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Can you get a mortgage with bad credit? And how do you go about getting a mortgage with bad credit? Here's our guide to help you understand your options and improve your chances of approval.

Key takeaways

• Getting a mortgage with bad credit may be possible but typically requires higher deposits (often 15%+) and higher interest rates. Representative example: £150,000 over 25 years at 4.5% APR would cost £834 per month. Subject to individual circumstances and lender criteria.

• Low credit score mortgages typically have higher interest rates

• You can get a mortgage with no credit score through specialist lenders

• Mortgage brokers may help improve your chances of approval by matching you with suitable lenders, though approval is never guaranteed

• Avoid making lots of applications in a short period, as this can concern some lenders and may impact your chances; instead, target a small number of suitable lenders

Mortgages for borrowers with adverse credit often involve specialist lenders and may require larger deposits or carry higher rates. Exact requirements depend on the lender’s criteria, the loan-to-value ratio, and the severity of the individual’s credit history.

Whilst lenders these days tend to be much more rigorous with their mortgage application processes, it's still possible to get approved for a low credit score mortgage even if you have 'bad' credit.

Here, we're going to explore what might be regarded by lenders as 'bad' credit and look at all the available options for taking out a mortgage if you're in this situation.

What is 'bad' credit?

If your credit history includes problems such as arrears, CCJs, insolvency, or defaults, you may face higher scrutiny from lenders. Lenders assess adverse credit based on individual criteria and credit history specifics. This may make it harder for you to take out credit now, or at least take out credit on an affordable interest rate. Some of the things that could negatively affect your credit scores include:

• having accounts in arrears

• being declared bankrupt

• being on a debt management plan

• having County Court Judgements (CCJs)

However, whether or not you have 'bad' credit is somewhat subjective. This is because expectations vary between lenders - so one may approve you while another rejects you regardless of any 'adverse' credit you may have. Even if you're wondering can you get a mortgage with adverse credit and CCJs, some specialist lenders may still consider your application.

What if I've never borrowed before?

Having little or no credit history may also be problematic if you want to take out credit. Without a credit history, you're an unknown entity. In other words, lenders can't know if granting you a mortgage is risky or not.

For this reason, you may find yourself in a similar situation to someone with an adverse credit history when applying for a mortgage. You're unlikely to qualify for the best deals; and you may have to settle for a mortgage with no credit score option aimed at first-time buyers instead.

How does a mortgage with bad credit work?

A mortgage with adverse credit works like any other mortgage, except that they accept people who had problems paying their debts in the past. For this reason, the terms of the mortgage will probably be less favourable than they'd be for someone with better credit scores.

First and foremost, your interest rate will probably be at the higher end of the spectrum. This is to offset the higher risk you pose to lenders.

You'll probably also be asked to put up a higher deposit than with a conventional mortgage. While it's possible to take out a mortgage with as little as a 5% deposit if you have good credit, borrowers with adverse credit may need a larger deposit - often around 15% or more - but the amount required varies by lender and your circumstances.

In the past, some government schemes (such as the Help to Buy equity loan in England) allowed eligible buyers to borrow part of the purchase price, but that scheme has now closed to new applications; check current government housing schemes on GOV.UK or with a broker to see what help, if any, is available.

What credit score do you need for a mortgage with bad credit?

UK lenders that consider adverse credit may accept applicants with low credit scores, but thresholds vary significantly by lender and credit bureau. Each application is assessed individually and acceptance is never guaranteed. Because each lender uses its own internal criteria to assess risk, there is no universal minimum score for 'bad credit' mortgages in the UK; instead, eligibility depends on the type, date, and severity of the credit issues.

Specialist lenders may consider applications from people with low credit scores. Getting a mortgage with adverse credit scores is possible, but you'll need to demonstrate improved financial management and provide a larger deposit.

How to get a mortgage with bad credit: application process

If you have bad credit, try to avoid making multiple mortgage applications.

Most mortgage providers cater to people with a good score, which means there's a risk you'll be rejected. Making multiple credit applications in a short period can impact your credit score through hard searches, regardless of whether applications are approved or rejected

Here's how to get a mortgage with bad credit step by step:

• Speak to your bank about suitable products for your situation

• Consult a whole-market mortgage broker who specialises in bad credit cases

• Prepare financial documentation showing improved money management

• Avoid multiple applications to help prevent further damage to your credit score

Start by speaking to your bank about products that might suit your situation. Initial discussions may not involve a credit check, but any formal application will require a credit search that appears on your credit file

Many low credit score mortgage options are only available via mortgage brokers, so seeing one can be very helpful. Besides, an experienced broker will know which lenders may be more suitable for someone with your particular circumstances, which could improve your chances of approval, though acceptance is never guaranteed.

For best results, choose a mortgage broker who advises on the whole market. To find yourself a broker you can try using websites such as Cherryfind, Unbiased or VouchedFor, which have been highlighted by official UK money guidance services.

Finally, your lender will want to carry out an affordability assessment before approving your mortgage. This is your chance to show you've learned from your mistakes and can manage your finances responsibly. Prepare ahead of time by eliminating unnecessary or frivolous expenses. You could also make a budget and stick to it, as this will prove you're able to live within your means.