Can you get a mortgage with bad credit?
Yes, but your options will be limited. Expect to put down a larger deposit and pay higher interest rates if you want to get a mortgage with bad credit.
It is possible to get a mortgage if you have bad credit, but you will have less choice over the kind of loan you’re able to apply for.
Every time you apply for credit, a lender will look at your credit history before deciding how much to lend you or whether to give you any money at all.
With mortgages, the best rates are reserved for those with excellent credit scores, but it is still possible to get a mortgage even if your credit score isn’t sparkling.
Defaults on repayments, county court judgments (CCJs), or individual voluntary arrangements (IVAs) will all impact your credit score and your ability to get a mortgage. But although your options might be limited, it’s not impossible to get a mortgage and to buy your own home.
How bad credit mortgages work
The type of mortgage you can get will depend upon your credit history and the amount of money you want to borrow.
If you have a bad credit history you might not be able to get a mortgage from a high street bank or a mainstream lender.
If this is the case you may be able to go to a specialist bad credit mortgage lender. These lenders are usually more flexible but they may require a bigger deposit and charge higher interest rates than a standard lender.
Aside from the higher costs involved, bad credit mortgages work the same way as mortgages for borrowers with good credit. You may also see them being called adverse credit mortgages or sub-prime mortgages.
How to get a bad credit mortgage if you are a first-time buyer
The terms and conditions for first-time buyers are often stricter because they haven’t had a mortgage in the past.
However, there are several mortgages available for first-time buyers with bad credit. Each lender will have its own criteria for the borrowers it will lend to, including whether it will accept borrowers with CCJs, IVAs or bankruptcies and how long ago these were issued.
How to remortgage with bad credit
You can also remortgage your property if you have bad credit, although you’re unlikely to be able to do this with a mainstream lender.
There will also be strict criteria you need to meet to be accepted for a bad credit mortgage when remortgaging. Again, the policy will vary between lenders and individual mortgage deals.
How to get a mortgage with bad credit
If you want to apply for a bad credit mortgage, there are a number of things you can do to boost your chances of being accepted:
Most leaders will specify a time period between having an IVA or a CCJ and the time you can apply for a mortgage. Marks on your credit score can also be seen as less important the longer ago they occurred.
Put down the biggest deposit you can
The higher your deposit, the better your chances of being approved by a lender. Learn how to save for a mortgage deposit so you can start building now.
Apply when you have a regular, stable income
You’ll need to show the lender you have a regular income and can meet the repayments.
Boost your credit history
Cutting back on your outgoings, having money left over at the end of the month and building up a pattern of regular repayments can all improve your credit score.
Lenders will look at you and your partner’s credit histories
If you’re making a joint mortgage application, the lender will take the credit history of both people into account.
What’s the minimum credit score for a mortgage?
There isn’t a set number that you need from your credit score to get accepted for a mortgage.
Instead, when you apply for a mortgage, the lender calculates a score for you. This is the same for any credit, including a loan or a credit card.
The higher your score, the more reliable the lender sees you – and the less risk that you will be unable to pay the loan back.
It will use this score to decide how much to lend you, or even to lend to you at all.
However, it’s important to note lenders interpret information differently and use different criteria. This means that just because one lender could reject your application, it doesn’t mean all lenders will. Most importantly, get advice. Don’t apply for a mortgage without understanding the likelihood of acceptance. Declined mortgage applications will have a negative effect on your credit profile.
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Rebecca Goodman is a freelance journalist who has spent the past 10 years working across personal finance publications. Regularly writing for The Guardian, The Sun, The Telegraph, and The Independent. Read more