Many aspiring homeowners can still access a mortgage with bad credit. Some lenders may consider a mortgage application, subject to their assessment of your circumstances and the property.
How to apply for a bad credit mortgage?
Applying for a mortgage with bad credit is the same process as applying for any mortgage. The applicant(s) must make the application without concealing information, and the lender will then make a decision based on your credit rating and other factors.
However, to improve your chances of being accepted with bad credit history, there are steps you can take:
Make time between events that reduced your credit rating and making an application. The more time that passes, the less impact they usually have on lender decisions. Apply with a stable income and a bigger deposit. Take steps to improve your credit score and clear existing debts.
You may also want to apply to lenders with a history of approving mortgages to people with bad credit history. We can assist with locating these lenders.
How much will a bad credit mortgage cost?
If you have bad credit, the lender may approve your mortgage application, but you may have to pay back more over time. Your offer may include a higher rate of interest because the lender wants to offset the risk that you might default on mortgage repayments.
People with bad credit may also need to pay a bigger deposit to secure a mortgage, compared to those with a good or excellent credit rating.
What are the most common causes of bad credit?
The most common causes of bad credit are unpaid debts, typically to utility companies, mobile phone providers or creditors such as payday loan lenders and credit cards from banks.
A missed payment can affect your credit record and a lender's assessment, even if you catch up later. If you have defaulted and been taken to court and issued with a County Court Judgment (CCJ) for unpaid debts, this can cause bad credit.
Defaults generally remain on your credit record for six years from the date of default. County Court Judgments generally remain for six years, but a judgment paid in full within one month of being issued can be removed from the register.
Checking credit reports
You can check your credit report by using a credit reference agency website. You are entitled to a free statutory credit report from each of the main credit reference agencies. You can also access your report through free services such as those linked from MoneyHelper (moneyhelper.org.UK). You are encouraged to check your credit report before applying for a mortgage.
You may be able to identify reporting errors and have them removed to improve your credit score. Correcting an error on your credit record may affect your score, but does not guarantee a particular score or lending decision.
How to improve your credit score
Steps that may help you maintain your credit record include:
Register on the electoral register Pay off existing debts Budget so you don’t create new debt Continue to borrow responsibly without utilising all available credit given to you Limit bank and saving account applications
We can provide helpful information on how to improve your credit score before considering a mortgage with poor credit.
Your home may be repossessed if you do not keep up repayments on your mortgage.