Bad Credit Mortgage UK: How Lenders Decide and What You Need

Can You Get a Mortgage with Bad Credit?

Usually, yes. You will have fewer lenders to choose from and you will probably need a bigger deposit than someone with a clean file, but missed payments, defaults, CCJs, an IVA and even a past bankruptcy do not close the door for good. Most of the people who ring us have already been turned down once, often by a scoring system that never put their file in front of a person.

The lenders that deal with adverse credit want a story that makes sense. What went wrong, when it happened, whether it has been cleared up, and what your finances look like today. A default after a redundancy, settled long ago and followed by years of clean payments, reads very differently from three missed payments last spring.

We place bad credit mortgages for existing homeowners and for first-time buyers.

If your recent record is clean and your income is steady, there will be lenders willing to look at you. The trick is choosing the right one first time, because every decline is recorded on your credit file and a run of them makes the next application harder.

At UK Mortgage Broker we go through your credit report, income, deposit and plans before we suggest a lender. We are FCA authorised and whole-of-market, so we can look well beyond the high street. If something needs fixing before you apply, we will tell you.

How Bad Credit Mortgages Work

There is no special product called a bad credit mortgage. It is a normal residential mortgage from a lender willing to read an adverse credit file properly, and it carries the same FCA protection as any other residential mortgage.

The big high street banks mostly run applications through automated scoring. A recent default or CCJ can end the application there, with nobody reading your explanation. Building societies and specialist lenders are more likely to underwrite by hand. A person looks at the credit report next to your payslips, bank statements and deposit and decides whether the picture adds up. We cover how we match these cases in our piece on how brokers place difficult-to-place mortgages.

Underwriters tend to ask the same handful of questions. What caused the problem, how long ago, how much was involved, is it settled, and has anything gone wrong since. They also want to see that your income can carry the payment with some room to spare.

How Different Credit Problems Are Treated

Lenders do not treat all adverse credit alike, and each one sets its own limits. This is the general picture.

Missed payments and arrears

A few late payments on a card or phone contract from some years back rarely matter. Arrears on a mortgage or rent in the last year or two matter a great deal, and the list of lenders shrinks fast.

Defaults

A default is recorded when a lender closes an account after a run of missed payments, and it stays on your file for six years. Lenders look at the date, the amount and whether you have paid it. One settled four years ago is a minor point. An unpaid one from last year is not.

CCJs

A county court judgment goes on the public register and on your credit file. Pay it in full within a month and it comes off the register. Leave it longer and it stays for six years, although marking it as satisfied helps. The size and the age both count.

Debt management plans

A DMP is an informal arrangement to pay your creditors less each month. Lenders want to see one that has run without a break, ideally one that has finished.

IVAs

An IVA is a formal agreement with your creditors that usually runs for five or six years. Plenty more lenders will talk to you once it has been completed, normally with a larger deposit.

Bankruptcy

Most bankruptcies end with a discharge after a year, but the entry stays on your file for six years from the start date. A small number of lenders will consider you after discharge, and the longer the gap, the better the terms.

Your own credit report shows exactly what a lender will see. Our article on how your credit score affects your mortgage application explains how to read it.

Bad Credit Mortgage Lenders: Which Types Will Lend

Lenders fall into four rough groups, and they behave differently when the credit file is poor. High street banks mostly rely on scoring and turn down recent defaults or CCJs quickly, although a light and old history can still get through. Several building societies underwrite by hand and will listen to an explanation, especially from someone who has saved or borrowed with them for years. Specialist adverse credit lenders exist for exactly these cases. They charge more and ask for a bigger deposit. For complicated or very recent problems there are private and bespoke lenders, at higher cost and on shorter terms.

No single lender takes everything, and appetite shifts from month to month. Checking criteria before anything is submitted is a big part of our job.

What Deposit Do You Need for a Bad Credit Mortgage?

Deposit does a lot of the work in a bad credit case. The more you put in, the less the lender stands to lose, and the longer the list of lenders gets. As a rough picture, older or minor problems can sometimes go through with 10 to 15 percent down. More recent defaults or CCJs tend to need 15 to 25 percent. Serious or recent trouble usually means 25 percent or more.

