Getting a mortgage is tough when you've got a bad credit rating, defaults, County Court Judgments, or a bankruptcy on your record – but it's not impossible.
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. You can call the friendly team for a free consultation on 0800 197 8461.
Can I get a mortgage if I have a bad credit history?
Yes, it's possible to get a mortgage with a bad credit history, although you may find your options are more limited than if you had a better credit score.
Most lenders will require a credit check before granting an application for a mortgage. However, some black marks on your credit history will carry more weight than others, depending on the amounts of money involved and how long ago it happened.
If you have a spotted credit history, some high street banks may refuse to lend to you. As an alternative, you can apply with a specialist lender, some of which cater specially to clients who have faced illness, divorce or other difficult life events.
These lenders are more likely to accept people with a poor credit rating and tend to offer more flexibility on affordability assessments.
But they do tend to charge higher-than-average interest and require larger deposits. In many cases (though not all), they may require a loan-to-value ratio of 80% or lower, meaning you would have to provide at least a 20% deposit.
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Which? Mortgage Advisers can give you expert advice on your mortgage options.
Steps to improve your mortgage chances
If you have a poor credit history, there are a number of steps you can take to improve your chances of getting a mortgage.
- Give it time – many blemishes in your record could be seen as less serious over time, especially if your financial situation begins to improve
- Repair your credit history – establish a pattern of consistent payments and responsible credit usage
- Present as a lower risk – offer a higher deposit and a stable income, which may mean targeting lower value properties
- Be honest about your situation – banks will conduct thorough searches, and trying to hide adverse credit will look worse for you in the long-term
- Consider your partners’ debt – buying with a partner may mean their credit history will be taken into account
- Have an explanation – banks will be interested in why you got into financial trouble and what has happened since then
Find out more: improving your mortgage chances - how you can strengthen your application.
Bad-credit mortgage lenders who accept CCJs, IVAs and bankruptcies
Our table shows different lenders' rules around bad-credit mortgages, including their criteria for people with bad credit, CCJs, IVAs or bankruptcies:
In October 2018, we asked the 19 lenders who offer mortgages to borrowers with bad credit about their lending criteria. You can find out what they told us in our full story on mortgage options for borrowers with a poor credit history.
Can I remortgage with bad credit?
Before considering remortgaging, look at ways you can improve your credit score.
Making your monthly mortgage repayments on time will help you build a stronger credit history (assuming all other debt is also paid back on time). If your credit rating has gone up after a period of time with a specialist lender, it may be possible to re-mortgage with a high street lender.
Whether you’re able to secure a better rate will depend on your credit score, your income, your property’s current value and the equity you hold in your home. The prospective lender will also run affordability calculations to ensure you’ll be able to afford payments at the new rate into the future.
A range of remortgaging deals are available on the high street, so it’s worth shopping around. You generally have to pay fees to remortgage, which you should factor into your decision-making.
Which? Mortgage Advisers has a detailed remortgaging guide with all the information you need to help you understand your mortgage options and get the best deal. They can also advise you on the best option for you, based on your personal circumstances - call 0800 197 8461 for a free consultation.
Types of bad credit: missed payments, IVAs, CCJs and bankruptcies
When considering your application, lenders tend to look not just at your credit rating, but the details of your credit history. The lender will consider what happened, when it happened and what the circumstances were at the time. A missed utility bill will be judged differently from a County Court Judgement, for example.
Criteria will also vary from lender to lender, so it may come down to finding one suited to your circumstances.
Use our menu below to see how different defaults or types of adverse credit may be treated by lenders.
Getting a mortgage with missed payments (defaults)
Failing to make payments on time – either on bills or on outstanding debts – can be recorded as a default on your credit history. However, not all defaults are equally bad.
Generally, missing a mortgage payment is considered one of the worst types of default. Lenders are likely to be reluctant to lend to a person who has missed a mortgage payment at any point.
By contrast, missing payments for other types of bills may be considered less serious, though still to be avoided. Quantity is also relevant – missing your phone payment for half a year may be seen more negatively than missing a single month
If you have a series of payment defaults, your best option is to build up a history of paying bills and loans fully and on time. Lenders will look to see a prolonged period – up to two years – where you have met your repayments as evidence of your improved financial management.
Some banks offer ‘payment holidays’, where you can opt out of paying your loans for a fixed period. In some cases, however, these suspended payments may be recorded on your history as defaults. If this happens to you, contact your bank to negotiate having them removed.
Find out more: how to plan your budget - keep on top of your payments with a realistic budget
Getting a mortgage with a debt management plan or IVA
If you are in severe debt, a debt management plan may help you climb out of the hole. Under these plans, you come to an agreement with your creditor to repay a limited amount of your debt each month.
Alternatively, you can seek out an individual voluntary agreement, or IVA, which allows you to make affordable payments towards your debt over the long-term, often five to six years. IVAs are recorded in a public register and while you have one in place, your creditors can't demand full repayment.
On your credit file, however, both IVAs and debt management plans are usually recorded as a series of defaults. Each month you fail to meet your minimum payment, your credit history takes a hit. This can have a severe impact on your overall credit score.
In general, banks will look for your debt management plan to have been fully paid out, followed by 12 months of on-time payments, before considering offering a mortgage.
In the case of IVAs, you may need to wait three to four years after completing the plan before applying for a mortgage.
Getting a mortgage with a county court judgment (CCJ)
A county court judgment, or CCJ, can be ordered against you if you owe somebody money and fail to pay it. A CCJ will stay on your record for six to seven years, and can be made for even minor sums.
Banks will consider the amount ordered against you in the County Court when deciding on your mortgage application. Some banks use thresholds to make their decision, so that a CCJ for £250 to £500 will be treated differently to one for more than £1,000.
In most cases, even high street lenders may accept a CCJ on your record if it is over three years old and paid out or ‘fully satisfied’. On the other hand, a ‘partially satisfied’ CCJ – meaning a debt where only a portion is paid back - is likely to damage your chances.
When facing a CCJ, always endeavour to pay off the sum in full. Even if the creditor agrees to settle for a smaller amount, the CCJ may be recorded as ‘partially satisfied’ on your record and could potentially count against your mortgage application.
Getting a mortgage after bankruptcy
In dire circumstances, declaring yourself bankrupt may be your only option. Most high street lenders will refuse to lend to people with a bankruptcy on their record, even if it happened in the distant past.
Specialist lenders may consider your application if the bankruptcy is discharged and occurred more than six years ago. Your chances are better if you can offer an explanation for what happened and show how your circumstances and financial management have changed for the better.
Checking your credit score
Whether or not you think these factors apply to you, you should always check out your credit report before applying for a mortgage. The three biggest organisations for this are Transunion (formerly Callcredit), Equifax and Experian. If you're concerned, it's worth checking how you fare with all three companies, as they all score slightly differently.
Once you have your report(s), consider what you can do to improve your credit rating, and check that all the information on record about you is correct.
In some cases, it will be better to wait until your credit history has improved so you can access more affordable mortgage deals. A good mortgage adviser will be able to ascertain what mortgage deals you are likely to be accepted for and advise whether you're better off waiting.
It’s worth being cautious about applying for a mortgage if you think you might be rejected. Every time you make an application for credit, it gets recorded on your credit history, and unsuccessful applications can bring down your score.
If you’re applying for a mortgage in principle, lenders may be able to conduct a ‘soft check’, which does not show up on your record. However, be aware that a soft check may fail to uncover everything in your history, so that your mortgage application may fail if issues come to light later.
Find out more: how to improve your credit rating - take steps to boost your score