Bad Credit Mortgage Lenders

Bad credit typically means you have a low credit score. Bad credit is usually caused by not making payments on time or defaulting on bills. A person with bad credit will likely find it much harder to borrow money at competitive rates than someone with a good credit history as potential lenders will consider them riskier to lend to than other borrowers.

The reasons for someone's bad credit rating will be marked on their credit report and can be anything from one missed payment to a CCJ (county court judgement) or bankruptcy. The severity and recency of the bad credit event(s) will impact the lenders and deals available to you.

Some examples of bad credit events include:

• CCJs
• DMP (debt management plan)
• Default payments
• IVA (individual voluntary arrangement)
• Late or missed payments
• Mortgage arrears
• No credit score or history
• Repossession and bankruptcy

Yes, you can get a mortgage if you have bad credit, but it can be harder getting a mortgage with a poor credit report. Every mortgage lender has their own criteria for what adverse credit they can and can’t consider - from missing a bill payment to home repossession.

If you have minor credit issues, such as one late or missed credit card payment, this won’t necessarily stop you from getting a competitive mortgage from a high street lender or building society. But, if you've had an IVA and/or CCJ in the last 6 years or been declared bankrupt, the pool of lenders and product available to you will be significantly reduced.

Essentially, the more severe and recent the bad credit event, the more of an impact it will have on your mortgage options.

The simplest way to ensure you find the best deal for your situation is to use a mortgage broker like John Charcol.

We know which lenders will consider applications despite certain bad credit events and we have access to adverse credit lenders who only operate through intermediaries. Call us on 0330 433 2927 to find out more.

The types of mortgages offered to people with poor credit are typically called bad credit mortgages. These work the same way as a standard mortgage offered to a person with good credit, the main differences being that they usually have higher fees and interest rates. Depending on the situation, some lenders may even require that you provide a slightly higher deposit of at least 15%.

Although this isn’t ideal, the good news is that, as long as you make all your mortgage payments on time and avoid any more adverse credit, you should see your credit score improve. Then you can remortgage onto a better rate later on.

You can check your credit score online. There are several credit reference agencies – e.g. Equifax, Experian and TransUnion. Your credit score is a 3 digit number that reflects how well you manage, borrow and repay money. Each agency uses a different scoring method, but most typically categorise scores into very poor, poor, fair, good and excellent.

Your credit score reflects the overall health of your credit report. The better your score, the healthier your credit report. And the healthier your credit report, the more lenders and the better the deals you have access to.

While specialist mortgage lenders tend to charge higher interest rates to offset the risk of lending, many also require larger deposits. This is usually at least 15%, especially if you have several settled defaults or CCJs on your credit report. The larger the deposit you can put towards the mortgage, the better the interest rates you'll likely have access to. A higher mortgage also means a lower LTV (loan-to-value), reducing the lender's risk. The LTV is the size of the mortgage loan as a proportion of the value of the property you're looking to buy.

Your credit score reflects the overall health of your credit report. The better your score, the healthier your credit report. And the healthier your credit report, the more lenders and the better the deals you have access to.

There are subprime mortgage lenders – sometimes referred to as adverse credit mortgage lenders – who specialise in mortgages for people with poor credit histories. These lenders don't have the same strict lending rules as high street mortgage lenders and can therefore be more flexible regarding applicants with bad credit events in their history.

Most subprime lenders tend to charge higher interest rates and sometimes require higher deposits than normal lenders. They’re also often not available directly to borrowers and only work through an intermediary such as John Charcol. We work closely with the best mortgage lenders for bad credit to help borrowers with bad credit find the best possible mortgage for their circumstances.

Some of the UK mortgage lenders for bad credit we work with include:

• Aldermore
• Bluestone
• Foundation Home Loans
• Kent Reliance
• Pepper Money
• And more

While specialist mortgage lenders tend to charge higher interest rates to offset the risk of lending, many also require larger deposits. This is usually at least 15%, especially if you have several settled defaults or CCJs on your credit report. The larger the deposit you can put towards the mortgage, the better the interest rates you'll likely have access to. A higher mortgage also means a lower LTV (loan-to-value), reducing the lender's risk. The LTV is the size of the mortgage loan as a proportion of the value of the property you're looking to buy.

Getting a mortgage when you have bad credit can be challenging and will likely cost you more in fees, interest and deposit. However, getting approved for a bad credit mortgage is not impossible, especially with a specialist mortgage broker like John Charcol.

We use our expertise and extensive market knowledge of bad credit mortgage lenders to help you find the right mortgage product for your circumstances. Get in touch today on 0330 433 2927 to see how we can help you.