An Introduction to Getting a Mortgage with Bad Credit

Securing a mortgage with bad credit can be tough, but it is not always impossible. Experian estimates that over 5.8 million adults have a poor credit score, often due to issues such as missed payments, defaults or County Court Judgments (CCJs) [1]. A significant number of mortgage applicants have some form of adverse credit and many of these are rejected by mainstream lenders as a result, underscoring the growing need for specialist lenders to serve this segment of the market. There are specialist lenders and brokers who can potentially help those with poor credit, including buy-to-let (BTL) investors and residential buyers, find mortgage solutions. This guide explores how bad credit impacts your chances, what lenders look for, and how to improve your eligibility.

What Counts as “Bad Credit”?

“Bad credit” means your credit report shows past issues, such as:

• Missed payments

• Defaults

• County Court Judgements (CCJs)

• Bankruptcy

• Individual Voluntary Arrangements (IVAs)

Each UK credit agency has its own scoring system. For example, Experian  flags anything under 721 (out of 999) as poor, Equifax flags anything under 439 (out of 1,000) as poor and TransUnion flags anything under 566 (out of 710) as poor. But it is not just the score, lenders also pay close attention to the actual issues on your file.

Severe issues such as bankruptcy and County Court Judgements CCJs stay on your record for up to six years. However, even smaller issues, such as a few late payments, can lower your credit score and impact availability.

Common Types of Adverse Credit

• Missed/Late Payments – Even one missed payment can impact your score and repeated ones show ongoing financial strain.

• Defaults – When a lender writes off some of your debt, it is usually a major red flag.

• CCJs – County court judgements are among the most damaging, with a significant proportion of applications with CCJs being rejected.

• IVAs and Bankruptcy – These suggest severe financial hardship. Most lenders will want to see 3–6 years of recovery time.

• Debt Management Plans (DMPs) – While the plans are not listed on credit files, the events leading to DMPs are likely to be.

• Repossession – Losing a property due to non-payment makes getting another mortgage significantly harder.

Lenders weigh the severity, timing and resolution of such issues. A CCJ that was satisfied years ago may be considered a minor issue compared to a recent default, which could be considered a big problem.

Can You Get a Mortgage with Bad Credit?

Yes, but expect more hurdles and fewer options. High-street banks typically decline applicants with recent bad credit. But specialist lenders may accept you for a price.

Bad credit mortgages usually mean:

• Higher interest rates (1–2% more than standard rates)

• Larger deposits (typically 15–30%)

• Lower loan-to-value (LTV) caps (e.g. 80–85%)

• More detailed underwriting and documentation

Using a specialist broker is often key to success. They can match your profile to a lender willing to consider your circumstances, saving you from rejected applications and additional credit searches.

Buy-to-Let vs. Residential Mortgages with Bad Credit

Whether you are applying for a residential or BTL mortgage, credit issues matter. But the assessment criteria differ:

• BTL mortgages focus on rental income, not personal income. However, bad credit still reduces options.

• Deposits for BTL mortgages start at 25%, often rising to 30%+ if credit issues exist [2].

• Residential mortgages may require smaller deposits (10–15%) if credit issues are minor.

Lenders might also impose stricter rental stress tests or minimum income thresholds on BTL applicants with adverse credit. A larger deposit and good rental yield may be essential for approval.

Specialist Lenders vs. High-Street Banks

Mainstream lenders favour clean credit histories and often decline applicants with adverse credit due to their strict underwriting criteria.

Specialist lenders, on the other hand:

• May consider the context of your credit history

• May accept older and satisfied CCJs/defaults

• Offer flexibility in assessing recent financial behaviour

However, the trade-off include:

• Higher mortgage interest rates and fees (e.g. arrangement fees of £999–£1,499+)

• Higher deposits

• Broker fees, especially for complex cases

These lenders are often accesible only via brokers. However, competition among them may mean better deals if you are working with the right intermediary.

Mortgage Rates, Deposits and Terms

What to expect if you have bad credit:

• Rates: Typically, 1–2% higher than standard rates (e.g. 5.5–6.5% instead of 4.5%) (Source: CountReady).

• Deposits: Most need 15–30% for residential; 25–35% for BTL (Source: HomeOwners Alliance).

• Terms: Usually standard (25–35 years, subject to your age), though you may be offered only a 2-year fixed rate period to start with.

• Interest-only loans are generally limited to BTLs.

How Lenders Assess Applications

Bad credit applications are assessed more stringently. Here is what lenders are likely to focus on:

• Credit history: What went wrong, how recently and whether it has been resolved. Satisfied and older issues are seen more favourably.

