Whether you are looking for a mortgage to buy a new property or remortgage an existing property, preparing your finances appropriately beforehand is likely to increase the chances of your mortgage application being approved. Lenders scrutinize items such as your credit history, income, expenditure and deposit or equity. It is important to put your best financial foot forward: this article explores some ways in which you could potentially improve your odds of getting your mortgage application approved even with bad credit.
Check Your Credit Score and Credit History Early
What credit score do you need to get a mortgage? There is no universal “minimum” credit score that is needed for a mortgage approval and each lender will have their own criteria.[1] That said, your credit score does matter. Generally, a higher score makes you more likely to be offered a mortgage and at a lower interest rate [2]. For example, under Experian’s scoring system (0-999), a score in the “Excellent” (961-999) or “Good” range (881-960) could mean that you are in line for most of the best deals, whereas a “Poor” score (i.e. below 720) might limit you to the more expensive offers or even lead to your not getting a mortgage offer[3].
It is worth reviewing your credit reports several months before you plan to apply for a mortgage. Consider obtaining reports from all the three main credit reference agencies, Experian, Equifax and TransUnion, and looking for any errors. Ask them to correct any mistakes you find, as even a small error, such as an incorrectly recorded missed payment, could hurt your application. Lenders may hesitate or reject your application if your credit history isn’t clean enough from their perspective[4].
Consider paying down as much outstanding debt as possible and make payments on time. Missed or late payments can stay on your record for 6 years, although their impact reduces over time[4]. If you have old defaults or County Court Judgments (CCJs), you might want to consider waiting until they are older or cleared, if feasible. Make sure that you are on the electoral roll at your current address, as being registered to vote helps verify your identity and can help improve your credit score slightly. Every little bit helps when you need to show you are creditworthy.
Avoid New Credit and Behaviours That May Lower Your Credit Score
In the run-up to your mortgage application, avoid doing anything that could dent your credit profile. Try not to apply for new loans in the 3-6 months before applying for a mortgage, if possible. Each credit application leaves a “hard search” on your report and multiple recent searches can worry lenders. Try not to use your entire credit card limit or overdraft if you can help it. Aim to keep your credit utilization as low as possible, perhaps under ~30% of your credit limit, so that lenders can see that you are not over-reliant on borrowing.
If you are constantly using an overdraft or maxing out your credit cards, actively work on reducing those balances. Try and spend less, live more frugally and avoid large purchases for a few months prior to applying for a mortgage. This not only improves your bank balance, which is useful for a deposit, costs and stamp duty in any case, but also ensures that your bank statements look healthy. Most banks will ask for bank statements over the last 3 to 6 months. They want to check your income and see that you manage your money responsibly. Any large or unusual transactions may need explaining. Ideally, keep your finances steady.
Save Up as Much of a Deposit as Possible
Your deposit size or equity is a major factor in mortgage approval. Lenders typically require at least 5-10% of the value of the property as a deposit or equity, but putting down much more can improve your odds significantly. The reason is simple: a larger deposit or equity means a lower loan-to-value (LTV) ratio, which reduces the lender’s risk.
If you can afford, say, a 25% deposit instead of a 5% one, you are likely to qualify for better interest rate and experience a smoother approval process[5]. A larger deposit or equity not only reduces your monthly payments, it also signals to the bank that you have the financial discipline to save and a strong commitment to your mortgaged property [5].
Manage Your Debts and Budget
Mortgage lenders will evaluate your debt-to-income ratio and overall budget to decide how much you can afford. As part of the approval process, they will conduct an affordability assessment that examines your income and outgoings[2]. Before you apply, get your finances in order, reducing monthly outgoings and clearing debts where possible. Pay off any small loans or credit card balances you can, as this will improve your disposable income. Try to cut out any unnecessary recurring expenses, such as streaming services and other subscriptions, in the months before applying, as lower fixed monthly bills will improve the affordability calculation. Lenders typically ask for 3 - 6 months of payslips and bank statements to verify your income and spending [4], so try and make sure that these paint a picture of someone who is living comfortably within their means. Avoid any surprise expenses. For instance, if you are planning an expensive holiday or major purchase, try and postpone it to a later date.
