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1 Apr 2019

Virgin Money open to bad credit mortgage applicants - how do their deals compare?

Find out which lender offers the best rates

Virgin Money has announced it will begin accepting mortgage applications from those who have had County Court Judgements (CCJs) against them or defaulted on previous loans.

The lender will now open up its products to people who have satisfied CCJs up to £500 and have defaults of up to £2,000 on their credit history, provided these are at least three years old.

So, how do these deals compare to other offers on the market for applicants with less-than-perfect credit?

Which? explores how the Virgin Money's mortgages compare with other deals and the best rates available for people with a poor credit history.

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What will Virgin Money mortgages accept?

Virgin Money announced this week it would loosen up it's lending criteria to allow people with CCJs and defaults to apply under certain circumstances.

However, there are limits - it will still not accept applicants if an individual voluntary arrangement (IVA) or bankruptcy is pending, or if they have been in recurring arrears.

Virgin Money offers some attractive deals for both first-time buyers and people hoping to move home.

First-timers looking for a two-year mortgage at 95% loan-to-value ratio (LTV) could secure a deal for 2.99% (4.6% APRC). Alternatively, you could secure a five-year deal fixed-rate deal for 3.35% (4.5% APRC).

And if you're looking to upgrade, and have an LTV of 75%, you could find a two-year deal for 1.75% (4.4% APRC) or a five-year deal for 2.09% (3.8% APRC).

But even where your options are limited by your credit history, it pays to shop around. There are other mortgage deals on the market that come at a lower rate that may be worth considering.

Keep in mind to check the fees and charges as well as the initial rate - a high fee could make a deal much less affordable. You should also check the terms and conditions, including early repayment charges you might face from paying back the mortgage before the full term.

Who offers bad credit mortgages?

In January, Which? analysed the mortgage market and found a third of 5,000 mortgage deals are open to people with bad credit.

Our table shows different lenders' rules around bad-credit mortgages, including their criteria for people with bad credit, CCJs, IVAs or bankruptcies.

Find out more: Bad credit mortgages: which lenders accept CCJs,IVAs and bankruptcy

Best bad-credit, first-time-buyer deals

Which? has studied MoneyFacts to find the best fixed-term and discount first-time buyer deals which are open to applicants with a poor credit history.

We've focused on fixed-rate mortgages, but your circumstances may suit a tracker mortgage- which varies with the base rate - or a discount deal tied to the lender's standard variable rate.

The best two-year fixed-term deals available to first-time buyers are shown in the table below.For first-time buyers, all the deals below are available up to a loan-to-value ratio of 95%.

ProviderInitial rateAPRCWho is accepted?
Marsden BS2.69%5.6%CCJs, poor credit
Skipton BS2.83%4.7%CCJs, IVAs, bankruptcy
Marsden BS2.89%5.6%CCJs, poor credit

Source: Moneyfacts

Alternatively, you may be looking to fix for a longer time period.

The best five-year fixed-term deals for first-time buyers are displayed in this table.

ProviderInitial rateAPRCWho is accepted?
Digital Mortgages by Atom Bank3.24%3.76%CCJs
Skipton Building Society3.27%4.4%CCJs, IVAs, bankruptcy
Skipton Building Society3.32%4.4%CCJs, IVAs, bankruptcy

Source: Moneyfacts

Top bad-credit home-mover deals

Which? has also looked at the best deals for home owners who are looking to buy a new property but may have suffered credit problems.

The top fixed-rate two-year home mover deals are shown in the table below.For home owners, all the deals are available up to a loan-to-value ratio of 75%.

ProviderInitial rateAPRCWho is accepted?
Digital mortgages by Atom Bank1.44%3.64%CCJs
Digital mortgages by Atom Bank1.49%3.66%CCJs
Yorkshire Building Society1.63%4.3%CCJs

Source: Moneyfacts

And if you're looking for a five-year deal as a home owner, you can see the best fixed-rate deals below.

ProviderInitial rateAPRCWho is accepted?
Digital mortgages by Atom Bank1.94%3.27%CCJs
Yorkshire Building Society1.96%3.9%CCJs
Digital Mortgages by Atom Bank1.99%3.29%CCJs

Source: Moneyfacts

How to get a mortgage with bad credit

When you apply for a mortgage, the lender will analyse your full credit history. The full circumstances will be taken into account, including when the issues occurred and how large your defaults were.

This means a missed utility payment would be treated differently to a County Court Judgement, for example.

Lenders will set their own rules for how to treat applicants with credit issues. However, you can find a brief explanation of the general approach below.

Keep in mind that being turned down for a mortgage can bring down your credit rating further, so do your research before you apply.

Getting a mortgage with a County Court Judgement

A CCJ can be ordered if you owe somebody money and fail to pay it. Banks will often consider the amount involved in the CCJ, so it would be treated differently if it was for say £250 compared to one for more than £1,000.

In general, high street lenders will accept a CCJ on your record if it is more than three-years-old and paid out or satisfied.

Find out more: How to get a mortgage with CCJs

Getting a mortgage with missed payments (default)

Missing a mortgage payment is considered the worst the type of default, whereas failing to make a payment for other types of bills is generally regarded as less serious.

If you have had a series of missed payments, you would be advised to build up a history of paying bills and loans fully and on time before trying for a mortgage.

Find out more: Getting a mortgage with late payments and defaults

Getting a mortgage after bankruptcy

Most high-street lenders will refuse to lend to people with a bankruptcy on their record even if it's in the distant past.

However, specialist lenders may consider the application if the bankruptcy has been discharged and more than six years old.