Getting a Mortgage With Bad Credit or a Low Credit Score

When you have bad credit or a low credit score, you might be certain that you won’t be able to get a mortgage. While it’s true that some lenders will only favour customers with a pristine credit score, it’s a huge misconception that bad credit automatically disqualifies you from obtaining your dream home. 

The key to being approved for a mortgage with bad credit or a low credit score is to find a mortgage lender who specialises in helping customers with this type of credit profile. They will be best placed to understand your position and will have a range of products designed to suit your circumstances. In this article, we’ll take a look at the process of finding a bad credit mortgage, getting approved and also, how to improve your credit score going forward. 

What is a Bad Credit Mortgage?

Bad credit mortgages are simply standard mortgages certain lenders offer to people who may fail credit checks elsewhere. They are more commonly called adverse credit mortgages and are designed to help people with poor credit histories get on the property ladder.

Interest rates and charges tend to be higher, and you will need a steady income and often require a deposit of more than 15% of the property value as lenders deem people with poor credit ratings to be a higher risk. However, paying back a mortgage for poor credit on time should help to repair your credit rating, which may enable you to move to a standard mortgage at a lower rate in the future.

Things to Do Before You Start Mortgage Shopping

Before you start the hunt for the right mortgage, there are some things you can do to improve your credit score and your chances of being accepted when you do apply. You don’t necessarily have to do these things, but the more you can do to improve your position and credit score, the better. 

Get Your Credit Reports Together and See What Lenders Will See

This might be a task you’ve been putting off because you are embarrassed about your bad credit or are scared to see your credit score. Don’t worry, you are not alone. Thousands of people in the UK have bad credit and more and more lenders have shaped their products and services to help them. Taking a deep breath and ripping off that plaster to see your current credit position is the best thing you can do and the first step towards getting to your dream home. You can get your credit score from many places, including Experian, Equifax, ClearScore and Callcredit. 

Repair Your Credit

No matter what your credit score, there are many things you can do to improve it. Here are some ideas to help you: 

  • Go through your credit report carefully and fix or dispute any errors
  • Always pay bills on time
  • Keep your credit utilisation ratio below 30%
  • Keep old credit cards open (but cut up the cards!)
  • Pay down your other debts (credit cards often command the most interest so focus on these first)
  • Don’t apply for or take out any further credit  
  • Avoid any credit searches on your file as these can put lenders off


Raise as Much Deposit as Possible to Reduce Your Risk Profile

Lenders know that they are taking on a bigger risk when they lend to customers with bad credit than they would lending to customers with a good credit rating. If you can, raise as much deposit for your mortgage as you can. A larger deposit can help to offset some of the risk involved for lenders.

Find the Right Mortgage Broker

The best way to find a bad credit mortgage is to use a mortgage broker that has access to the whole market. This means that they will have access to the most favourable products that suit your circumstances. By working closely with an experienced mortgage broker, you can often save money on your monthly payments as they can find mortgages with the most competitive rates. One thing to bear in mind however is that a bad credit mortgage will have higher interest rates than a regular mortgage but your broker will try to find you a great deal regardless. 

“Here at Alextra we don’t discriminate, we are committed to helping all of our clients find the right mortgage provider regardless of your credit status. We will take the time to sit down with you to find the best possible solution and, if we can’t help you right at this moment in time, we will provide you with some hints and tips on what areas of your financial profile you need to focus on or could do with some work, in order for you to achieve your end goal” – Lisa Boulton, Mortgage Advisor, Alextra Mortgages. 

How Lenders Assess Applications

Lenders consider two additional eligibility criteria when reviewing an application for a bad credit mortgage:

  • How severe the issue with bad credit is. Missed bill or loan payments are looked at less harshly than a more serious problem such as recent bankruptcy. 
  • The date the negative mark was registered on your credit report – the older the adverse mark, the better. 

Bankruptcy - What Can I Do?

If you have been made bankrupt, you will be unable to apply for a mortgage until you have been discharged. This usually takes around 12 months. Most lenders will only accept an application three to four years after you have been discharged and you must also have built up a good credit history during that time. It’s also important to note that mortgages for bad credit won’t work in conjunction with government schemes such as Shared Ownership and are rarely available to those made bankrupt in the past six years – unless your credit file is now clear with no defaults showing.

Home Repossessed Recently - What Are My Chances?

If you’ve had a home repossessed within the past three years, you should still be able to get a mortgage but the interest rates may be very high. The good news is that these rates should decrease steadily as time goes on. The longer you can maintain financial activity without any problems, the lower the risk of lending and the lower the rate of interest. 

How Our Bad Credit Mortgage Experts Can Help

A mortgage application is all about getting it right first time and that’s why you need Alextra Mortgage brokers to take away all the hassle of dealing directly with mortgage lenders. We put the personal touch into the mortgage process, helping you get your finances back on track and those keys to your next home in your hand.

The guidance provided within this website is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK.
Alextra Wealth Management Limited which is an Appointed Representative of TenetConnect Limited, which is authorised and regulated by the Financial Conduct Authority. 
TenetConnect Limited is entered on the Financial Services Register (www.fca.org.uk/register) under reference 149826.