look at you as someone who doesn’t fulfil their credit obligations and you may one day decide not to clear a balance you have with the mortgage lender.

Clearing your outstanding balances will ensure that you look better in the eyes of the mortgage lender and improve your chances of getting a mortgage with bad credit.

John Bate

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.