How do I get a mortgage with bad credit?

Dealing with the mind-boggling world of mortgages can be intimidating for just about anyone – let alone someone with poor credit. With 1 in 5 people in the UK having poor credit, and this number expected to rise with the impact of the cost of living crisis, it’s more important than ever for people to understand their options when it comes to getting onto the property ladder.

It’s no secret that sourcing a mortgage can be more challenging if you have bad credit, but it’s certainly not impossible, and there are things that can be done now and in the future to help secure a mortgage. What’s important is to find an honest and trusted advisor who can provide guidance to help you navigate the complexities and help you on your way to getting your first home.

How do I check my credit score?

Before researching any long term lending deal, such as a mortgage, it’s worth checking your credit score through a reputable provider such as Equifax, TransUnion or Expeiran. Although these could differ between each provider, it will give you an insight into what a lender may see and even highlight where there are easy improvements to make, e.g. associated accounts, old credit card accounts or unused store cards.

Each of the main credit scoring agencies have nuances in how they rank, but most of them work on a 5-band system, with the ranges of each bracket differing between them.

  • Poor
  • Fair
  • Good
  • Very good
  • Excellent

Each credit scoring agency uses a different scoring system, but the breakdown is as follows:

Experian – poor 561 to 720, very poor 0 to 560
Equifax – poor 0 to 438
TransUnion – poor 551 to 565, very poor 0 to 550


What is the average credit score?

According to Finder, the average credit score rating for adults in the UK is 644, however, this differs between age and regions of the country, with people in the South East having the highest average credit score (680). Wherever you’re based, and whatever your age, there are ways to consistently improve your credit score and ensure you’re on the right trajectory for when the time comes for borrowing from lenders.

What’s classed as a ‘bad’ credit score?

Although there’s no definitive rule for what’s considered ‘bad’ credit, the general rule is that a credit score of less than 500 is below ‘good’. Bad or poor credit is wrongly associated with a person unable to manage their finances effectively, however this is often not the case and there can be other influences that impact whether you’re able to get the mortgage you need. Barclaycard have discussed the common reasons people are seen to have low credit scores, which range from declaring bankruptcy to never having had credit, and even being a victim of identity theft, so it’s important to keep an eye on how and when your scores fluctuate.

Finally, it’s important to remember that each lender has a different criteria for lending money, with many of them having a different view of what ‘adverse’ credit looks like. The good news is that it means that some lenders will see you more positively than others, but the bad news is there are some factors on a credit report which could flag you as a higher risk to potential lenders.

What affects credit rating?

There are a few financial red flags that will almost always catch a potential lender’s attention when your history is checked, so it’s important to know where you stand with this and how you can improve this before the time comes to borrow.

1. Your repayment history

If lenders or service providers report missed, late or defaulted payments, your credit score could be significantly lowered. Lenders also look at whether you are consistently only paying the minimum of your borrowing, or pay this back in full each month. The former can hugely impact your credit rating for the better as it shows good money management, so if you have savings but still have an unpaid bill, it may be wise to clear it.

2. Previous mortgage arrears

Previous mortgage arrears are likely to be registered as defaults on your credit file which could damage your rating for a number of years. When taking a mortgage out with a partner, their missed payments are also your missed payments, as you are connected to the account.

It’s not the most romantic prospect, but it’s really important that any joint finances are monitored by both parties to ensure consistent payments.

3. Applying for credit too often

Making multiple credit applications, particularly within a short time, can negatively affect your score – even if the applications are successful. When applying for mortgages, it may be worth reviewing the timing to ensure you’ve not applied for other loans such as car finance, new credit cards or furniture finance agreements before applying.

4. County court judgments (CCJs)

A county court judgment is a court order which may be registered against you if you fail to repay money you owe. A CCJ can negatively impact your ability to get credit for up to six years.

5. Having little or no credit history 

Even if you have a good income, you could have a low credit score if you have little or no experience with credit, since there’s very little evidence of how you manage borrowing and repayments.

