Bad Credit Mortgage FAQs

Below we have listed the most common queries we get asked by bad credit mortgage applicants.

As the name suggests, bad credit mortgages are home loans designed specifically for applicants with an imperfect credit history. They are also sometimes referred to as subprime mortgages or adverse credit mortgages, though the product itself remains the same. Most lenders naturally assume that when an applicant has an imperfect credit score, they represent a higher-risk candidate for non-repayment. This is why the vast majority of major high street banks are unwilling to work with poor-credit applicants. Away from the High Street, specialist subprime lenders are more flexible and accommodating. By taking all aspects of the applicant’s financial status into account, they are able to determine who is genuinely able to afford a mortgage. Just as poor credit does not mean you cannot afford to buy your own home, a flawless credit history does not necessarily mean you can.

Depending on the level of adverse history you should be able to get a bad credit mortgage. The sub prime lender may charge you a higher rate as they see it as them taking a higher risk in lending you the money. It is also dependent on whether you are able to easily explain the cause of the arreas / poor credit. Once again depending on when the arrears occurred or what the amounts are, they can also be ignored.

Because a terrible credit history is generally seen by lenders as an indication of increased risk, obtaining financing with really bad credit might be difficult. Based on an applicant’s credit history, lenders utilise credit scores and credit reports to determine the likelihood that the borrower would repay a loan. Your alternatives may be limited if your credit score is really low. You could have to pay higher interest rates or provide more security.

You may be considered to have a poor credit score if you have failed to meet any formal payment obligations in the past. Everyone has their own unique credit score and lenders having their own criteria regarding credit scores. Bad credit mortgages are engineered specifically for poor credit applicants or those that have yet to build any credit at all.

This will depend on what has caused the poor credit rating. You would need to check your credit report and if the poor credit is not due to missed payments or is from a while back, it is possible that the sub prime lender will ignore it or offer you a slightly higher priced mortgage. The key to getting a mortgage (at a competitive rate of interest) with poor credit lies in exclusively targeting the right lenders. This is a process that begins with an extensive independent consultation with a broker, who can help you assess your eligibility for a mortgage, your budget, your credit status and so on. After which, a whole-market comparison can be carried out to find the best sub-prime deals available. The vast majority of which will not be available via the usual High Street lenders, or may only be accessible via approved brokers. It is important to remember that every unsuccessful mortgage application you submit could inflict further damage on your credit report. If you are not 100% confident you will qualify, it is not worth taking the risk. Always consult with a broker to find the right lender for you, preserving your credit history in the process.

The only realistic way to establish whether or not you have poor credit is to check your credit score. There are various apps and online facilities these days via which you can view your credit history, or you can take your questions and concerns to an independent broker. If you have ever missed a planned payment in the past – utility bills, credit cards, mobile phone bills, personal loans etc. – each oversight will have left its mark on your credit history. It is comparatively rare for anyone to have a 100% unblemished credit record, which is why minor oversights are not normally taken into account. By contrast, any evidence of a debt management plan, bankruptcy, specialist consolidation loan or general default could stand in your way. As could a combination of multiple smaller discrepancies over the years. Should you have any questions or concerns, it is essential to discuss them with an independent broker before applying.

Your credit rating will affect your eligibility for a home loan with the vast majority of major banks and lenders. This doesn’t mean you won’t qualify for a specialist bad credit mortgage. It’s simply a case of directing your applications at the right lenders, most of which are not on the High Street.

Boosting your credit score is something that takes time, so it is advisable to get started as soon as possible. Upon examining your credit file, you may notice discrepancies that can be brought to the attention of those responsible. If corrected due to inaccuracies, this will be reflected immediately with an improved credit score.

Other than this, the most effective ongoing strategies for building better credit include the following:

  • Paying all bills and debts on time
  • Adding your name to the electoral roll
  • Avoiding consolidation where possible
  • Using loans and credit cards responsibly
  • Not applying for too many lending facilities
  • Keeping on top of your debts
  • Avoiding payday loans

As all of these things take time, it is unlikely that taking action today will result in your qualification for a standard mortgage in the near future.

Applying for a bad credit mortgage can be simplified by working with an independent broker. Due to the nature of a bad credit mortgage, it is important to ensure that you compare as many deals as possible from an extensive panel of specialist subprime lenders.

A lot of specialist lenders will ignore some level of adverse or bad credit. It is best to contact a broker who has a range of subprime lenders on their panel and will be able to find you a lender based on your level of adverse.

It depends on the lender and the mortgage products you apply for. While a bad credit mortgage can sometimes attach higher borrowing costs than a traditional mortgage it isn’t always the case. Your bad credit mortgage broker will help you secure the best deal.

Yes. It’s simply a case of directing your applications at the right lenders rather than the High Street banks. If you’re in a strong financial position and can comfortably afford the monthly repayments, you can definitely get a good deal on a bad credit mortgage.

Yes. There are a number of mortgage providers happy to lend if you have CCJs on your credit record. Much will depend on how recently your CCJs were registered and how many you have. Typically it’s much more straightforward to find a lender for CCJs registered 2 or more years ago. The size of your deposit will also be a factor both in terms of eligibility and the deals available to you.

For lower level bad credit, such as CCJs, defaults on cards / bills etc, typically a minimum of 15% deposit is required. For settled IVA’s and ex-bankruptcy you will need 20-25% as a minimum deposit. As ever, more deals and better rates are available if you can raise a larger deposit.

There’s no initial credit check. Your advisor will usually be able to confirm if you will qualify for a mortgage just by looking at your credit report. A further credit search will only be carried out if and when you are happy to proceed to a full application to the lender.

Historically mortgages for people with bad credit have been more expensive. However as more lenders have entered the adverse credit mortgage market in recent years, competition has increased. Which means it’s now possible to achieve highly competitive terms similar to high street deals, depending on your circumstances.

In some circumstances, yes. Much will depend on how long you’ve been discharged, and the amount of deposit you have available. You will need to have at least 20-25% to put down.

Unfortunately we are unable to help if you’ve been or are going through an IVA.