Bad Credit Mortgages – Our Guide to Getting a Mortgage with a Low Credit Score

If you’re hoping to buy a home and you’ve got a less than favourable financial history, you might be worried about your mortgage prospects. So this is our guide to bad credit mortgages.

First up, what is ‘bad’ credit?

Let’s address the big question first. What exactly is ‘bad’ credit? When we say ‘bad credit,’ we mean all sorts of things, but there are typically two types of potentially problematic scenarios:

  • Those with a low credit score (based on the information held by credit reference agencies)
  • Those with little or no credit history – for example those who’ve only just turned 18, have been living outside the UK for the past years or more or who have simply not ever used credit

When we refer to ‘bad credit mortgages’ throughout this guide, we’re talking about mortgages for those who don’t have good credit scores.

Why does a credit score matter for a mortgage?

A credit score is just one thing that a lender will look at when considering you for a mortgage. In addition, there are often in depth affordability checks.

But a credit score is important to a mortgage lender for several reasons:

  • It highlights any existing credit you have, enabling the lender to understand your existing financial commitments a little better
  • It highlights any problems with making repayments you might have had in the past – or makes it clear if you’re a good repayer

So a credit score is important information for a lender when trying to assess how likely you are to make repayments on your mortgage as agreed.

So, come on, can I get a mortgage with bad credit?

Let’s cut to the chase.

You may be able to get a mortgage with bad credit. We know that’s a bit of a naff answer, but this varies from lender to lender and depending on a number of factors within your credit record.

What is likely is that if you are able to get a mortgage, it will be on less favourable terms than if you were approaching lenders with a good credit history.

What can you do about it?

Start by getting a copy of your credit file. You can get a free credit score from Clearscore or a comprehensive report from all agencies at checkmyfile.com.

Get to grips with exactly what is holding your credit score back and then put in place a plan to fix it.

Lenders can access 6 years of credit history on applicants. But we’re not suggesting it will take 6 years to fix things. Even a couple of years of paying on time could help. Ensuring you’re on the Electoral Register and clearing as many credit arrangements as possible will help.

Guarantor mortgages – another option

If fixing your credit score is too long term an option and you need to be looking more immediately for a mortgage, then a guarantor mortgage could be an option. If you’ve a homeowner family member who could act as a guarantor for you, then this could accelerate your ability to get a mortgage despite bad credit.

A guarantor mortgage essentially means that someone in your family (usually someone who owns a home and has a good credit standing) agrees to foot the bill in the event that you fail to make a payment.

Of course, that does mean that the guarantor’s house is at risk in the event that you fail to mee your financial commitments to your mortgage lender.

Where do I even start?

The main thing to note is that there are still mortgage options for you even if you have a bad credit history. However, you need to start by speaking to a professional mortgage adviser.

Don’t apply for loads of mortgages! This could actually make your credit score worse!

You could apply for a mortgage in principle with a lender if you think you might be borderline. But the best course of action would be to go and speak to a professional and get their advice on the approach to take.

Good luck 🙂

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