Obtaining a mortgage with bad credit

Finding a mortgage with bad credit can be difficult and has to be approached carefully. Due to the shortage of lenders available in this market, getting the application right the first time is very important. Having the experience of a specialist adverse credit mortgage broker will greatly enhance your chances of success.

I specialise in helping individuals with adverse credit histories find the right mortgage solutions. My expertise in helping client navigate the complexities of bad credit mortgages will ensure that you get the best possible outcome. 

For a free no obligation chat, get in touch today.

Can I get a mortgage with a bad credit?

It is possible to get a mortgage with bad credit, but it is something which should be approached with great care. Many high street lenders will reject mortgage applications where credit issues are present, so understanding which lenders to approach is key. Having too many mortgage applications rejected will further damage your credit rating.

Credit issues come in all shapes and sizes, from a minor late payment up to bankruptcy and repossession. The less serious (and frequent) your credit issues are, the easier you’ll find it to get your mortgage application accepted. Having said that, I’ve helped people with severe credit issues including bankruptcy and repossession cases to get accepted.

Which lenders will give a mortgage with bad credit?

For the majority of credit issues, you will struggle to get a mortgage with a high street lender due to their strict lending criteria. For a small credit issue such as a late (non-mortgage) payment several years ago, with a good excuse, you may have a chance. However, randomly applying with highstreet (or specialist) lenders without knowing their lending criteria can harm your chances of success overall, as repeated application rejections will further damage your credit file.

How will bad credit affect my mortgage application?

Having credit issues when applying for a mortgage will be a red flag for most high street lenders, and likely result in a rejection. There are several specialist lenders who will accept you with bad credit on a mortgage application. Knowing which lenders these are, and what the specifics are around the particular credit issues within their lending criteria is key.

I specialise in adverse credit mortgages and have a complete list of lending criteria and will match you with a lender who accepts the number of, and the type of bad credit marks you may have on your file.

Do you have to declare a bad credit issue on your mortgage application?

Yes, definitely. Any debts or bad credit marks must be declared when applying for a mortgage. It is incredibly important, and a legal requirement, to be completely truthful when applying for a mortgage. In addition, the lender’s credit checks will almost certainly identify any debts registered to you, including if any missed payments or defaults have been registered against you.

How can I improve my credit score?

The first thing to do is to download a copy of your credit file from Check My File as they provide data from three credit reference agencies – Equifax, Experian & TransUnion – so it is a good place to start to get an overview of your credit history. 

Here are a few tips that you can focus on to improve your adverse credit before a new mortgage application. 

1. Review Your Credit Report: Obtain a copy of your credit report from major credit bureaus and check for errors. Dispute any inaccuracies to ensure your report is accurate. 
2. Pay Down Debt: Focus on paying down high-interest debt and reducing your overall debt-to-income ratio. 
3. Make Timely Payments: Ensure all your bills and debts are paid on time to demonstrate financial responsibility. 
4. Avoid New Credit: Refrain from opening new credit accounts or taking out loans before applying for a mortgage. 
5. Seek Professional Advice: Consult with a financial advisor or credit counselor for personalised strategies to improve your credit score.

It may be that once I have identified a lender, we get copies of your credit file directly from the agency the lender uses to make sure your credit history is OK for that particular lender.

How long after a credit issue can you get a mortgage?

The amount of time between the adverse marks on your credit file and your mortgage application is crucial.

For example, if you had a CCJ or Default that was registered more than 6 years ago, you could get a mortgage today without a problem. However, if they were 3 to 6 months ago, it would be much harder to get a mortgage – though not impossible, as I have lenders who would consider you even in these circumstances.

If you are in a Debt Management Plan, some lenders will only lend if it finished 12 months ago, whereas others say it must have been running for 12 months but does not have to be cleared. And some lenders even say there is no minimum term it has to have been running.

Take a look at our other adverse credit services for information on Bankruptcy and IVAs

Does your bad credit need to be cleared before you can get a mortgage?

No they do not. Although clearing any bad debt may help your application, the main issue is the fact that you actually had the issue in the first place. A lender will likely look at an outstanding credit issue such as an unpaid debt and a cleared default in the same way – the issue is you defaulted or missed a payment on a credit agreement.

How much can you borrow with bad credit?

This really depends on what the particular credit issue is, and the circumstances of it. 

Generally for a standard property you could borrow up to 95% with poor credit, if your credit history has been OK for the past few years. This is where time is important as the shorter the period between credit issues and the mortgage application, the more deposit you will likely have to put down.

If your bad credit is related to a default, any defaults registered over 2 years ago can be ignored up to 85% loan to value and do not have to be repaid. If they were registered over 36 months ago, you could borrow up to 95%. However defaults are just one type of credit issue. It may be more difficult to borrow more if the credit issue was a CCJ or bankruptcy. 

The important thing to remember when looking at your credit file is the date the credit issue was registered and the amount. When they were cleared is important to some lenders as they will not lend unless they have been paid off before making a mortgage application.

What deposit will you need for a mortgage with bad credit?

The LTV and required deposit required will largely come down to the specific circumstance of your credit issue, as well as other factors on your application. Generally, the longer ago the credit issue was registered on your credit file, the lower the required deposit will be. Whether the bad credit mark is cleared will also play a big factor in the size of the deposit required.

Different lenders will have their own rules around required deposits for mortgages with bad credit, but the figures below can be used as a guide for defaults:

How a mortgage advisor can help with bad credit

I understand exactly which lenders will accept mortgage applications from those with bad credit – at various levels – and the exact lending criteria for each. Once I’ve discussed your individual circumstances with you, I can match that with a lender to find you a mortgage.

I have decades of experience in helping those with defaults to get a mortgage, and ensuring they get the application right first time, as well as getting the best deal available for them. 

For more information or to discuss your application, please call me on 01494 526 400 or complete my online enquiry form today

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