• Affordability: Strong and stable income can help offset past issues. You will probably need to document income and outgoings and possibly provide explanations.

• Deposit and LTV: A bigger deposit reduces lender risk and increases approval chances.

• BTL rental income: For BTL, lenders are likely to stress-test rent vs. mortgage payments using Interest Coverage Ratios (typically 125–145%).

• Stability: Being on the electoral roll, having long-term employment and good banking and credit habits will all count in your favour.

Remortgaging with Bad Credit

Remortgaging when your credit has worsened can be tricky. Still, you could potentially have a few routes available:

• Internal product switch: Your current lender may offer a new rate without a fresh credit check, especially if you have kept up with your payments.

• Specialist remortgages: Lenders who cater for adverse credit may offer new terms, especially if you have enough equity in your property.

• Like-for-like deals: Remortgaging for the same amount or a lower amount may be seen as lowering risk.

• Waiting it out: If recent issues make mortgaging difficult or impossible today, you may need to stay with your current lender while you rebuild your credit.

For BTL remortgaging, rental performance and equity matter most. An experienced broker can guide you to lenders still open to your profile.

Tips to Boost Mortgage Eligibility

If you have bad credit, consider taking these steps before applying:

1. Check and clean up your credit reports (including Experian, Equifax and TransUnion). Dispute any errors and disassociate from financially problematic ex-partners.

2. Pay all bills on time. Set up direct debits and avoid missed payments.

3. Reduce credit card balances to below 50% of their limits.

4. Save a larger deposit – aim for at least 20–25%.

5. Register on the electoral roll – this boosts your credibility.

6. Avoid new credit applications close to applying for a mortgage, as multiple hard searches can hurt your score.

7. Get family support – a gifted deposit or guarantor arrangement can unlock better deals.

8. Use credit-building tools such as Experian Boost, whereby you connect your current bank account to your Experian account. If your bank account shows a strong payment history and Experian finds the information positive overall, it may calculate a Boost (with the maximum score raise hitting an increase of up to 101 points) and instantly apply it to your Experian Credit Score.

Over time, negative factors fall off your record, typically after six years. Lenders prefer older resolved issues over new unresolved ones.

Finding a Bad Credit Mortgage Broker

A broker can improve your chances significantly. Here are some tips on how to find and work with one:

• Look for terms such “adverse credit mortgage broker” and “whole-of-market broker”

• Ensure that they are FCA-authorised

• Read reviews and ask for recommendations

• Be honest about your credit history — brokers aren’t there to judge

• Ask about their fees — some charge fees only upon success

A good broker understands each lender's risk appetite — e.g. which ones ignore small defaults or accept satisfied CCJs after 2 years. They also help avoid wasted applications and protect your credit file from further damage due to unnecessary hard searches.

Conclusion

Getting a mortgage with bad credit is not easy, but it is also not impossible either in many cases. In summary, understand your credit history, work with a specialist broker, save a larger deposit and present your case properly. Even if your mortgage comes with higher initial costs, it can be a stepping stone for better deals once your credit improves.

FAQs:

Q. Can I get a mortgage with a poor credit score?

A. Yes, it is possible to get a mortgage with a poor credit score, but your options may be limited to specialist lenders. Expect to pay higher interest rates and possibly provide a larger deposit.

Q. What credit score is needed to get a mortgage?

A. Each credit agency has its own scoring system. While there is no universal threshold, lenders may typically look for a credit score of above 720 from Experian, above 438 from Equifax or above 565 from TransUnion. Scores below these levels may be considered subprime, making mortgage approval more difficult. Beyond scores, lenders also pay close attention to the actual issues on your file, such as missed payments and CCJs.

Q. How much deposit do I need for a bad credit mortgage?

A. Most borrowers with bad credit might need a deposit of at least 15 to 30 percent for a residential mortgage or at least 25 to 35 percent for a buy to let. A larger deposit improves your chances and may even reduce your interest rate.

Q. Which lenders offer bad credit mortgages?

A. Specialist lenders such as Pepper Money, Kensington Mortgages and Together often accept applicants with adverse credit histories. These lenders are typically accessed through mortgage brokers.

Q. Will a CCJ stop me getting a mortgage?

A. A CCJ does not automatically disqualify you especially if it has been satisfied and is over 12 to 24 months old. However, mainstream lenders are likely to decline, so a specialist lender may be required.

Q. Is it better to wait and improve my credit before applying for a mortgage?

A. In many cases, yes. Waiting 6 to 12 months to build a stronger credit profile by clearing debts and paying on time and saving a larger deposit could improve your mortgage approval chances and terms.