Bad Credit, Good Home: Can You Get a Mortgage in the UK with Bad Credit?

In 2018, the average ClearScore credit score in the UK was 380. A score of between 380 and 419 is considered a fair credit score under their system.

Can You Get a UK Mortgage with Bad Credit?

Do you have a poor credit history? Are you house hunting and wondering how to get a mortgage with bad credit? This guide for UK residents covers the basics.

In 2018, the average ClearScore credit score in the UK was 380. A score of between 380 and 419 is considered a fair credit score under their system.

Since 380 is the UK average, it means that a large number of us have a lower score. And that equates to a credit rating of poor or even very poor.

Having a bad credit rating can have a severe impact on your ability to borrow. If you’re thinking about taking out a mortgage, you’re probably worried about what your bad credit score will mean for your application.

So read on as we take a look at whether you can get a UK mortgage with bad credit.

Some Good News and Some Bad News

The good news is that for many people, it is still possible to take out a UK mortgage even if you have bad credit.

But the bad news is you are probably going to have to choose from a much smaller set of lenders. And since you’re more high risk, the costs involved are going to be much higher. You will likely need to pay a much higher deposit and accept an interest rate that is much higher than for those with a good credit score.

But it is still possible.

What Are the Most Serious Credit Issues?

There are a number of factors that can have an impact on your credit score.

A history of missed bill payments, having a lot of credit accounts that have outstanding balances, and borrowing close to your credit limits can all bring your overall credit score down.

When it comes to taking out a mortgage, lenders are mostly like to be concerned about previous mortgage arrears, defaults or repossessions, and county court judgments (CCJs). If you have any of these in your recent past, most mortgage lenders will be reluctant to take you on.

Is There Anything You Can Do?

If you have had any of these serious issues in the past, the first thing you can do is wait.

The longer it has been since you have had a major negative on your credit report, the better. So if you were declared bankrupt last year, you’re unlikely to have much luck. But if it was a few years ago and you’ve not had any issues since, then lenders might start to consider you again.

You can also offer to pay a larger deposit than would be the norm, which means the lenders will face less risk. You are then more likely to get them to accept your application.

What Else Could Stop You from Getting a Mortgage?

There are a number of other factors that can have an impact on whether a lender considers you high risk or not.

The most obvious is how much you earn. The higher your wage, the more likely you are to be able to comfortably afford the repayments on your loan. But if you’re not earning much, or you’re self-employed, you might need to seek a specialist lender.

Your age can also have an impact on whether your application is successful. Lenders tend to be wary of lending to people who are over 75, and the further past this milestone you are, the less likely you will be to find a suitable lender.

What Are Your Options for Getting a Mortgage with Bad Credit?

If you’re trying to get a mortgage with bad credit, there are a number of options open to you.

What option you go for will depend on your personal circumstances. How much money you have, how soon you need the mortgage, and how much you are willing to pay in interest will all be important factors.

Improve Your Credit Score

An obvious way to improve your chances of getting a mortgage with bad credit is to improve your credit score.

One way of doing this is to pay off as many of your debts as you can. If you have a number of different credit sources at different interest rates it might pay to consolidate your debts into one loan. There are companies that can offer bad credit loans that can be used for just this purpose.

If paying your debts off completely isn’t a viable option, then try to keep the balances on your credit accounts as low as possible.

Put Down a Larger Deposit

As we have already seen, reducing the risk makes lenders more likely to accept your applications.

The larger the deposit you can afford, the more chance you have of being accepted for a mortgage, even if you have a poor credit history. This is because the loan-to-value ratio is much lower.

If you fail to meet your payments and your home is repossessed, the lender is far more likely to be able to recoup the amount that they lent you plus the interest owed.

Find a Bad Credit Mortgage Lender

If you cannot wait for your credit score to improve and you don’t have the savings to afford a larger deposit, then you will need to find a bad credit mortgage lender.

These type of specialist lenders make their money from lending to people with bad credit and mitigate their risk by charging a higher interest rate than standard lenders. If you have bad credit, borrowing through a lender of this kind may be your only option. And whilst the monthly repayments will be higher, you will at least be in the position to be able to buy.

Are You Looking for a Buy-to-Let Mortgage?

If you’re looking for a mortgage because you’re thinking about becoming a buy-to-let landlord, then you’re in the right place.

Whether you’re looking for a buy-to-let mortgage with bad credit or want advice on dealing with nightmare tenants, we have loads of great articles that can help. With plenty of resources for old hands as well as new and first-time landlords, we’ve got you covered no matter how long you’ve been in the game.

Feel free to take a good look around.