Getting a bad credit mortgage is difficult but not impossible. Because lenders view you as a riskier borrower, you’ll typically pay higher interest rates and mortgage fees.
You might also need to put down a bigger deposit (possible 15% or more) than someone with an excellent credit score, which may reduce the total amount you can borrow overall.
Some lenders specialise in so-called bad credit mortgages, also known as adverse credit or sub-prime mortgages, which are designed for those with poor credit ratings.
There’s no hard and fast rule of what lenders consider bad credit, and there’s no single credit reference agency that all lenders use.
However, any adverse credit action over the past six years could affect your rating and ability to get a mortgage from a mainstream lender.
When you apply for a mortgage, lenders will want to see that you’ve borrowed responsibly in the past and that you have a good history of repaying what you owe on time. Mortgages are long-term loans, so lenders will want to examine your long-term credit history.
If you’ve had difficulty repaying loans before, you’ll be viewed as a higher risk, which means lenders will usually be more reluctant to let you borrow from them.
Issues that can impact your credit score include:
Late or missed payments on credit agreements
Exceeding your agreed credit limit or overdraft
Falling behind on mortgage payments
Previous repossessions
County Court Judgments (CCJs)
Bankruptcy, debt management plans or individual voluntary agreements (IVAs)
Sharing an account with someone who has debt problems
If you find yourself being turned away by mainstream lenders, several mortgage lenders accept defaults and will be able to offer you a mortgage, although it’s likely to be at a much higher interest rate.
A mortgage broker may be able to help as they are likely to know which lenders are more likely to accept you based on your financial circumstances.
Mortgages for those with bad credit work in the same way as regular mortgages but will usually have higher interest rates and fees.
The higher interest rates on a bad credit mortgage means it will cost you a lot more than a regular mortgage, at least initially.
However, if you take out a bad credit mortgage, providing you keep up with your monthly repayments, your credit score should start to improve over the next two to three years, and you may be able to remortgage to a better rate.
Although remember if you try to remortgage before the end of your initial deal, you'll likely have to pay an early repayment charge (ERC).
When you apply for a mortgage, lenders will check your credit score to understand how well you manage your finances. Your credit score is compiled by several different credit reference agencies (CRAs), with the three main ones being Experian, Equifax and TransUnion.
Each agency will have its own unique method of calculating your credit score, which means your rating can vary across the three.
Experian – poor 561 to 720, very poor 0 to 560
Equifax – poor 0 to 438
TransUnion – poor 551 to 565, very poor 0 to 550
Lenders might work with all three credit reference agencies or with just one or two.
If you’re struggling to get accepted for a mortgage with a mainstream lender because of your credit rating, there are several specialist lenders who will be more willing to accept those with poor credit.
These include United Trust Bank, Kensington Mortgages and Atom Bank.
The first step is to make sure your finances are in as good a place as possible. Try to reduce any existing debts or loans, and pay bills and other credit repayments on time.
It’s also worth reducing your spending where you can and aiming to keep your monthly outgoings consistent. Avoid taking out further credit before applying for a mortgage, too.
Use a free online service to check your credit scores with all three reference agencies. This will let you see any black marks, such as if you’ve missed payments in the past.
If you spot any mistakes, ask the CRA to correct them as soon as possible. You’ll also be able to see whether you are still financially linked to anyone – for example an ex-partner or flatmate.
If your joint account or mortgage is now closed, ask the credit reference agency to remove the financial association.
Simple steps such as making sure you’re registered on the electoral roll and paying bills on time can help improve your credit score, as can remaining in the same address for a number of years and having a regular income.
Consider applying for a credit builder credit card. These typically have a low credit limit and high-interest rate, so it’s important that you repay your balance in full each month.
Used sensibly, credit-builder cards can help you to improve your credit score over time.
Taking the time to save up as much of a deposit as possible will give you access to better mortgage rates and save you money in the long term.
You may find that lenders ask for a 15% deposit or more if you have poor credit, compared to the 5 to 10% you might need if you have good credit.
The best mortgage rates are generally available to people with deposits of 40%, so saving a large deposit can get you a better deal.
If you currently rent your home, consider using a service such as Canopy, Credit Ladder or LOQBOX so that agencies include your regular rent payments in your credit report. This can help improve your credit history.
The more you improve your credit rating, the better deals that will be offered to you, and the wider the range of providers you can consider.
Most lenders will accept a deposit that’s gifted from a family member which can boost your loan-to-value (LTV) ratio and help you to get on the property ladder faster.
But the money must not be a loan, and you must be under no obligation to pay it back to the person who gave it to you.
The family member may have to write a letter confirming the money is a gift and could also be asked to provide bank statements to prove where the money comes from.
If you’re struggling to get accepted for a mortgage due to your credit rating, you could consider getting a mortgage with a guarantor.
