Can You Get a Mortgage With Bad Credit?

What is Bad Credit?

Bad credit usually refers to a poor credit history or a low credit score. This is an indication to lenders that you may have struggled with managing debt in the past.

Credit scores typically range from 300 to 999, with scores below 600 often considered poor. Factors that contribute to bad credit include late or missed payments, high levels of debt, bankruptcies, or defaults on loans.

A low credit score can make it difficult to secure loans or credit cards, and if you are approved, you may face higher interest rates or an application decline from some lenders.

In the UK, the most common sources of bad credit include missed payments on utility bills, credit cards, and loans. The use of payday loans and over-reliance on credit can also contribute to a poor credit score. In addition to this, if you've been registered for bankruptcy or have had county court judgments (CCJs) against you, your credit history can be severely impacted. Understanding your credit score and the factors that influence it can help you manage and improve your financial situation.

How does bad credit impact mortgage applications?

Having bad credit is not the end of the road, but it can certainly make it more challenging to access mortgage products. Lenders view individuals with bad credit as higher risk, which is why they may be more cautious when offering loans or mortgages.

But don’t give up, there are still options available which Premier Mortgage Services can help with. This includes finding certain specialist lenders for people with bad credit or helping you to find ways to improve your credit score over time. It's important to understand what bad credit means and how it affects your financial options before making any decisions.

Can I Get a Joint Mortgage with Bad Credit?

Yes, it is possible to get a joint mortgage with bad credit but there are certain factors to consider. When applying for a joint mortgage, both applicants’ credit scores and financial histories will be taken into account. This means that if one person has bad credit it could affect the overall mortgage application. However, if the other applicant has a good credit score, it may help offset the impact of the lower score and increase the likelihood of approval.

However, there is no general rule for the above and each application is treated differently depending on the circumstances.

Lenders will assess the combined financial stability of both applicants, including income, debt levels, and credit history. A joint mortgage may also reduce the risk for the lender, as they have two borrowers responsible for repaying the loan. If one applicant has bad credit, the other applicant's good credit can help secure more favourable terms, such as lower interest rates and a higher chance of approval.

What is the Lowest Credit Score to Buy a House?

Unfortunately there is no concrete answer to this. The lowest credit score required to buy a house can vary depending on the type of mortgage, the lender's specific requirements and your personal financial situation. Remember, your credit score isn’t the only factor considered when applying for a mortgage, although a good score does help in most situations.

If your credit score looks like it may need improving, you may want to consider working on this before applying. Avoiding missed payments and reducing credit card balances can all help increase your score over time, leading to better mortgage options when you’re ready to buy that dream home.

How Can I Improve My Chances of Getting a Mortgage with Bad Credit?

Getting a mortgage with bad credit may seem difficult but there are several steps you can take to improve your chances. By following these steps, you may increase your likelihood of being approved for a mortgage, even with adverse credit.

1. Check Your Credit Score  

The first step in improving your chances is to know where you stand. As suggested above, check your credit score and also review your credit report for any errors or inaccuracies. In some cases, discrepancies in your report may be affecting your score. You’ll also be able to understand where you need to improve and how lenders may view you as an applicant.

2. Work to Improve Your Credit Score  

If your credit score is low, focus on improving it before making a mortgage application. Remember, it’s about reducing your credit card balances and ensuring that you make all future payments on time. Even small improvements can make a big difference when applying for a mortgage.

3. Save for a Larger Deposit  

A larger deposit can make you more attractive to lenders, as it lowers the loan-to-value (LTV) ratio and reduces the lender's risk. While the typical deposit is around 10-20%, saving for a larger deposit, such as 25% or more, can significantly increase your chances of getting approved. It shows that you are financially stable and committed to your investment, making lenders more likely to offer you a mortgage.

4. Borrow with a Partner  

If you have a partner or family member with a stronger credit history, consider applying for a joint mortgage. Lenders will assess both applicants' credit scores and financial histories, which may improve your chances of approval. With a joint mortgage, your partner's good credit may offset your bad credit and help secure better terms and lower interest rates.

5. Consider a Specialist Lender  

If your application is rejected by mainstream lenders, consider applying with a specialist lender who focuses on offering mortgages to people with bad credit. These lenders may be more flexible and willing to offer loans, although you may face higher interest rates or stricter terms. Be sure to research these options thoroughly and ensure you can comfortably afford the repayments.

6. Consider Government Schemes  

If you are a first time buyer or meet certain eligibility criteria, you may qualify for government-backed mortgage schemes such as the Help to Buy or Shared Ownership programmes. These schemes are designed to support individuals who may be struggling to get a mortgage, or to save a large deposit.

7. Speak to a Qualified Mortgage Advisor  

Whilst you can do your own research, often this information is generalised and not necessarily geared to your own financial situation. A qualified mortgage advisor can provide expert guidance tailored to you. They can help you navigate the complex mortgage market, suggest the best lenders available for those with bad credit and guide you on the most suitable mortgage products. Advisors can also help you understand the specifics of the application process and assist with improving your overall mortgage eligibility.

You can talk to a qualified mortgage advisor for free at Premier Mortgage Services. Just contact us here to arrange an in person or phone appointment, or call 0115 949 9988.

‍