How to Get a Mortgage With Good Income but Bad Credit

All lenders will look at your credit record to gauge whether or not they want to lend to you. Most mainstream lenders will use the information on your credit record to assign you a credit score as an indicator of how risky you are as a lending prospect. Many adverse credit lenders don’t assign you a credit score when assessing your application.

Your credit record will show an overview of your history of borrowing money and repaying it, as well as other financial matters such as how many lines of credit you currently have, including credit cards, loans, car finance and other mortgages. It will also show if you have missed any payments on any loans in the past few years, as well as any serious matters like county court judgements or bankruptcy.

There is no one answer to the type of income you need to get a mortgage. This is because your income – among other factors – determines how much you can borrow, and therefore what you can afford to buy. Most lenders will estimate your maximum borrowing for your mortgage at between 3 – 5x your income.

You may find that having a poor credit history will limit the lenders available to you and the maximum LTV (loan-to-value) at which you can borrow – meaning you’ll need a bigger deposit to buy the house you want.

Good income does not usually make up for having adverse credit, but it can improve the options available to you if you’re able to use that income to save up a bigger deposit and secure a lower LTV mortgage. The lower your LTV, the less you’ll need to borrow and the less you’ll pay overall in interest – this is particularly beneficial when securing an adverse credit mortgage as bad credit lenders tend to offer high interest rate products.

Your credit score will be based on your past financial history. It is hard to say a specific number that counts as a bad credit score as different credit agencies and lenders calculate them differently – and some adverse credit lenders don’t credit score you at all when looking at your credit record.

You should consider your credit score as an indicator of the overall health of your credit profile and financial history. You can find your credit score online through credit reference agencies such as Experian, Equifax and TransUnion.

If your credit score is poor, this will likely mean that you’ve had some adverse credit issues which may limit the lenders and deals available to you.

It’s still possible to get a mortgage with a poor credit score, but you may have to use an adverse credit lender who charges higher rates and may require a larger deposit amount.

Having no credit score is also a problem when it comes to getting a mortgage. While having a bad credit score shows that you struggle with making repayments, having no credit score means that the lender will have no idea whether or not you can make your payments on time. Many lenders will consider it too high a risk to lend to someone with no credit history.

It’s worth noting that you probably have more of a credit history than you first thought. Especially if you’ve paid for things like your phone bill or Council Tax. You may still have a low score if you don’t have much of a credit history but it’s likely it won’t be non-existent.

If you’re still struggling to get a mortgage despite having a high income, you should look at ways that you can improve your credit score. While this could take more time compared to finding a suitable specialist mortgage, you’ll probably find that improving your credit score gives you access to a wider range of lenders and better mortgage products. This could mean that you can get a mortgage with a smaller deposit requirement and a lower interest rate.

Ways to improve your credit score include:

• Paying off debts and loans on time - making it a priority not to miss any payments can help improve your credit score significantly over time
• Not using all your line of credit - lenders want to see that you’re not going to struggle if you have unexpected issues, so you should avoid using almost all of your available credit
• Settling CCJs, IVAs, defaults and more - you ideally want to have issues such as CCJ and defaults settled before you start looking for a mortgage. Most lenders will not consider lending to people with active CCJs

Avoid hard credit checks - hard credit checks show up on your credit report and can put off lenders if multiple have been carried out over a short period of time

Using an independent mortgage broker like John Charcol can help you get a mortgage more easily despite having bad credit. This is because our experts know which lenders to approach and who can offer you the best deal for your situation. Brokers also have access to lenders who do not deal with homebuyers directly.

Working on getting a mortgage when you have poor credit can be difficult whatever your income level is, but it’s not impossible. The main factors are how severe your credit issues are and how long ago they occurred, as well as your affordability.

Using a mortgage broker can be a great way to improve your options and secure a suitable mortgage deal for bad credit but good income. Here at John Charcol, we have experience helping people get adverse credit mortgages for all kinds of properties. Get in touch today to see how we can help you.