Bad credit mortgages

Learn about how to get a mortgage if you have less-than-perfect credit.
Stephen Maunder

Getting a mortgage with bad credit can be tough, especially if you have defaults, county court judgments (CCJs), individual voluntary arrangements (IVAs) or a bankruptcy in your credit history - but it's not impossible.

This guide offers help and advice around how to get a mortgage with bad credit, but it's often helpful to talk directly to an impartial mortgage broker who can advise on your individual situation.

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Can I get a mortgage with bad credit?

It's often possible to get a mortgage with a less-than-perfect credit history, although your options may be limited.

Lenders conduct a credit check on anyone applying for a mortgage. However, some black marks on your credit history will carry more weight than others, depending on the amounts of money involved and how much time has passed.

If you have a bad credit history, some high-street banks may refuse to give you a mortgage outright. Building societies can sometimes be more flexible and there are also specialist bad-credit mortgage lenders, some of which cater specifically for people who've faced illness, divorce or other difficult life events.

Specialist lenders tend to be more flexible when assessing your mortgage application, but they often charge much higher-than-average interest rates and require larger deposits in return.

How to get a mortgage with bad credit

If you have a poor credit history, there are a number of steps you can take to improve your chances of getting a mortgage.

  • Give it time: blemishes on your record could be seen as less serious over time, especially if your financial situation has improved.
  • Consider your partner's credit history: buying with a partner will mean their credit history gets taken into account as well as yours.
  • Repair your credit history: establish a pattern of consistent payments and responsible credit usage.
  • Present as a lower risk: apply when you have a stable income and try to offer a high deposit, which may mean looking at cheaper properties.
  • Be honest: mortgage lenders will conduct thorough searches, and trying to hide adverse credit will look bad.
  • Have an explanation: lenders will be interested in why you got into financial trouble and what you've done to remedy the issue since then.

Understanding rates on bad credit mortgages

It can be difficult to compare bad credit mortgage rates, as different deals will be available to you depending on your personal credit history.

Deals that allow for CCJs and IVAs, for example, will have specific rules around how long ago an IVA has to have been satisfied, and how many CCJs you can have had in recent years or months.

Ultimately, an applicant with a blip on their credit report which has now been resolved is likely to be able to obtain a much better rate than somebody with serious outstanding issues. So while some 'bad credit mortgages' will be fairly accessible to customers with poor credit history, some can be much harder to secure.

As well as having higher initial rates, deals available to people with credit problems may come with higher up-front fees. With this in mind, it's important to analyse the full cost of the mortgage before choosing a deal and take advice from a mortgage broker.

Should I buy a house with bad credit or wait to improve my score?

While it may be technically possible for you to get a mortgage when you have a poor credit history, you also have the option of trying to improve your credit score first, in order to increase your chances of getting accepted for a 'normal' mortgage. Here are some of the pros and cons of getting a bad credit mortgage:

Pros

  • Choice: applicants with more minor credit issues are likely to have a decent range of mortgage options
  • Faster home ownership: you'll start your journey to homeownership sooner if you take out a bad credit mortgage instead of waiting

Cons

  • Higher rates: you'll often have to pay much higher interest rates if your credit history is poor
  • Bigger deposit: you might have to put down a bigger deposit to secure a mortgage with bad credit

Find out more: how to improve your credit score

Remortgaging with bad credit

It's usually possible to remortgage with bad credit, but it's worth trying to improve your credit score if you have time.

Making your monthly mortgage repayments on time will help you build a stronger credit history (assuming all other debt is also paid back on time). If your credit rating has gone up after a period of time with a specialist lender, it may be possible to remortgage with a high-street lender.

Whether you're able to secure a better rate will depend on your credit score, your income, your property's current value and the equity you hold in it. The prospective lender will also run affordability calculations to ensure you'll be able to afford payments at the new rate in the future.

A range of remortgaging deals are available on the high street, with rates similar to those offered to home movers, so it's worth shopping around. You generally have to pay fees to remortgage, which you should also factor into your decision-making.

Types of bad credit: missed payments, IVAs, CCJs and bankruptcies

When considering your mortgage application, lenders tend to look not just at your credit rating, but the details of your credit history. The lender will want to know what happened, when, and the circumstances. A missed utility bill will be judged differently from a County Court Judgement, for example.

Criteria will also vary from lender to lender, so it may come down to finding one suited to your circumstances.

We've explained the main types of bad credit and how they might affect your mortgage application below - just click on the headings to find out more.

Checking your credit score

Whether or not you think these factors apply to you, you should always check out your credit report before applying for a mortgage.

The three biggest organisations for this are TransUnion (formerly Callcredit), Equifax and Experian. If you're concerned, it's worth checking how you fare with all three companies, as they all score slightly differently.

Once you have your report(s), consider what you can do to improve your credit rating, and check that all the information on record about you is correct.

In some cases, it will be better to wait until your credit history has improved so you can access more affordable mortgage deals. A good mortgage broker will be able to advise you on what mortgage deals you're likely to be accepted for or whether you're better off waiting.

It's worth being cautious about applying for a mortgage if you think you might be rejected. Every time you make an application for credit, it gets recorded on your credit history, and unsuccessful applications can bring down your score.

If you're applying for a mortgage in principle, lenders may be able to conduct a 'soft check', which does not show up on your record. However, be aware that a soft check may not uncover everything in your history, so your mortgage application could fail if issues come to light later.

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