A poor credit history can make getting a mortgage harder, but it does not always make it impossible. Some lenders consider applicants with missed payments, defaults, county court judgments or other credit problems, especially where the issues are historic, settled or explainable. However, bad credit mortgages often come with higher rates, larger deposit requirements and stricter checks.
What is a bad credit mortgage?
A bad credit mortgage, sometimes called an adverse credit mortgage, is a mortgage considered for someone with credit problems. It is not a separate legal category of mortgage. It simply means the lender is willing to look at cases that mainstream lenders may reject.
The lender still needs to assess affordability, income, deposit, property value and overall risk. Bad credit does not remove normal mortgage checks. In fact, it often makes the assessment more detailed.
Types of credit issues lenders may review
- Missed payments: Late or missed payments on credit cards, loans, utilities or mobile contracts.
- Defaults: Where a lender has formally recorded that an agreement was broken.
- County Court Judgments: Court judgments for unpaid debts.
- Debt management plans: Informal or formal arrangements to repay debts.
- Individual voluntary arrangements or bankruptcy: More serious insolvency events.
- High credit utilisation: Using a large share of available credit limits.
How lenders assess bad credit
Lenders usually consider the severity, date, value and status of credit problems. A small settled default from several years ago is usually less serious than recent unpaid mortgage arrears. The lender may also consider whether the problem was caused by a one-off life event, such as redundancy, illness or relationship breakdown.
Deposit size matters. A larger deposit reduces the lender’s risk and may improve your options. Stable income and clean recent banking conduct can also help demonstrate that your finances have improved.
Can you get a mortgage with a CCJ?
It may be possible, depending on the date, value, whether it has been satisfied and the lender’s criteria. Recent or unpaid CCJs are much harder than older, settled ones. Some lenders require a CCJ to be satisfied before application, while others may consider the wider case.
How long do defaults stay on your credit file?
Defaults usually remain on a credit file for six years from the default date. Paying a default can still be helpful because it shows the debt has been settled, but the record may remain visible until it drops off the file.
Why bad credit mortgages can cost more
Lenders price mortgages according to risk. If a borrower has previous credit issues, the lender may charge a higher interest rate, require a larger deposit or limit the maximum loan size. This is why improving your credit position before applying can save money over the long term.
How to improve your chances before applying
- Check all three main UK credit reports.
- Correct errors and dispute inaccurate information.
- Register on the electoral roll where eligible.
- Pay current commitments on time every month.
- Reduce credit card balances where possible.
- Avoid payday loans and unnecessary credit applications.
- Settle old debts if affordable and appropriate.
- Build a larger deposit before applying.
Should you wait before applying?
Sometimes waiting can improve your options. If a default or CCJ is close to becoming older or dropping off your file, waiting may allow access to better lenders. If your income has recently improved or debts are being repaid, a few months of clean bank statements can also help.
However, waiting is not always the right answer, especially if house prices, rent or personal circumstances are changing. A qualified mortgage adviser can compare whether applying now or waiting is more sensible.
Avoid making multiple applications
Rejected applications can create stress and may leave hard searches on your credit file. Instead of applying randomly, research lender criteria carefully or use an adviser who understands adverse credit mortgages. The aim is to apply to lenders most likely to consider your case.
Frequently asked questions
Can I get a mortgage with bad credit?
Possibly. Approval depends on the type of credit issue, how recent it is, whether it is settled, your deposit, income and lender criteria.
Do I need a bigger deposit?
Often, yes. A larger deposit can reduce lender risk and may improve the range of available deals.
Will all lenders reject me?
No. Lenders have different criteria. Some specialise in more complex or adverse credit cases.
Can I remortgage with bad credit?
It may be possible. Keeping up with your current mortgage payments is especially important because mortgage arrears are treated seriously.
Final thoughts
Bad credit does not always end your chances of owning a home, but it does mean preparation matters. Check your credit reports, improve recent conduct, save as much deposit as possible and avoid unsuitable applications. The better your evidence of financial recovery, the stronger your case becomes.
Disclaimer: This article is for general information only and does not constitute financial, mortgage, debt or legal advice. Your home may be repossessed if you do not keep up repayments on your mortgage. Consider regulated advice before applying.