If you have a car loan or student loan, there is usually no need to pay these off, as that may not be realistic, but do make sure that you do not miss any payments. Indeed, all bills must be paid on time. A stable employment history also makes lenders more comfortable. If you are self-employed or a contractor, try and ensure that you have all the necessary tax returns and accounts ready, as banks will want to see two to three years of evidence in many cases.
If you are applying for a remortgage, treat it as you would a completely new mortgage application, as the lender will effectively check your credit and affordability on that basis. If your financial situation has improved since you bought your home, highlight that. If it has worsened, try to rectify what you can. When remortgaging, the equity you have built up in your home functions like a deposit. If your home’s value has risen or you have paid down a chunk of the old mortgage, your loan-to-value will be lower. That will also puts you in a stronger position to get approved for a better rate, provided your credit is solid.
Can You Get a Mortgage with Bad Credit?
Yes, but it is harder. Mainstream high-street banks often decline applicants who have recent defaults, CCJs or poor credit scores, so you may need to approach specialist “bad-credit” lenders. These providers design products for borrowers with imperfect credit histories or other non-standard profiles.[3]
If you have poor credit, the deals you are likely to be offered will usually carry higher interest rates and sometimes additional product fees. Lenders might also want to mitigate their risk by asking for larger deposits or equity, perhaps 15-25 % or more [3][4].
If you are applying jointly, lenders will usually base the decision on the weaker credit profile. One partner’s recent default can mean that the whole application faces steeper rates, a higher deposit requirement or a rejection. In borderline cases, waiting until the credit blemish ages or applying only in the name of the stronger borrower could potentially improve the outcome.[4]
Consider using an independent whole-of-market mortgage broker. Brokers usually know which specialist lenders are open to specific types of bad credit and can secure an Agreement in Principle based on a soft search that protects your credit score before you submit a full application. Such an approach avoids multiple hard searches and potentially increases the likelihood of your first formal application being a successful one.[4]
Conclusion
Getting your finances in order before applying for a mortgage is well worth considering. This might take a bit of time, as you may need a few extra months to save money, pay down debt or let your credit score recover, but the patience could pay off with an approval from a lender and a more affordable mortgage deal. Try and keep your credit report clean, build the biggest deposit you can, trim your expenses and debts, and don’t raise any red flags, such as new credit or erratic spending, in the lead-up to your application.
FAQs
Q. What credit score do I need for a mortgage?
A. There is no universal minimum, but most mainstream lenders prefer scores that fall in the “Good” and “Excellent” ranges. Specialist lenders might consider lower scores if you can offset the risk with a larger deposit and strong affordability.
Q. Can I get a mortgage with bad credit?
A. You will need to approach specialist bad-credit lenders and be ready for stricter affordability criteria, higher mortgage rates and a larger deposit (perhaps15-25% or more).
Q. How much deposit will improve my approval odds the most?
A. Aim for at least 10 %, but if you can push it to 15–25 % or higher, you will probably widen your choice of lenders and better rates.
Q. Will applying jointly hurt our chances if only one of us has poor credit?
A. Lenders usually base their decision on the weaker credit profile. You might improve your outcome by applying only in the stronger borrower’s name if their income is sufficient or waiting until the credit blemish ages.
Q. How long should I wait after improving my credit before applying?
A. Give yourself at least six months, as this allows your credit score to recover and your bank statements to reflect healthy finances.
Q. Can a mortgage broker really help if I have bad credit?
A. Absolutely. A whole-of-market broker can target specialist lenders that accept your specific type of circumstances, secure a soft-search Agreement in Principle and spare you multiple hard credit checks that could lower your credit score further.
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