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Bad Credit Mortgages - frequently asked questions

If you’re trying to get a mortgage with bad credit, you’ll probably have a lot of questions about exactly how the process works, what credit issues are important and the steps you can take to try and reduce the risk of your mortgage application being declined.

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In this article we’ll take a look at some of the most common questions about bad credit mortgages, to give you a headstart when it comes to understanding your options.

What does it mean to have bad credit?

When we talk about having ‘bad credit’, we normally mean that you’ve had some kind of issues with credit in the recent past that might then affect your ability to get other credit such as a mortgage. This could be anything from a single late payment to more serious credit issues like repossession or even trying to get a mortgage after bankruptcy.

Information about your credit history is stored on by credit reference agencies and lenders can check this information to get an idea of how reliable a borrower you are. If they see that you are regularly getting behind on repayments, have defaulted on credit agreements, or had to make repayment agreements on other borrowing, they will be less likely to offer you a mortgage. Information is normally stored for up to six years.

What is a bad credit mortgage?

The term ‘bad credit mortgage’ may be a little misleading, as it’s not usually a specific product as such, it’s more that lenders will vary their rates and eligibility criteria depending on your credit history. You may be eligible for a standard mortgage for example, but at a slightly higher rate than average to allow for the additional risk that the lender sees represented by your history of bad credit.

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What’s a credit reference agency?

A credit reference agency (CRA) is an organisation that holds information about you and your use of credit. There are three main credit reference agencies in the UK - Experian, Equifax and TransUnion. Each will store information about you slightly differently, and each will give you their own credit score. They all score you on different scales, so what represents a good score with one, may not equate to a good score with another.

What is a bad credit score?

There isn’t one definite ‘bad’ credit score, as each CRA uses their own scale and definitions. The table below shows how this varies between each of the main three agencies:

Keep in mind too that mortgage lenders won’t be looking at the credit scores that you will see when you look at your own reports - they will usually be looking at your whole file and using their own scoring system.

Credit score Fair Good Excellent
Experian 721-880 881-960 961-999
Equifax 380-419 420-465 466-700
TransUnion 566-603 604-627 628-710

Can I get a mortgage if I have bad credit?

It depends on the type of credit issues you’ve had, when they occurred, and the amounts involved. For example, if you missed one payment of £50 on a credit card five years ago, that’s going to have a much smaller impact on your mortgage application than if you had a country court judgement - often called a CCJ - in the last six months. Lenders will also be prepared to take into account the context of the bad credit, so if you had one rough patch due to illness or an accident, they may be more sympathetic to this than consistently poor credit due to poor financial management.

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More Information

Do all mortgage lenders do credit checks?

Yes, lenders will almost always carry out multiple credit checks as part of the application process, as they need to assess the risk involved in lending to you. Typically they carry out three credit checks in total:

  • Initial check at the ‘decision in principle’ stage - this may only be a soft credit check. You can ask in advance whether it will be a soft or hard check.
  • A more in-depth credit check for the full mortgage offer
  • Possibly a final credit check just before completion to make sure that nothing has changed - this may be more likely if it has been a lengthy process

Can I get a mortgage if I’ve been turned down already?

It’s definitely not impossible, but it depends on why you were turned down originally, and how much time has passed. The best thing to do is to check your reports thoroughly and to work with a specialist adverse credit mortgage broker to support you through the process.

Having a mortgage application declined could potentially be a red flag on your credit report, so it makes sense not to rush into a mortgage application in the first instance, but to make sure you feel as confident as possible that you are approaching the most relevant lender for your circumstances.

Can I get a bad credit mortgage with a low deposit?

Potentially. Firstly, it really depends on the circumstances of your bad credit. If it’s a severe or very recent issue, then lenders are going to be much more inclined to insist on a lower loan-to-value ratio in order to mitigate the risk. If it’s something less serious then it may not be viewed so harshly, and you’ll probably still be able to qualify for the standard LTV requirements. Typically this means a 10% deposit, possibly 5% with some lenders.

If you’re able to get together a bigger deposit, this usually opens up more competitive rates, so it might be worth saving for longer if you can.