Your guarantor will usually need to be a family member who is also a homeowner, and they must be prepared to meet your monthly mortgage repayments if you can’t.
However, you need to tread carefully. If your guarantor is unable to meet the repayments, their own home could be at risk. What’s more, you will be linked financially, so any missed payments will affect both your credit ratings.
Speaking to a mortgage broker who can compare mortgages from across the market can help you find the best mortgage for you. A broker will look at all the options available from mainstream lenders to find the best deal.
They will also approach a range of specialist mortgage lenders for bad credit to help you find one that’s more likely to accept an application given your circumstances.
The first step is to make sure your finances are in as good a place as possible. Try to reduce any existing debts or loans, and pay bills and other credit repayments on time.
It’s also worth reducing your spending where you can and aiming to keep your monthly outgoings consistent. Avoid taking out further credit before applying for a mortgage, too.
Use a free online service to check your credit scores with all three reference agencies. This will let you see any black marks, such as if you’ve missed payments in the past.
If you spot any mistakes, ask the CRA to correct them as soon as possible. You’ll also be able to see whether you are still financially linked to anyone – for example an ex-partner or flatmate.
If your joint account or mortgage is now closed, ask the credit reference agency to remove the financial association.
Simple steps such as making sure you’re registered on the electoral roll and paying bills on time can help improve your credit score, as can remaining in the same address for a number of years and having a regular income.
Consider applying for a credit builder credit card. These typically have a low credit limit and high-interest rate, so it’s important that you repay your balance in full each month.
Used sensibly, credit-builder cards can help you to improve your credit score over time.
Taking the time to save up as much of a deposit as possible will give you access to better mortgage rates and save you money in the long term.
You may find that lenders ask for a 15% deposit or more if you have poor credit, compared to the 5 to 10% you might need if you have good credit.
The best mortgage rates are generally available to people with deposits of 40%, so saving a large deposit can get you a better deal.
If you currently rent your home, consider using a service such as Canopy, Credit Ladder or LOQBOX so that agencies include your regular rent payments in your credit report. This can help improve your credit history.
The more you improve your credit rating, the better deals that will be offered to you, and the wider the range of providers you can consider.
Most lenders will accept a deposit that’s gifted from a family member which can boost your loan-to-value (LTV) ratio and help you to get on the property ladder faster.
But the money must not be a loan, and you must be under no obligation to pay it back to the person who gave it to you.
The family member may have to write a letter confirming the money is a gift and could also be asked to provide bank statements to prove where the money comes from.
If you’re struggling to get accepted for a mortgage due to your credit rating, you could consider getting a mortgage with a guarantor.
Your guarantor will usually need to be a family member who is also a homeowner, and they must be prepared to meet your monthly mortgage repayments if you can’t.
However, you need to tread carefully. If your guarantor is unable to meet the repayments, their own home could be at risk. What’s more, you will be linked financially, so any missed payments will affect both your credit ratings.
Speaking to a mortgage broker who can compare mortgages from across the market can help you find the best mortgage for you. A broker will look at all the options available from mainstream lenders to find the best deal.
They will also approach a range of specialist mortgage lenders for bad credit to help you find one that’s more likely to accept an application given your circumstances.
The best bad credit mortgage rate for you will depend on your circumstances and the financial issues that have resulted in your poor credit rating.
If you’re worried about your credit history but want to apply for a mortgage, it's often worth speaking to a mortgage broker who can assess your financial situation and apply to lenders that may be more likely to consider you.
A mortgage adviser will be able to compare deals from different lenders to find the best bad credit mortgage rate for you.
Defaults will stay on your credit file for six years, even if you pay off your debt in full, lenders will be able to see them when you apply for a mortgage.
Some people might prefer to wait until any defaults or other adverse credit has disappeared from their credit file before applying for a mortgage.
If you’d prefer not to wait that long, make sure you weigh up both the pros and cons of applying for a mortgage with bad credit.
A sub-prime mortgage is simply another name for a bad credit mortgage, which is designed for those with poor credit ratings.
You can check your credit history for free. This guide explains how credit records work and how to check them yourself.
All credit applications appear in your credit file. So, if you’re rejected, this can negatively affect your score, and being rejected by lots of lenders can significantly damage your rating.
For this reason, it’s best to only apply for deals you think you have a good chance of getting, and to space out your credit applications by three to six months.
A successful application can also change your score – this could be an improvement as you’ve got a mortgage or a temporary drop because you have more debt.
Yes, if you keep up with the repayments every month, your credit record could improve.
When you’ve paid off a part of your mortgage, you may then be able to remortgage to a better deal.
If you have bad credit you will usually need a higher mortgage deposit than other borrowers - usually at least 15% of the purchase price.
Use the links below to find out about other mortgages
