Bad credit mortgages

There are fewer high street lenders willing to approve bad credit remortgage applications, but you should be able to find a specialist bad credit (or subprime) lender to help you.

Your best chance is to ensure that the rest of your circumstances match lender criteria well. It will also help the more equity you can offer, or if you top it up with a cash deposit, if you don't hold a lot of equity.

If you've maintained your mortgage repayments well to date, this will also go in your favour, whereas you could struggle to remortgage if not. The longer you keep making your mortgage repayments on time, the higher your credit score will go, and this will go a long way to convincing the lender that you’re a responsible borrower. 

How much equity (the percentage of the home that you own - i.e what you have repaid, compared to the current value of the home) you’ve got can also be an important factor here. Those with a large amount of equity in their home will typically get a remortgage more easily, even if they have bad credit, as there is less risk for the lender.

Credit scores tend to change fairly slowly over time, and if you have very bad credit, it can be years before your file is in good shape. However, there are a few quick wins that will improve your score:

• Register on the electoral roll if you haven’t already and ensure your address is correct

• Check all details are correct on your credit file, and close old accounts, especially if they are linked to ex-partners etc who may have their own credit issues

• Reduce your debts

• Pay all financial responsibilities on time

• Don’t apply for any more credit

It’s fairly easy to sign up to a credit reference service to receive ongoing access to your credit file. This way you can check in on it regularly. Some banking apps now include a section where you can view your score and recommendations on how to improve it, but bear in mind they will typically be associated with just one of the three main agencies.

Some companies, such as Check my File, allow you to view all of the information held about you by all of the credit agencies, in one place. This can be useful, as lenders tend to use different agencies based on their preference, so it’s good to get an overall picture. 

It depends on your circumstances, and a mortgage broker will be best placed to help you make this decision if you’re struggling to. In some cases, you won’t have a choice but to wait until your score has increased, especially if your credit issues are very severe. 

Most people with less severe or older credit issues are able to find a suitable mortgage, but will pay a higher rate of interest. Buying a house with bad credit or waiting until your file is in better shape will be down to personal choice, so you'll need to weigh up whether paying more now and owning a home sooner is more important than potentially paying less in interest and charges in the future.

The documents you need will typically be the same as any other application, however, if you have particular reasons for bad credit that the lender is willing to accept, such as missing bills due to being in hospital, for example, you may also need to provide evidence of them. 

You will also need:

• Three months of payslips if employers and two to three years of accounts and tax calculations if unemployed

• Three to six month’s worth of bank statements

• Photo ID

• Proof of address - this will be checked against the electoral roll so make sure everything aligns

The loan that lenders are willing to provide will be based predominantly on affordability, and they tend to use a multiple of your disposable income to calculate the figure. For the average borrower, this is between four and four and a half times your annual income, but lenders may choose to reduce this multiple slightly if you have poor credit.

You can, but it you may pay more interest than if you both had good credit. That said, it could also increase your chances of acceptance if your home buying partner has a strong credit score.

If one applicant is buying a house with bad credit then the joint applicant's credit record could also be affected by association, so it's important to take advice and consider your joint position carefully.