Bad Credit Mortgages

Getting a Mortgage with Bad Credit

Have you been denied a mortgage based on your credit history? Have you ever wondered how to get a mortgage with bad credit? Our aim at Just Mortgage Brokers is to make it easier for you to find a mortgage regardless of your credit score.

We understand that it can be difficult to find a lender willing to provide a mortgage in these circumstances, but with help from our specialist advisors, you can get access to a potential mortgage with minimum fuss.

Get started today with our bad credit mortgage calculator below.

Bad Credit Mortgage Calculator

Bad credit Mortgages

A bad credit mortgage is simply a term used to describe a mortgage arranged with a specialist lender for a borrower who has experienced financial difficulties in the past.  Typically a bad credit mortgage  for someone who has had debt problems will be offered at a slightly higher rate than that found from your usual high street lenders and may also require a slightly bigger deposit or a larger amount of equity.

In our experience however, it is not necessarily the case for everyone that, just because they have experienced problems in the past with their credit, they will need to go down the route of getting a bad credit mortgage from a specialist lender.  The market has evolved over the last few years and some mainstream lenders are now considering elements of adverse credit, and those eligible can still obtain standard interest rates.  Our expert advisers are fully qualified and following an initial discussion and sight of your credit report should be able to ascertain which route you may have available.

Bad credit mortgage rates

Interest rates offered for bad credit mortgages are invariably higher than that provided by your mainstream lenders due to the perceived additional risk for the lender.  Appetite for lending to those that have experienced credit problems however has increased over recent years and more mortgage providers have entered the market giving much greater choice.  In addition many lenders have continued to review and improve their rates together with their criteria as the competition increases, and as such margins over the standard mortgage rates have decreased.

The interest rate offered will be determined by the severity of the credit history but, also other factors can be taken into consideration such as your loan to value (sometimes referred to your LTV and determined by the amount of deposit or equity you have).

Typically due to the complexity of the pricing of bad credit mortgage rates, these are not widely advertised nor shown in best buy tables.  Much more research is therefore required which is where an experienced specialist mortgage advisor should be able to use their knowledge of the varying lenders criteria to source the most suited available product for you.

Bad Credit Mortgage lenders

Since the financial crisis in 2008 where mortgage providers heavily restricted the availability of their products to only those that had clean credit histories and big deposits or low loan to values, the growth of the specialist lender has steadily re-emerged.  A bad credit mortgage lender is a categorisation of a type of mortgage provider who specifically caters for those that have experienced financial difficulties in the past.  Due to the very nature of their existence their criteria and interest rates will be tailored to this sector of the market.

Whilst many mainstream lenders will either not have a set ruling for an applicant with bad credit or have this at a very restrictive level, a bad credit mortgage lender will set out their stall in specific detail of what they are happy to accept, including the type of the event, the amounts and the time frames of when it occurred.  A bad credit mortgage broker will be able to use their expertise and knowledge to match the suitable lenders to the potential borrower.

Can you get a mortgage with bad credit?

While it can be more difficult to secure a mortgage with a bad credit history, it’s certainly not impossible for all. Also, there are things you can do that could improve your chances of being accepted for a mortgage with bad credit.

How to improve your credit for a mortgage:

1. Consider doing these things now:

  • If you aren’t on the electoral roll, get registered.
  • Request copies of your credit report from the three main UK agencies.
  • Close any accounts you don’t use – e.g. store or credit cards.

2. Next, do this:

  • When you get your credit reports, check that the information they contain is accurate. If anything is wrong, get in touch to get it corrected.
  • Make a list of all your sources of income and outgoings, so you understand how money flows into and out of your household. Use this to work out a realistic budget, and stick to it.

3. Longer term actions:

  • If you’re struggling with your budget, look at the figures again – maybe you haven’t allocated enough for groceries (for example) or you forgot about something.
  • Open a savings account and put something into it every month – no matter how small a sum. When you have a little bit extra – such as your ‘free’ council tax months – put that money into your savings account.

