Bad credit mortgages: what are my options if I have a poor credit history?

Anyone with a low credit score or complicated credit history may think they have no chance of ever getting a mortgage - but that's not necessarily the case.

Bad credit mortgages are currently on the rise - meaning there's an increasing amount of specialist options tailored to those with marks on their credit history.

But that's not your only option, as some high street lenders may also consider taking you on.

Which? asked the biggest high street lenders, plus more specialist lenders, what their policies are on giving mortgages to those with poor credit histories so that you can get a clear idea of those that can help you if you've had a few blips on your credit record.

Why might I need a bad credit mortgage?

Bad credit mortgages are products for those who havecredit reports with a less-than-perfect history of taking out and repaying loans.

Factors that can bring down your credit score and mean that some lenders won't consider you for a standard mortgage include:

• Default payments - If you fail to pay bills or other debts on time these can be recorded as default payments on your credit history. Missing mortgage payments is generally considered as the worst type of default, whereas other bills might not be as bad. The amount of money you fail to pay and the number and frequency of default payments will also be taken into account.
• County Court Judgements (CCJs) - CCJs can be ordered against you if you fail to repay money to someone. Banks will look at whether you pay the amount back in full, how much you owed and how long ago the CCJ was ordered.
• Individual Voluntary Arrangement (IVA) - If you are in debt and have opted for an IVA to help you make affordable payments towards it, this will often be recorded on your credit file as a series of defaults. Banks will look at how long ago an IVA was in place, and whether it's been paid in full.
• Bankruptcy - Declaring yourself bankrupt may be the only option in extreme cases of debt, and it's looked upon seriously by mortgage lenders. It's best if you can provide an explanation for what happened and show how you're now in charge of your finances.
• Thin credit file - A thin credit file is when someone has little proof of borrowing and repaying - they've never had a loan, direct debits or a credit card, for example - and they're given a low credit score simply because there isn't enough evidence to make it higher. Banks will often take more time to look at the individual circumstances if this applies to you.

If you have any of these marks on your credit history, don't give up hope of getting a mortgage - more providers than you think may still consider lending to you.

Last month, we reported that the number of bad credit mortgages is rising, which could be good news for those who struggle to find mortgages on the high street.

But the downside is these products often have far higher interest rates, as lenders charge more to those they deem a higher risk of not paying back their loan.

Should I apply for a bad credit mortgage?

If you have a poor credit history, you have a choice of applying for a specialist bad credit mortgage,which will have a higher interest rate, or improving your borrowing behaviour and repairing your credit score in order to be accepted by a high street lender which usually charges lower rates of interest.

Your decision will depend on your individual circumstances - but we've directly asked almost a dozen biggest high street and specialist lenders what their policies are on the most common blips in people's credit histories, to give you an idea of how long you might need to wait to apply, and what your options are.

As a general rule, default payments can often be considered as long as some time has elapsed since they happened, anywhere between three months to three years.

The likes of bankruptcies and IVAs are less commonly accepted - if they are, you'll often have to wait for a longer period of time before making an application. Lenders cited three to six years.

As you might expect, more specialist bad credit mortgage lenders would consider applications with some form of marks on your credit history. Precise Mortgages, for instance, would consider those with defaults and CCJs just three months after they took place.

However, larger high street lender Coventry Building Society said it would also consider someone with default payments from three months afterwards - so, regardless of your circumstances, it's still always worth shopping around.

Lenders appear, however, to be more willing to lend to someone with a poor credit history than someone with a 'thin' credit file. While these people may have never been in debt or missed any payments, the absence of any borrowing behaviour will give you a poor credit score and makes you an unknown entity to mortgage lenders.

Note that applying after the allotted amount of time a lender has suggested won't guarantee your mortgage application being accepted - it's just a guideline for what they'd look for before you could be considered.

All lenders stressed that applications are considered on an individual basis, and will depend on circumstances such as your employment, how much you want to borrow, and how complicated your credit history is.

Which? went to 19 major high street lenders and more specialist mortgage lenders, and only 10 were prepared to share their specific bad credit mortgage policies.

Bad credit mortgage lenders application criteria

Below, we show how 10 major mortgage lenders approach applicants with bad credit.

Barclays

• Default payments- Will accept applicants with defaults after three years, and these should have predominantly have been settled when you apply. For secured loans or rent arrears, there should be no defaults in the last six months.
• CCJs- Will accept applicants with CCJs for less than £200 within the last three years; amounts above this would be accepted after three years. Both cases require the CCJs to have been satisfied.
• Bankruptcy and IVAs- Will accept applicants after six years.
• Thin credit file -No specific timeline, but suggests that people take time to build up their credit score.