Will I need a guarantor?

You don’t need a guarantor as standard for a poor credit score mortgage, but if you’re really struggling to find a lender or have a very small deposit, then it could be an option to consider. A guarantor mortgage is where a guarantor - normally a close family member such as a parent - agrees to guarantee your mortgage. They are normally required to be a homeowner as the mortgage is secured against their own home. This means that if you default on your mortgage, their home is at risk, so it’s not something to enter into lightly unless you’re very confident about your ability to meet your repayments.

Are bad credit mortgages more expensive?

Yes, you’ll normally find that you pay a slightly higher interest rate on a bad credit mortgage, depending on the severity of the credit issue, the lender, and the rest of your circumstances. The good news is that you’re not stuck with this higher interest rate for the whole term of the mortgage - once you’ve got a couple of years or regular repayments under your belt and have built up a bit more equity in your home, you should be in a stronger position to remortgage to a better deal.

Using a broker will also make sure you’re getting the very best deal and not paying over the odds.

Should I check my credit records before I make my mortgage application?

Yes definitely. As scary as it can be facing up to bad credit issues, there is really nothing to be gained from burying your head in the sand. Knowledge really is power, and unless you have a clear picture of your finances, you risk being turned down for a mortgage.

Not all mortgage lenders will use the same CRAs to complete their credit checks, so it makes sense to check all three when you’re looking at your own credit records. You can also use a service like checkmyfile, which pulls together information from all three into one place. There is usually a monthly fee to access your information, but you should be able to access free trials.

Will checking my credit report impact my credit score?

No. While many people worry that checking their own credit reports will have a negative impact on their credit score, this is actually a myth. While hard checks carried out by third parties can certainly have an effect, especially if there are lots being done within a short space of time, you can check your own reports as often as you want without it having any effect whatsoever.

In fact, it makes sense to check your credit reports regularly if you are trying to improve your bad credit, as you can then monitor your progress, look for improvements in your credit score, and keep an eye out for mistakes or evidence of fraud.

Does my partner’s bad credit affect my mortgage application?

This depends whether or not they are applying jointly with you. If you’re making the mortgage application on your own, then it won’t have an effect as their credit history won’t be checked as part of the application process. If you are applying jointly however, then yes, you will both be subject to the same credit checks and anything that’s flagged on their credit files will be taken into consideration by your potential lender.

If you are a married couple, it’s worth taking some expert advice about how to proceed. Although it is possible to apply on your own for a mortgage if you’re married, most lenders prefer married couples to make joint mortgage applications and may question why you are applying alone.

Do I need to use a mortgage broker if I have bad credit?

It’s always a good idea to use a mortgage broker, even if you have perfect credit, but it’s even more important if you have bad credit as you may need to be using a more specialist lender that would be harder for you to find on your own. You may also find that some bad credit lenders - Aldermore for example - don’t accept direct applications and will only go via a broker.

What percentage mortgage can I get with bad credit?

This depends on how long ago your credit issues occurred and how serious they were. In some circumstances you might find you qualify for a 90% mortgage or even a 95% mortgage with bad credit, but if the issue is more serious or more recent then a lender might offer to lend you less. If the deposit amount is going to be an issue for you, a broker can help you research lenders who are prepared to be more generous with what they’re prepared to lend.

What’s the lowest credit score allowed for a mortgage in the UK?

There’s not a specific credit score in the UK that guarantees you being accepted or rejected for a mortgage. For starters, each CRA has their own scoring system, and so it’s impossible to say what a good or bad credit score even is generally speaking. Lenders don’t look at credit reports in such a simplistic way anyway - they will look at your whole credit history in the context of your wider financial situation, and will apply their own criteria when assessing the relevance of any bad credit issues.

Which are the best mortgage lenders if you have bad credit?

This really depends on what exactly your credit issues are, and other factors such as your deposit, your income and your other personal circumstances. For some people with bad credit, a regular high street bank might be appropriate, while for others it could be that going to a more specialist, niche lender is going to give you the best chance to secure a mortgage. A broker will be best placed to guide you to the lender that’s right for you.

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