Take a look at our in-depth guide for more guidance on how to boost your chances of being approved for a mortgage with bad credit. For further information on bad credit mortgages, contact our team of specialist brokers. They have a wealth of experience of securing mortgages for people with a history of bad credit and have access to exclusive deals you wouldn’t necessarily find on the high street.

How Much Will a Bad Credit Mortgage Cost?

A mortgage with bad credit is usually more expensive because the lender will price their products accordingly in their assessment of risk. As well as potentially costing you more, you might find the amount they will consider affordable for you to borrow is less than some other lenders.

What issues have an impact on cost?

Lenders take a number of issues into account, including:

  • The type and number of adverse credit events on your credit report: some have a bigger impact than others. For example, a lender might not be too concerned if you occasionally paid your mobile bill late, whereas if you have defaulted on a mortgage, that will be viewed as a more serious issue.
  • How old adverse events are: credit information stays on your file for six years; generally speaking, the older the events are, the less impact they will have.
  • Whether old debts have been settled.
  • The LTV of the mortgage: this is a measure of security for the lender. If they lend, say, 70% of the value of the property rather than 90%, should something happen to prevent you keeping up your payments, they have a better chance of getting their money back.

A lender will look at the big picture shown by all the information you provide and make a decision based on the overall strength of the application. As well as the above, this can include issues like whether you’re on the electoral register, how often you’ve moved house or changed your job, and how much debt you have in relation to your income.

So, what will it cost me to get a mortgage with bad credit?

For a general idea of your chances of being approved for a bad credit mortgage, try our Bad Credit Calculator. Bear in mind, however, that this simply provides an estimate, not an offer. For advice tailored to your unique circumstances, speak to one of our experienced bad credit mortgage brokers. An initial enquiry costs nothing, but could save you money.

What Causes Bad Credit?

Technically, there’s not such a thing as a “bad credit” score. This is because credit scores are calculated in different ways by the UK’s credit reference agencies. Your score is not what will impact your final decision; it is the different information that makes up your credit file.

Here are some key contributors to a ‘bad’ score:

  • Not being registered on the electoral roll
  • Any previous court records such as CCJs, IVAs and bankruptcies
  • Previous history of missed payments/defaults
  • Wrong previous addresses on credit report
  • Frequent credit applications, especially declined ones
  • How much you owe and what you are currently repaying
  • Any payday loan information

You can take steps to improve your own credit score, which will make getting a mortgage easier, but not all lenders will use this data in the same way. Your circumstances will be viewed and dealt with differently by each lender, but one of our experts can help you find the best potential mortgage for you credit history and help walk you through the steps to look to get this arranged.

Black marks on your credit history:

But it is often not as bad as you think – those people who have had credit issues in the past could still get a mortgage, and we specialise in helping clients who have almost given up hope.

How Do You Know If You Have Bad Credit?

If you are being chased by debt collectors, or receiving letters from credit card companies, it will be clear that your credit history is not as strong as it could be. For some, however, the first real sign they have a bad credit rating is when they are declined a mortgage by a high-street lender. This may be a surprise if you have not had a long period of a credit history (or no credit history at all), but for others it may be less of a shock, simply because they may be aware of missed payments or any court actions in the past.

Mortgage With a Low Credit Score

In the UK, most people have three credit scores, one from each of the credit reference agencies – Experian, Callcredit and Equifax – who collect data on people’s financial behaviour. Lenders will access one or more of these agencies when conducting a credit check.  Do note, however, that a lender will use its own assessment of your credit rating rather than that given by any of the agencies.

There is no easy way to compare scores and no simple answer to the question of where someone sits overall with regard to credit rating. Add to that the fact that different lenders interpret data differently and you can see the problem.

