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Bad credit mortgages

There is such a thing as a mortgage for people with bad credit, but do some research before you apply to avoid further damage to your credit score

So, you’ve got a bad credit score. Perhaps you’ve missed a few credit card payments, have had a County Court Judgment awarded against you or have previously been made bankrupt.

This may be the case, but that doesn’t necessarily mean that you can’t get a mortgage. Bad credit mortgages are available but that doesn’t mean they’re easy to obtain either.

Bad credit mortgages

Interest rates on bad credit mortgages are higher than standard mortgages and you will probably need a larger deposit, but there are still options available.

They don’t work in conjunction with any government scheme such as Help to Buy or Shared Ownership and usually don’t accept applications from people made bankrupt in the past six years – unless your credit file is now clear with no defaults showing.

Applicants will still need a steady income and this should be above £15,000 per annum, with the deposit making up at least 15% or more of the property value.

How do I know if I have bad credit?

You will probably have bad credit if:

  • you’ve been declared bankrupt, or have had a debt management plan, IVA etc;
  • you have missed credit card, loan or mortgage payments or if you’ve made late payments;
  • you have County Court Judgements against you.

It is always a good idea to have a look at your credit report before you apply for any kind of mortgage – bad credit or not.

See below for some tips to help improve your credit rating.

What are bad credit mortgages?

Bad credit mortgages can help people with a poor credit rating get a mortgage; they are also known as sub-prime mortgages and adverse credit mortgages.

Bad credit mortgages | If you have bad credit, taking out a mortgage may not be the next step, consider your options

If you have bad credit, taking out a mortgage may not be the correct next step for you, so consider your options thoroughly

Bad credit mortgages are the same as standard mortgages, but they are available to people who would fail a standard lender credit check.

Interest rates and charges tend to be higher as people with poor credit ratings are deemed to be a higher risk.

How do bad credit mortgages work?

Bad credit mortgages are the same as standard mortgages, but they have higher interest rates and charges.

You will also probably need a larger deposit of at least around 15% or more of the value of the property. If you can get to the 30% mark or higher that would be better for your chances of being approved.

Many types of bad credit mortgage deals are available, for example, fixed, variable, and discounted rates, but that doesn’t mean they will have better rates than a standard mortgage. The opposite of this is actually more likely to be the case.

The reason for this is that the mortgage provider has less reason to loan you a larger amount of money at a lower interest rate if your credit history is poor.

The risk on their side is mitigated by the higher interest rate and larger deposit you pay.

After a few years of paying a bad credit mortgage on time it should ‘repair’ your credit rating sufficiently to be able to move to a standard mortgage at a lower rate.

Where can I get a bad credit mortgage?

Before looking for any mortgage it is a good idea to check what is on your credit reference agency file to see if you have any credit problems.

It’s essential that you compare the total cost of different mortgages, taking into account fees and charges too.

You should also avoid making lots of applications for credit, as these searches will affect your credit rating.

Using a price comparison site can help you get an idea of what different rates might be available to you, without having to spend hours online or on the phone.

A mortgage broker, rather than a standard high-street retail bank, might be a better option to speak to as they can give you an overview of the whole market and see which providers might be best for you.

You may also wish to speak to your current account provider to see what mortgages they offer and explain to them your credit history situation.

If they have no products suitable for you, then at least you know without having to make an application.

How can I improve my credit rating?

There are some things you can do, which could improve your credit rating and possibly increase your chances of being approved for a bad credit mortgage.

  • Make sure you’re on the electoral roll.
  • Pay your bills on time and in full.
  • Close any credit accounts you don’t use.
  • Consider applying for a credit builder credit card to improve your credit rating.
  • Check your credit report regularly to make sure that all the information is correct. If you notice any errors, contact the relevant lender and ask for them to be corrected.

Remember, doing all of these things is no guarantee that your credit score will have improved enough to be approved for a bad credit mortgage. It takes time for your credit score to recover if you have been rejected multiple times or missed multiple repayments.

Each mortgage provider will have their own criteria for eligibility, but generally these amendments to your personal finance habits could help improve your score.

Find out more about credit reports here and see if your score can tell you more about your finances and what you can do to improve your credit rating.

Check your credit rating

Checking your credit score could save you the trouble of applying for a bad credit mortgage and having the rejected application show up on your profile to future credit and mortgage providers.

Use our comparison table below to find a credit reference agency who can show you your credit report and score.

CompanyPriceOther information Apply
30 day free trial
£14.99 a month
Freephone UK call-centre
Email & SMS alerts
Proceed
30 day free trial
£14.95 a month
Weekly alerts
Customer support team
Proceed
30 day free trial
£7.99 a month
Three credit agency checks
Debt advice centre
Identity theft protection
Proceed
£19.99 One off credit report check
No monthly subscription
Proceed
30 day free trial
£7.99 a month
Unlimited credit report access
Alerts and tools
Support to improve credit rating
Proceed
7 day free trial
£14.99 per month
Daily web monitoring
Instant identity notifications
Unlimited credit report access
Proceed

See if you can get a bad credit mortgage through our mortgage provider, Seico Mortgages: 0800 840 6500

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