We've rebranded! Formerly known as Green Mortgages
We've rebranded! Formerly known as Green Mortgages
Very few people get through their twenties and thirties with a completely spotless credit file. A phone bill that went unpaid after a house share broke up, a credit card that got away from you during a difficult stretch, or a default you had no idea existed until you finally sat down and checked. Most of the time none of it feels particularly significant until you start thinking seriously about buying a home.
The worry we hear more than any other is that a single mark on a credit file rules you out completely, and that there’s no point even asking. That isn’t how it works, and plenty of the people we arrange bad credit mortgages for arrive expecting to be turned away.
In this helpful guide, our experts will explain what lenders actually count as bad credit, which issues carry the most weight, how different lenders go about assessing an application like yours and what you can do to put yourself in a stronger position before you apply.
Yes, you can get a mortgage with bad credit, and a great many people do every year. Missed payments, a default or even a County Court Judgment on your file won’t automatically mean a decline. What they change is which lenders will consider you, how much deposit you’re likely to need and what interest rate you end up being offered.
The main difference is that the high street becomes less accommodating and specialist lenders become more relevant. Most of the big names run applications through automated credit scoring, which tends to filter out anything unusual without a human ever looking at the detail. Specialist lenders take a different approach and underwrite manually, which means somebody reads your file, takes account of what happened and when, and makes a judgement rather than letting a system decide.
One thing worth clearing up early is that there’s no single credit score that lenders share between them. The number you see when you log into Experian or Equifax isn’t what a mortgage lender looks at, and a score you might consider poor could be perfectly acceptable to one lender while another turns it down.
What lenders review is the underlying information on your credit file, which they then run against their own criteria. They’re looking at your payment history, how much you currently owe, how close you are to your credit limits and whether there are any formal markers against your name. Alongside that they’ll assess your income and outgoings in the usual way, so your debt-to-income ratio and general affordability still matter just as much as they would for anyone else.
Not all bad credit carries the same weight, and lenders treat these very differently depending on what happened and how long ago it was.
Lenders care about timing at least as much as severity. A default from five and a half years ago that’s about to drop off your file, with a clean record since, is a very different proposition to a default registered last autumn. Some lenders work in tiers, so they might accept a CCJ over three years old but not one from the last twelve months, and those cut-off points vary from lender to lender.
The pattern since the problem occurred carries real weight too. Somebody who ran into difficulty during a redundancy or an illness and has paid everything on time since presents very differently to somebody whose balances have kept climbing. If you’re in the earlier stages of rebuilding your credit profile, a few months of consistent conduct genuinely does help.
Two things usually change when there’s bad credit on the file. The first is deposit. Where a clean applicant might get away with 5%, many specialist lenders will want at least 10%, and where the bad is recent or more serious you could be looking at an even higher deposit. A bigger deposit reduces the lender’s risk, so it often does more to open up options than anything else you could change in the short term.
The second is the rate. Specialist lending is priced higher than the high street, and that’s simply the cost of somebody underwriting your case by hand rather than a computer scoring it, as well as the overall risk appetite for the lender. The important thing to keep in mind is that this doesn’t have to be permanent. Once the bad credit ages, or drops off your file entirely at six years, you can usually look at a remortgage onto something considerably cheaper.
It helps to have a rough idea of the numbers before you go any further. Our mortgage payment calculator will show you what monthly payments could look like at different rates and loan amounts, which gives you something concrete to work from when you speak to an advisor about what’s realistic in your situation.
There’s usually more you can do than people assume, and a few months of preparation can change what’s available to you.
If existing borrowing is part of the problem, it’s worth understanding how lenders view applying for a mortgage while you still have debt. And if you’re currently struggling to keep up with repayments, speaking to a free debt advice service before you apply for anything is time well spent.
With a clean credit file you can reasonably walk into a bank and get somewhere. With bad credit that approach tends to work against you, because a good number of specialist lenders don’t deal with the public at all and are only accessible through brokers. You could apply directly to three high street lenders, get declined by all three, and never come near the lenders who would have said yes.
There’s a practical cost to that as well. Every application leaves a hard search on your file, and a run of them in quick succession makes you look like somebody desperately chasing credit, which makes the next application harder still. Knowing which lender fits your circumstances before you apply avoids that entirely.
Having bad credit narrows your options rather than removing them, and the picture is often better than people expect once somebody has actually looked at the file properly. Whether you’re a first time buyer or already own and want to move, there are lenders who will consider your circumstances.
At Proper Advice we work with over 90 high street and specialist lenders, and we’ll give you a straight answer about what’s realistic before you commit to anything or put an application in front of the wrong lender.
Fill out our contact form, give us a call on 01244 955 399 or email us at info@properadvice.co.uk.
Yes, though it depends on how recent the judgment is, how much it was for and whether you’ve satisfied it. Specialist lenders will often consider a CCJ that’s more than two or three years old, particularly where it’s been paid and your record has been clean since. A larger deposit strengthens the case considerably.
There’s no set waiting period. Some specialist lenders will consider an application with a default registered in the last twelve months, though the deposit required will be higher and so will the rate. Options improve noticeably once a default is three years old, and again once it drops off your file after six years.
Yes, but usually not straight away. Most lenders want you discharged, which normally happens after twelve months, and many want to see a further period of clean conduct on top. The bankruptcy stays on your credit file for six years from the date it was made, and your options widen the further you get from it.
A decline itself isn’t recorded on your credit file, but the hard search that came with the application is, and it stays visible to other lenders for a year or so. Several searches close together do look poor, which is why it’s far better to find the right lender first rather than applying repeatedly and hoping.
Your home may be repossessed if you do not keep up repayments on your mortgage.
You may have to pay an early repayment charge to your existing lender if you remortgage.