However, as a broad guideline:

Experian generates a score from 0–999 and breaks results down into five categories, as follows:

Experian ScoreValue
0 – 560Very Poor
561 – 720Poor
721 – 880Fair
881 – 960Good
961 – 999Excellent

Callcredit will generate a credit score out of a possible 710, and use the score to calculate a rating from 1 to 5:

Call Credit RatingValue
1Very Poor
2Poor
3Fair
4Good
5Excellent

Equifax generates a score out of 700 and breaks results down into five categories, as follows:

Equifax ScoreValue
0 – 279Very Poor
280 – 379Poor
380 – 419Fair
420 – 465Good
466 – 700Excellent

 

How Do You Get Your Credit Report?

Being able to obtain your own credit report has never been easier, and we would always strongly advise people to take a proactive approach to this, especially when they are looking to get a mortgage and are concerned they may struggle to gain credit.

If you haven’t already, take a look at one of our preferred choices, or if you want more information on the content of your credit report, we have a definitive guide which should give you what you need.

Can I remortgage with bad credit?

A low credit score could be the result of many varying factors and not just simply a history of adverse credit.  Situations such as high levels of available credit where unused credit cards still remain open on record could affect someone’s score, and therefore could be easily rectified if needed.  So yes, it is certainly possible to remortgage with a low credit score however it is very much dependent on your own individual circumstances to be able to answer this question with clarity.

Even if at the time of looking to remortgage with a low credit score you are unable to do so, with a little planning and expert advice you can hopefully work towards a position of being able to do so and perhaps even obtain a much better suited product at the time of need.

Bad Credit Mortgage Calculator

Many calculators are in existence today to assist you with varying aspects of the house buying or remortgage process.  These vary from indicating how much you may be able to borrow to how much stamp duty you may have to pay.  A bad credit mortgage calculator will help you understand your potential chances of securing a mortgage based on your circumstances and credit rating.  His can be of great use to begin your journey of looking into your possible options.

Bad credit mortgage calculators will ask relevant questions about you specifically so that your response is tailored to your personal situation.  Many will also ask for your credit score as provided by some of the more widely recognised credit reference agencies and as such it is advisable to have this to hand when inputting your details.

Bad Credit Mortgage brokers

At Just Mortgage Brokers we receive many enquiries from would be borrowers who find themselves in a position where they have had some credit difficulties in the past.  These are put in contact with one of our many bad credit mortgage advisors who are specifically trained in this area to ensure they are best place to give the most appropriate advice.

In general terms, a bad credit mortgage broker is a title given to an advisor who specialises in this area of the market and who specifically focuses on this to ensure they are knowledgeable in this sector. They will also have the ability to recognise when a bad credit mortgage is required or where a standard lender would still be available.

What Else Can I Do to Secure a Mortgage?

The best thing you can do is help show you are less of a risk to lenders. Having existing debts is not necessarily a bad thing, provided you are able to demonstrate your ability to continue to pay the monthly payments due in the future.

The next step is getting in touch with one of our team. Do not be put off by any possible negative previous experiences with other brokers or high-street lenders; we have a wealth of experience in dealing with mortgage lenders who are more sympathetic towards our clients, who may have experienced credit issues in the past. We maintain excellent relationships with these lenders to give you the best possible chance of obtaining a mortgage with bad credit.

  • - Are you tied to high street lenders?
  • - Do overdrafts make credit scores worse?
  • - What do I need to get started?
  • - What does a bad credit score look like?
  • - How does bad credit affect you?
  • - Can I apply for a joint mortgage if my partner has bad credit?
  • - Can I refinance a mortgage with bad credit?
  • - Can a mortgage broker help with bad credit?
  • - Is it possible to remove bad credit from your record before seven years?
  • - Does marrying someone with bad credit give you bad credit?

MORE ABOUT THE AUTHOR

Carl Shave

Carl has worked in financial services since leaving education and specifically the mortgage industry since 1993.   As a cofounder of Just Mortgage Brokers, he believes that good advice should be available to all, regardless of their circumstances.