Despite the earlier point of applying for too much credit, it’s important for lenders to know you’re responsible with borrowing. Timing is everything, but getting a credit card or a small finance agreement before applying for your mortgage may help your chances of increasing your credit score.

6. Bankruptcy

Bankruptcy will appear on your credit file for at least six years or until you’re officially discharged, with the bankruptcy remaining visible on file even after you’ve been cleared. There is financial advice available to support with any applications for bankruptcy or an Individual Voluntary Arrangement (IVA), so be sure to seek this before going through a mortgage application.

Solutions for applying for a mortgage with bad credit

There are a range of options available to those applying for a mortgage with bad credit, it’s just a case of finding the right advisor to help you navigate the market. Despite the sinister connotations, a ‘bad credit’ mortgage works in a very similar way to regular mortgages, only the interest rates are likely to be higher and there could be a lower limit on how much money you can borrow.

Pay a higher deposit

The bigger your deposit, the better chance you have of finding a mortgage you’ll be accepted for. Lenders often ask that you have a larger deposit if you have bad credit, for example, around 20% or more as opposed to the 5 to 10% you’d need if you had good credit.

Accept a ‘gift’, if available 

Many lenders will accept a deposit which is gifted from a family member – so long as it’s not considered a loan and there’s no obligation to pay the family member back. A gifted deposit can boost your loan-to-value (LTV) ratio and get you on the property ladder faster.

Disassociate yourself on old accounts

If you have financial ties with someone, their credit rating can directly affect yours. For example, a joint bank account or credit arrangement with ex-partners, housemates, family or friends. You can ask credit reference agencies to issue a Notice of Disassociation to let lenders know that you’re no longer financially associated with that person.

Know your outgoings

It can be easy to forget about the rogue store cards or old direct debits, so keeping track of your finances and minimising anything that could be unnecessarily increasing your outgoings will help when it comes to borrowing. It’s also really important to ensure that as well as having savings, you pay off any outstanding credit cards as quickly as you can. Opting to save overpaying what you owe may seem like a great idea, but can in fact cause the opposite effect when it comes to your credit score.

Can a mortgage help your credit?

Yes! Getting a mortgage is actually an effective way to improve your credit rating as it demonstrates the ability to make payments on time and keep your debt-to-income ratio at a reasonable level.

On average, a mortgage makes up for 10% of your total credit score, so getting on the property ladder certainly has its advantages, aside from providing a place to call home. Improving your credit score through a mortgage can also open up other opportunities to borrow for home improvements should they be needed, or increasing your mortgage if you choose to move house later down the line.

However, mispayments on your mortgage can hugely affect your credit score, more than many other loans. Often the fear of repeated issues with payments is that the property will be repossessed, when in actual fact the more immediate impact on your credit score can be just as damaging.

Who provides bad credit mortgages?

Seeking a bad credit mortgage doesn’t have to be a minefield if you know where to turn. Whilst it can be extremely time consuming to go to individual banks and go through the same conversations, using a trusted broker will allow you to discuss your needs in one conversation and be presented with your options and solutions in one go.

Fortunately, there are many options available for those seeking mortgages with bad credit, and despite the sometimes complex and challenging process, you will be given guidance and opportunities to improve your chances of getting a mortgage when seeking help.

  • High street banks are offering support for those with poorer credit scores
  • Specialist lenders are also available, such as United Trust Bank, Kensington Mortgages and Atom Bank

Of course, if you do find yourself declined in the first instance by lenders, don’t despair. With the right guidance and solutions from your expert advisor, you can form a plan around how to improve your credit rating, keep an eye on your score and reapply when the time is right.

It’s important that if you have any current or former issues with your credit score, you seek advice from a qualified specialist before proceeding with any deal.

Credit repair with Lendese

If you’re struggling with any of the issues we’ve mentioned above, or you’d like a little more information about getting onto the housing ladder with bad credit, please don’t hesitate to get in touch and have a chat with one of our experts today.