When you apply for a mortgage the lender will ask whether you’ve had past credit problems, including any defaulted credit card and loan payments, or CCJs.

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If you have missed repayments on bills, credit cards or loans in in the past, you’re likely to be asked for extra evidence that you can afford to pay a mortgage now.

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The lender might want to see more payslips and bank statements than it would if you had no past credit problems.

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You’ll also need to provide everything you would for a standard mortgage application:

• Details of your salary and any other income

• Details your partner’s income, if you’re buying with someone else

• How much deposit you have

• Details of all your outgoings

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How to get a mortgage with bad credit

Take some steps in the months before you apply for a new mortgage to increase your chances of being accepted.

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Sort your finances

Postpone buying a home until you’re in a stronger financial position.

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In the meantime, build your credit rating back up by making repayments for bills and credit cards on time. And save more for your deposit.

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Although that could take months or even years, it’ll give you access to more competitive mortgage rates in the future, which will save you money in the long run.

Check your credit record

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You can use free services like Experian or Credit Karma to look at your credit report and see when you’ve missed payments or had CCJs.

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These services will also show you a credit score, although this is just to give you a general idea of your creditworthiness. Each lender will score you differently against their own criteria.

 

Rebuild your credit score

Once you’ve assessed your credit problems, you can work on fixing them.

Anything from a single missed payment to bankruptcy can affect your ability to get a mortgage. You should start pushing up your credit score well in advance of a mortgage application by making all repayments for bills and credit on time.

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One way to do this is with a credit builder credit card, but only once you feel able to handle the responsibility and repayments.

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Save for a bigger deposit

Low-deposit mortgages often have tighter acceptance criteria. The more deposit you have, the better chance you have of finding a mortgage you’re eligible for.

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Lenders might ask that you have a larger deposit if you have bad credit – for example around 20-30%, instead of 5-10%.

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That’ll give you a lower loan-to value (LTV) of 70-80%, which can be easier to get accepted for.

Accept help from family

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If saving that larger deposit is a struggle, most lenders will accept a deposit if it’s ‘gifted’ from a family member. This can’t be a loan and you must be under no obligation to repay the money.

In the future you might find you’re in a position to repay the money. There’s nothing stopping you from ‘gifting’ the money back to them then.

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Get a guarantor

If you’re unable to get a mortgage because of bad credit, a family member might be willing to be named as a guarantor.

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You both need to consider the implications. The guarantor will have a charge placed against their own home. That means if you default on your mortgage payments, your guarantor will be asked to pay. They could even have their house repossessed if they can’t.

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You and your guarantor will be tied to each other financially. Any missed repayments in the future will affect both your credit ratings.

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Even if you have a guarantor, you’ll still need to be credit checked to get a mortgage. You could still be turned down due to a poor credit rating.

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Speak to an advisor

A mortgage advisor will help you find the right product for your needs and help you with your application. They could help you to find a deal you’re likely to be accepted for with past credit issues.

Should I apply for a mortgage with bad credit?

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A mortgage lender will credit score you as part of the process of deciding whether to offer you a mortgage and defaults within the last six years will show up on your credit report, Try it FREE for 30 days, then £14.99 a month – cancel online anytime’.

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Because of this, it’s best to wait for credit problems to drop from your credit file, all while making payment for other bills and finance on time to strengthen your credit score.

But that could take months or years. If you’d rather apply immediately, there are a few advantages and disadvantages.

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Advantages

• Quicker – If you find a mortgage now you won’t have to wait years before moving to your new home

• Buy at current house prices – If you do manage to get a mortgage with adverse credit, you’ll avoid future house price rises

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Disadvantages

• Bigger deposit needed – lenders might be unwilling to lend as much as they would if you had no past credit problems

• Higher interest rates – you’ll have less choice of mortgages so interest rates might be higher

• Broker fees – a mortgage broker will help you apply to lenders that are more likely to accept you. But you’ll pay for their services

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What’s the lowest credit score for a mortgage?

There’s no cut-off credit score you need to achieve to get a mortgage. That’s because there’s no such thing as a single credit score that all lenders use. When you apply for a mortgage, the lender will look at your credit record and apply its own credit scoring.

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But there are some things you can do to improve your credit score with all lenders:

• Pay utility bills on time

• Don’t miss any repayments for loans or credit cards

• Pay off loans and credit cards if you can – Close down unused credit, for example a credit card you no longer use

• Get on the electoral register

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Looking for a bad credit mortgage then contact us here

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