Everything you need to know about getting a mortgage with bad credit.
If you’re thinking about buying a home in the future, you may be wondering if you can get a mortgage with bad credit. A lot of the time when people talk about credit scores, it’s often said that having a bad credit score can seriously impact your chances of buying a home.
While this is true, it doesn’t mean that if you have a bad score you can’t get a mortgage, so if you’ve made a few financial mistakes or have come into financial hardship it doesn’t mean it’s the end of the world.
Can you get a mortgage with bad credit?
Yes, it is possible to get a mortgage with bad credit, however, it can be tricky. It will depend on your personal circumstances, if you’re trying to buy a home with someone else and their credit history and the type of mortgage you want to get. You may need a guarantor, a good explanation for previous financial difficulties and proof that you are now a responsible borrower.
In some cases, you may be eligible for a bad credit mortgage which is the same as a regular mortgage just with higher interest rates and a potentially lower limit on how much you can borrow.
What’s the minimum credit score you need for a mortgage?
There isn’t a specific number you need to be accepted for a mortgage, but you do need to show a responsible financial history. This is also because there isn’t just one universal credit score and in the UK there are multiple credit reference agencies each with their own scoring system.
Mortgage lenders will also look at a lot more than just your credit score, such as monthly outgoings, council tax and childcare payments as well as any court records for bad credit.
However, if you were to look at the credit reference agency Experian for example, you would need to have an excellent score to access the best mortgage deals and a good score to access most deals. If you had a fair or poor score you could get a mortgage but with higher interest rates and if your score was categorized as very poor you may struggle to be accepted for a mortgage.
How do you get a mortgage with bad credit?
You will need to be honest and upfront with your mortgage advisor who will be able to help you and suggest some ways you can either improve your credit score, or get around it. For example, you may need a guarantor or you may need to pay a higher deposit or apply for a mortgage with much higher interest rates.
Can you get a mortgage with defaults?
Yes, you can but it can be difficult. If you have defaults on your credit report they’ll stay there for six years and will be visible to mortgage lenders. This would be a big reason for a lender to not want to accept your mortgage application, however, the right mortgage advisor may be able to help you get around this and be accepted for a mortgage if you have a previously bad financial history.
When do mortgage lenders do the credit check?
The credit check will normally happen early on in the mortgage application process, so if you do have a bad credit history it’s best to be open and honest about this from the start. A final hard check may also be taken towards the end of the process, such as on exchange day, prior to exchanging or close to completion day.
How far back do mortgage lenders look at your credit history?
This can vary but it will normally be six years, as this is the length that defaults and CCJs stay on your credit report. They will be looking for missed loan payments, credit/loan rejections, CCJs, bankruptcies and repossessions. If you had defaults more than six years ago, they’ll be removed from your credit report but mortgage lenders may be able to see them if they do look back further than six years.
Don’t forget to check out what is a credit score and how you can improve it.