Bad Credit Mortgages: The Ultimate Guide To Getting One

Bad Credit Mortgages

The Ultimate Guide To Getting One



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Getting A Mortgage With Bad Credit

There are many reasons why a mortgage application may be declined, one of which could be a bad credit score.

Check your credit score for free by visiting any of the three major credit reference agencies listed below:

  1. Experian
  2. Equifax
  3. Callcredit

Boost Your Credit Score

You can improve your chances of getting approved for a mortgage by checking your credit report and ensuring that any mistakes are corrected. This can be done by notifying the relevant credit reference agency, either by calling or emailing. The agency will then contact the organisation that provided the erroneous data on your behalf and start investigating. A note will also be added to your credit report to make it clear that the accuracy of the entry is being questioned. You will be notified of the outcome once a response is received from the data provider.

Other factors could still count against your mortgage application. These include the following:

  1. A lack of financial history
  2. CCJs, IVAs, Bankruptcies
  3. Previous history of missed payments/defaults
  4. A lack of electoral roll information
  5. Erroneous address details
  6. Frequent credit applications, especially declined ones
  7. Excessive debt and repayments
  8. Any payday loan information

If you have one or more of these factors appearing on your credit report then you should try to boost your credit rating before applying. There is still hope! Some lenders specialise in providing credit solutions for those looking for a mortgage with less than perfect credit history.

What Is A Bad Credit Mortgage?

This is a mortgage specifically designed for individuals with impaired credit histories including:

  1. County Court Judgements (CCJs)
  2. Mortgage arrears and
  3. Bankruptcy

Bad credit mortgages are also known as credit-impaired, adverse credit, credit repair or complex prime mortgages.

So Can I Get A Mortgage With Bad Credit?

Yes - but this largely depends on your individual circumstances. The best thing you can do to improve your chances and lower the long term cost is to show that you are less of a risk to lenders. You can achieve this by repairing your credit score.

Do I Qualify For A Credit-Impaired Mortgage?

To help answer this question, let’s look at some impaired-credit mortgage lenders currently operating within the UK market:

  1. Bluestone - part-owned by Australia’s Macquarie bank. Bluestone will accept applications from individuals who have been declared bankrupt, provided the bankruptcy order was discharged at least 12 months ago.

  2. Pepper Homeloans - caters for individuals who have experienced a “credit event”. This includes missing payments on a previous mortgage.

  3. Foundation Home Loans - offers buy-to-let mortgages to individuals who have experienced financial problems.

  4. Magellan Homeloans - will consider bankrupts discharged at least a year ago. Someone who had a property repossessed as recently as 13 months ago may be considered for a loan, subject to confirmation that any shortfall has been, or is being, made good or has been forgiven.

  5. Masthaven - considers people who have suffered financial problems, such as one or two missed mortgage payments, or who have county court judgments against them, depending on how big and how recent these CCJs are.

    Other specialist lenders include:

  6. Kensington Mortgages

  7. Precise Mortgages

  8. Vida Homeloans

The table below details some eligibility requirements as well as other financial firms that consider individuals with impaired credit histories:

Provider Accepts people with poor credit score? Accepts people with CCJs? Accepts people with IVAs? Accepts people with bankruptcies?
Accord Mortgages No Up to £500 Satisfied Over 3 Years Discharged Over 3 Years
Aldermore No None in last 3 years No No
Bank of China (UK) No Up to £300 No No
Buckinghamshire BS No Up to £500 No No
Cambridge BS Yes Up to £5000 No No
Digital Mortgages by Atom Bank No Up to £250, 3 in last 36 months and 1 in last year No No
Hanley Economic BS No Up to £1,500 No No
Ipswich BS No Up to £500 No No
Legal & General Mortgage Club Yes Up to £1000, none in the last 6 months Satisfied Over 12 Months No
Magellan Homeloans Yes Limit of 5 valued to £3000, max 1 in the last 24 Months and none in the last year Satisfied Over 72 Months Discharged Over 72 Months
Manchester BS No Up to £500 max, 1 in the last year No No
Marsden BS Yes Up to £2500 max, none in the last year No No
MBS Lending Ltd Yes Up to £6000, none in the last 6 months Continuing Considered
Metro Bank Yes Up to £2000 No Considered
Pepper Homeloans Yes None in the last 36 Months No No
Precise Mortgages Yes Max 3 in the last 24 Months No No
Skipton BS No Up to £500 and max 1, none in last year and 1 in last 3 years Satisfied Over 4 Years Discharged Over 4 Years
The Mortgage Lender Yes Up to £3000, max 2 in the last 24 months and none in the last 3 months Satisfied Over 36 Months Discharged Over 36 Months
Vida Homeloans Yes None in last 6 months and 4 in last 24 months No No
Yorkshire BS No Up to £500 and max 2, none in the last year No No

Information sourced from Moneyfacts & Which?


These lenders will tend to have low consumer profiles as their mortgages are typically only available through brokers and financial advisers. They operate within a “not on the high street” market.

It’s important to note that stricter rules on mortgages were introduced in the wake of the financial crisis, but subprime mortgages were never banned.


So How Do I get A Mortgage With Bad Credit?