Coventry Building Society

• Default payments - Will accept applicants with defaults after threemonths has passed.
• CCJs-Will accept applicants six months afterwards.
• Bankruptcy and IVAs- Will accept applicants aftersix years.
• Thin credit file-Will accept applicants, although they are less likely to be accepted due to having a low credit score.

Kensington Mortgages

• Default payments- All communications defaults (such as phone bills) will be ignored. You can have a maximum of two unsecured missed payments in the last 12 months.
• CCJs-Applicants will be accepted after two years.
• Bankruptcy-Will not accept applicants.
• IVAs-Debt management plans can be accepted after 12 months.
• Thin credit file-Maybe - decisions are not made using full application scoring.

Metro Bank

• Default payments-Will accept applicants after three years. Some smaller and satisfied defaults will be considered on a case-by-case basis if exceptional circumstances explain the default.
• CCJs, bankruptcy and IVAs- Applicants will be accepted after three years.
• Thin credit file-Customers would need to meet the application score threshold for Metro Bank's own application scorecard.

Pepper Money

• Default payments- Will accept applicants after six months. Accepts up to four defaults recorded in the last 24 months.
• CCJs- Will accept applicants after six months. Accepts up to four CCJs in the last 24 months.
• Bankruptcy and IVAs- Will accept applicants after six years.
• Thin credit file-Maybe, loans are based on personal circumstances, not someone's credit score.
• Other-There must be no payday loans in the last 12 months, no mortgage arrears in the last six months, a maximum of three missed mortgage payments in the last 24 months, no missed payments on unsecured loans in the last six months.

Precise Mortgages

• Default payments- Will accept applicants after three months.
• CCJs- Will accept applicants after three months.
• Bankruptcy and IVAs-Will not accept applicants.
• Thin credit file-All applications must pass credit score requirements without exception.

Royal Bank of Scotland

• Default payments-Unlikely to be approved.
• CCJs-Unlikely to be approved.
• Bankruptcy-Policy is not to lend to undischarged bankrupts, but applications may be considered following a formal discharge from the courts.
• IVAs-Policy is not to lend to customers with an IVA, but applications may be considered following a formal discharge from the courts.
• Thin credit file-Maybe, but these applicants would typically be subject to more comprehensive underwriting checks.

The Cambridge Building Society

• Default payments-Will accept applicants after two years if defaults of less than £500 have been satisfied, or three years if defaults of £500 and over have been satisfied.
• CCJs-Will accept applicants after two years if they are for less than £500 and have been satisfied.
• Bankruptcy and IVAs- Will accept applicants after three years.
• Thin credit file-Maybe, the bank doesn't credit score applicants but searches their credit history to see how they manage credit commitments.

Virgin Money

• Default payments-Maybe - this is assessed on a case-by-case basis.
• CCJs, Bankruptcy and IVAs- Will not accept applicants.
• Thin credit file-Maybe, this is assessed on a case-by-case basis.

Yorkshire Building Society

• Default payments- Will accept applicants after three years. There can only be one default payment and the amount cannot exceed £150.
• CCJs-Will accept applicants after three years. They must have been satisfied within six months of application and the total amount cannot exceed £500.
• Bankruptcy- Will accept applicants after three years. The maximum LTV offered would be 85%.
• IVAs- Will accept applicants after three years. There must be no further adverse credit since the IVA was satisfied.
• Thin credit file-Maybe - as long as the customer passed other credit score criteria.
• Other-Customers must declare any repossessions - failing to do so will mean the application is denied. Repossessions must have taken place at least six years ago.

How to improve your chances of getting a mortgage

Letting time pass and keeping out of debt isn't the only way of improving your credit score and chances of getting a mortgage.

• First, understand what you're working with. Check your credit score and history - our guide explains how you can check your credit score for free.
• Prove that you can borrow and repay - establish a pattern of making consistent payments, by using a credit card, for example, so that lenders can see evidence of you being able to make repayments. Over time, this will also help improve your credit score.
• Don't make multiple applications - every time you apply for a credit card, loan or mortgage, a 'footprint' will be left on your credit history. Being turned down for any of these products will also bring down your credit score, so do your homework before applying and make sure you're likely to be successful.
• Be honest - don't try to hide anything in your credit history, as banks will carry out thorough checks before lending to you, and finding out unexpected problems may only end up making you look untrustworthy.
• Explain your circumstances - if you can explain the reasons why you missed payments or received a County Court Judgement, and how you've been trying to put your credit score right since then, some lenders may be more lenient.
• Minimise your risk - that is, your risk to the lender. Having a larger deposit, a stable income and asking to borrow on a lower value property will all mean the lender has to take less of a risk in giving you money.

Find out more: How to improve your credit score