Bad credit mortgages

  • If it's possible to get a mortgage with a bad credit rating
  • What is a bad credit mortgage
  • What creates a bad credit score
  • How to improve your credit rating

Since the credit crunch began it has become more difficult for people without a good credit rating to borrow money.

Before 2007, the sub-prime sector  - ie. people with bad credit - was viewed as a lucrative area of the mortgage market for lenders, and these kind of loans were widely available.

But in recent years, lenders have become more risk averse and the market for bad credit mortgages is now more limited.

Bad credit mortgages - can I get one?

Even with a poor credit history you may still be able to find a mortgage, but it will be more difficult than for someone with a better credit record. You can also expect to be charged higher than average interest and you will need to have a large deposit. 

Lenders often restrict the amount they are willing lend. This is usually around 80% of the value of the property, though some lenders will only offer mortgages up to 60% of the value of the property. For more information about what LTV means read 'what a mortgage lender will lend you'.

Some lenders specialise in bad credit mortgages and a financial adviser would be able to suggest lenders that can help. The Which? Group offers an independent mortgage advice service, Which? Mortgage Advisers, that looks at every mortgage from every available lender. You can also find an independent mortgage adviser using the Unbiased.co.uk website

Why would I have bad credit?

A number of things can affect your credit rating, some of the main reasons are:

  • If you have missed credit card, loan or mortgage payments
  • You are in some kind of debt repayment arrangement e.g an IVA or have been declared bankrupt
  • You have County Court Judgements against you

If you think you this may apply to you then you should request a copy of your credit report before applying for a mortgage. There are three agencies in the UK that hold this data, Experian, Equifax and Callcredit. Our guide to credit reports has more information about how to do this.

Once you have your report you should consider what things you can do to improve your credit rating for example checking all the information they have about you is correct, read how to improve your credit rating for more suggestions.

You should also avoid making lots of different applications for credit including mortgages as this will show up on your record and may harm your rating further.

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Which Ltd is an Introducer Appointed Representative of Which? Financial Services Ltd, which is authorised and regulated by the Financial Conduct Authority. Which? Mortgage Advisers, Which? Insurance Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.