You can apply with a specialist lender, some of whom specifically cater to clients who have faced illness, divorce or other difficult life events.

However, you need to be aware that these types of lenders tend to charge higher-than-average interest rates and will most likely require larger deposits. In many cases, they may require a loan-to-value ratio of 80% or lower, meaning you would have to provide at least a 20% deposit.

If you are struggling to find a mortgage because of a poor credit rating, we would recommend talking to a whole-of-market, impartial broker such as Which? Mortgage Advisers. Call for a free consultation on 0808 252 7987.

It’s also a good idea to be aware of how the new rules for lenders and advisors will affect your application.

In the meantime, improve your chances by:

  1. Rebuilding your credit score
  2. Tracking your income and keeping records
  3. Tracking your expenses and keeping records
  4. Tracking living costs
  5. Tracking repayments such as credit cards, hire purchase agreements
  6. If you are applying for an interest-only mortgage, you will need to have a plan in place for repaying the loan once the interest-only period ends

Applying for a mortgage without taking advice, either by post or online will mean that you will lose the legal protection you would otherwise have if you did take advice. This includes losing the right to complain about how suitable the mortgage is for you.

What about mortgages specifically designed for council tenants?


Right To Buy Mortgages

If you have been a council tenant for at least 3 years, or if you were living in your home when the council transferred it to another landlord, then you may be eligible to buy your home at a discount under the Right to Buy scheme. This is because the length of time you have spent as a tenant entitles you to a discount. This, however, only applies to England.

If you have had a mortgage application declined, it does not necessarily mean that you will be declined by another lender. High street banks and building societies differ on their lending criteria, and finding the right mortgage can save you money, long term.

Finding Right To Buy Lenders

The good news is you do not need to find specific Right To Buy Mortgages as you have access to the same mortgage products available on the market as everyone else. This allows you to shop around and get impartial advice before settling on a mortgage product. A good place to start would be the Which? Money Compare page.

Alternatively, you could use a mortgage broker or advisor.

Right To Buy Brokers

As mentioned, you have the same access to mortgage products as everyone else. In other words, you do not need to find specific Right To Buy Brokers.

If you're struggling to find a mortgage because of a poor credit rating, we'd recommend talking to a whole-of-market, impartial broker such as Which? Mortgage Advisers. Call for a free consultation on 0808 252 7987.

Right To Buy With No Deposit

Most lenders will accept your Right to Buy discount as a deposit. This means you can approach most lenders.

Right To Buy With Bad Credit

You may find that you can’t get a mortgage due to a poor credit score. There are mortgage brokers who specialise in advising on impaired credit cases. In the meantime, you can take steps to improve your credit rating. The sooner you get started, the better as you can avoid hold ups when you are further into the buying process.

Bad Credit Mortgages

Right To Buy Calculators

  1. The Right To Buy Discount Calculator - This is the government’s own discount calculator that shows you how much discount you could be entitled to through the Right To Buy scheme. You may be able to use your discount as a deposit for your mortgage.

  2. Money Advice Service Mortgage Calculator - This is a free-of-charge government-backed money advice organisation. You can get an indication of how much you could pay for your mortgage each month, with the exact amount dependent on mortgage type and the lender you use.


Now Take The Next Step..

Right To Buy Video: righttobuy.gov.uk


Download The Right To Buy Guide

For free, friendly, impartial advice contact the Government's Right to Buy Agent service. Advisers are available Monday to Friday, 8am to 6pm. You will also need to give the name of your landlord in any correspondence.

Phone: 0300 123 091

Email: enquiry@righttobuyagent.org.uk


Private Mortgages

A private mortgage is a mortgage arranged through non-traditional lenders. These lenders may be an individual or a business.

Private mortgages can also be in the form of loans between family members. Typically, the interest rate will be more than that available from savings accounts, but lower than that of a typical mortgage. In this way private mortgages can be mutually beneficial. The loan will typically be backed by a first charge on the borrower’s property.

Age can, however be a significant factor. If the lender dies during the loan term, his or her estate may want to call in the loan – even if the original lender was happy not to do so while alive.

The loan agreement needs to have clear terms that consider the various circumstances of the concerned parties as well as possible eventualities. This may include:

  1. Missed Payments & Defaults
  2. Early Termination

In any case, both parties should be represented by solicitors. Typical terms will include:

  1. Repayments Schedules
  2. Interest Rates and
  3. Loan Term

Once terms have been drafted and agreed, a deed would then be drawn up by solicitors who would also carry out the conveyancing procedure.

Things To Note

Forgoing a conventional mortgage in favor of a private mortgage may mean that your credit report is not as comprehensive as it would otherwise have been.

Another type of private mortgage is one where clients obtain finance from the private banking sector rather than high-street lenders. This is usually because private banks have more of a willingness to lend, without necessarily placing a premium on rates. Independent mortgage brokers often have access to private banks.

Private mortgages also give an opportunity for private institutions to entice customers in, with the potential of providing a full range of services.

Private Mortgage Resources

  1. Council Of Mortgage Lenders
  2. Bowens Solicitors - firm of solicitors that prepares mortgage documentation for loans between friends or family members, secured on the borrower's property

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