Those bands are starting points, not rules, and a satisfied default from years back will be treated more kindly than a missed mortgage payment last winter. If you have less to put down, the choice of lender matters even more. A lower loan to value also earns a better rate. For how your income and commitments set the ceiling, see how much you can borrow.

Bad Credit Mortgage Rates and Costs

Expect to pay more than the best high street rate. The lender is pricing for extra risk, fees tend to be higher, and most fixed deals carry early repayment charges. What you pay depends on the loan to value, the type and age of the credit problem, how steady your income is and the property itself.

Plenty of borrowers choose a shorter fix, two or three years, with the plan of moving to a mainstream deal once the credit file has recovered. We put the full cost of each option in front of you, including fees and what happens when the fixed period ends, so you can see whether it still works. Pricing across the wider market is on our UK mortgage rates page.

How to Improve Your Chances Before You Apply

Some of the most useful work happens before an application. Get your reports from Experian, Equifax and TransUnion and look for mistakes: an account that should be closed, an address that is not yours, a payment marked late that was not. Check you are on the electoral roll at your current address, since lenders use it to confirm who you are. Keep everything paid on time from now on and hold back from new credit, because every search is recorded. Try not to approach lenders directly until you have taken advice.

Then write down what went wrong and what has changed, and keep your proof of income handy. An underwriter reads that explanation, so it helps to have it ready. If you are self-employed, lenders will want your income evidenced in the usual way, and our self-employed mortgage page lists what they ask for.

Why Use a Mortgage Broker if You Have Bad Credit?

Going straight to a lender with a messy credit file is a gamble. If it says no, that is recorded. Do it three or four times and the file can look worse than when you started. A broker can check criteria first and approach one lender with a case put together for an underwriter to read.

For us, that means reviewing your whole credit history before anything is submitted, choosing lenders that actually deal with your kind of problem, writing up the explanation, and setting out the rates, fees and exit plan on day one. The advice is fully FCA regulated throughout.

When a Bad Credit Mortgage Makes Sense

It is rarely anyone’s first choice, but it can be the right call. You may have found a property you do not want to lose. A bank may have turned you down and you would rather avoid collecting more declines. Automated scoring may keep rejecting you because you are self-employed, or you may want to roll expensive debt into one payment.

Many people treat it as a stepping stone. Buy now, keep up the payments, and refinance in a few years when a wider group of lenders will take you on.

Bad Credit Mortgage Calculator

An online calculator gives you a ballpark, but it assumes ordinary lending and knows nothing about your credit file or how a specialist lender stress tests. Our CeMAP qualified advisers work out real affordability, test the repayments at higher rates and match you with lenders that accept your profile. Our mortgage affordability explanation shows how lenders do the sums.

Frequently Asked Questions

Working With UK Mortgage Broker on a Bad Credit Mortgage

We are whole-of-market and FCA authorised, with advisers who handle adverse credit cases regularly. You get one qualified adviser from the first conversation to completion, a clear recommendation rather than a menu of options, and updates through our WIIN Client Portal. You will know where you stand, what to expect and why we picked the lender we did.

Speak to a Bad Credit Mortgage Specialist Today

A previous credit history does not have to prevent you from moving forward, provided the right advice and lender are used. A specialist bad credit mortgage UK can help you buy or remortgage while you work on improving your financial situation, but you should get professional advice first.

Get in touch with our mortgage broker UK team today for a free consultation to learn how the right bad credit mortgage can help you move forward with confidence.

UK Mortgage Broker is an independent whole-of-market broker, directly authorised and regulated by the Financial Conduct Authority. We help homeowners and property investors throughout the UK and overseas. Your home may be repossessed if you do not keep up repayments on your mortgage.

Call: +44 1628 969 500
Email: info@uk-mortgagebroker.co.uk

Related Pages

• Why Mortgages Get Declined UK – the most common reasons applications fail and how to avoid them
• Self-Employed Mortgage – how lenders assess self-employed income for mortgage applications
• 5% Deposit Mortgage Risks – the specific pressure points at 95% LTV that catch buyers out
• When Mortgage Deals Fall Through After an Agreement in Principle – why applications that pass AIP stage can still be declined at full underwriting
• First-Time Buyer Mortgage UK – mortgage options for first-time buyers including those with past credit issues
• Case Study: First-Time Buyers Overcoming Lender Hurdles – how specialist lender selection secured a first mortgage despite credit challenges