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17 Jan 2019

Can you get a mortgage with bad credit in 2019?

A third of mortgage deals are available for people who've had credit problems in the past

If you think that problems with missed payments, county court judgments (CCJs) or even bankruptcy will stop you from getting a mortgage, think again - new Which? analysis has found that there are currently more than 1,600 mortgage deals available to people with bad credit.

Which? analysedalmost 5,000 residential mortgage deals available to first-time buyers, people looking to move home and those remortgaging, and found that 33% will consider someone who has had credit issues in the past.

More than 30% of the market will consider you if you've had a CCJ, while more than one in 10 deals are available to people who have gone bankrupt, according to our analysis of Moneyfacts data.

Each deal that accepts people with bad credit has its own criteria - and those who've had credit issues in the past could find that they are charged higher rates of interest or asked to provide bigger mortgage deposits. But this year, it appears there are plenty of options for people to get a mortgage even if they've had credit problems.

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Bad credit mortgages - how many deals are available?

Our analysis found that, of the 4,921 mortgage deals currently available on the market, 1,662 will consider someone with creditissues.

The vast majority of these deals are fixed-rate, fixed-term mortgages - 88% in total - lasting between two and five years.

But a word of warning to first-time buyers who only have a small deposit and have had credit issues in the past: our analysis suggests that just 137 (just 8% of) deals are available to those who have a 5% or 10% deposit.

The most common maximum loan-to-value (LTV) is 75%, meaning there's a greater choice for those with at least a 25% deposit.

Mortgages after CCJs

A County Court Judgment (CCJ) is issued if youfail to pay money that you owe and most other reasonable avenues to recover the money -letters, defaults, late payment notices - have been ignored and exhausted.

The good news is that the vast majority (1,498) of bad credit deals accept people who have had a CCJ, although there are strict conditions.

There are 108 deals available for people who have had one CCJ in the past year, and nomore than three in the past three years. But the CCJ can't be for any more than £250.

Some 287 allow you to have a CCJ of up to £500, while 248 allow you to have CCJs worth £1,000 or more.

Even if you've had a CCJ in the last year, there's still hope for getting a mortgage - 164 deals are available to those who haven't had a CCJ in the six months before applying.

A satisfied court judgment - one which has been paid off, solved or settled - is looked on more favourably. A settled CCJ disappears from your credit file after sixyears, and there are plenty of lenders willing to take you on if this is the case.

Find out more in our guide to getting a mortgage with CCJs.

Mortgages after an IVA

An individual voluntary agreement, or IVA, is a contract between someone who is in debt and the company they owe the money to, which can sometimes help stave off bankruptcy.

If you cannot afford to pay off your debts in full, an IVA allows you to come to an agreement with the companies to which you owe money to freeze the interest you're paying and possibly reduce the amount you owe to an affordable level.

Our analysis shows that there are 591 deals available to people who have had IVAs - but in the vast majority of cases, your IVA needs to be completed, and your debt settled. There are only two deals available for those who have open IVAs.

The more time that has passed since your IVA was completed, the more choice you have. There are only 11 deals available for those who settled a year ago, and six for those who completed an IVA two years ago.

Waiting until three years after your IVA was completed appears to be a sweet spot, as the number of deals available jumps to 112. But you'll get far more choice if there have been six years or more since your IVA was completed - 387 deals are available for people in this situation.

Mortgages after bankruptcy

Bankruptcy is the process of writing off all of your debts, with your assets being sold off to pay your debts.

You can't apply for a mortgage whilst you are still bankrupt. Your bankruptcy ends once you receive a discharge notice - normally 12 months after the date the bankruptcy order was made, though this can vary depending on the terms given to you at your bankruptcy hearing.

There are a surprisingly high number of deals available for people who've been through this process - 670, or 13% of all of the available mortgage deals on the market.

Much like people who've had an IVA, the number of deals available to those who've only recently been discharged from bankruptcy is low. There are only 23 deals available for people who were discharged within the last two years.

The number of deals jumps to 150 after three years have passed since discharge; 51 require at least four years to have passed; 13 after five years.

But the majority of deals (350) are available for people who've been discharged from bankruptcy for at least six years.

How to get a mortgage with bad credit

If you've missed debt repayments in the past and have marks on your credit history, there are steps you can take to make yourself more attractive to mortgage lenders.

They will want to see evidence that you've been responsible with repayments since your previous issues, making bill and other debt payments on time.

It's really important that you take steps to strengthen your credit score - such as ensuring you are on the electoral roll, limiting credit applications in the run-up to applying for a mortgage and keeping the amount of credit you are using to under 20% of your overall limit.

Having a big mortgage deposit will make things easier: there is less risk for the lender if you own a big chunk of your property outright and you fall behind with payments in the future, as it will have a greater chance of recovering the loan it has given you.

Find out more in our guide to bad credit mortgages.