Can You Get A Mortgage With A Bad Credit History
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Can you get a mortgage with a bad credit history?
Chris Kenny explains how the mortgage process works if you have a bad credit history.
Can you get a mortgage with a bad credit history?
Yes. There are myriad options out there for people with bad credit. There are dozens of lenders who will consider it, each one with their own criteria. The circumstances have to be right, because each lender has their own list of what they will and won’t do, but there will more often than not be bad credit mortgage options there.
What is classed as bad credit?
Bad credit is any black mark on your credit file, any arrears, missed payments, defaults, county court judgements or something more serious – like repossessions, bankruptcies, IVAs or debt recovery orders.
Can I get a mortgage if I’ve been bankrupt, got an IVA or a CCJ?
Yes, you can get a mortgage if you’ve been bankrupt, had an Individual Voluntary Arrangement (IVA) or a County Court Judgement (CCJ) . As I mentioned, each lender has their own specific criteria on what they will and won’t accept, so they’ll all have rules about how long ago the bankruptcy or CCJ or IVA was, how much it was and when it was settled.
Are there many lenders that don’t look at your credit score?
Thankfully, the answer to that question is a resounding yes, with the exception of one or two. Most specialist mortgage lenders for people who’ve had credit issues don’t work off any credit score. You could have a zero and they still may consider you.
It’s all about their set-in-stone criteria. That might be X number of defaults within X number of years, X number of CCJs within X number of years etc. Anything over a certain amount of time is ignored.
It’s very strict, but straightforward – you either do or you don’t meet criteria. I’ve had experiences in the past where people have had scores close enough to zero and they’ve still got mortgages.
Can I buy a home with no deposit and a bad credit?
Technically, yes, but there’s only one real option to do that at the time we’re recording this podcast in December 2024. One lender will consider giving you a 100% mortgage, and that’s if you’re purchasing a shared ownership property. That’s the only bad credit option at the moment.
That being said, that deal is for people whose bad credit is too much for high street banks to consider. If the situation is not so serious, like a missed payment a few years ago that mainstream lenders will still accept, there may still be options with zero deposit out there for you.
How do bad credit mortgages work? Is there a specific product here?
The process for applying for a bad credit mortgage is largely the same as going through the normal process. You get your Agreement in Principle and you submit your full application. The application process is normally a bit more involved, because bad credit means you’ve got a track record of having credit agreements and not paying them back according to the agreed terms.
You can understand that lenders are a little bit more diligent. They do dot the i’s and cross the t’s as part of the underwriting. The process is usually a bit longer and more involved, and underwriters often ask for a bit more documentation than normal.
What is the lowest credit score allowed for a mortgage?
Most of the lenders who work in adverse credit don’t score in the first place. As long as you meet their criteria, you could have a score of zero and they would still consider you.
How much deposit is required for a mortgage with bad credit?
The older your credit issues are, the more generous lenders are and the more risk they’re willing to take.
For example, if you had credit issues only 12 months ago, you’d likely need somewhere in the region of 15% deposit or more. If your credit issues are over four years ago and you’ve had clean credit since then, quite a few lenders out there could go as low as 10% or potentially 5%.
The general rule of thumb is that for every 12 months older those credit issues get, more doors open for you. As time goes on, you can potentially get away with less deposit.
If you’ve got an adverse credit history, try and aim for a minimum of 15% deposit, because then the majority of adverse credit lenders in the market will come to you. If you’ve got less than that, it’s still possible to get away with 10% or potentially lower, but the options are fewer and further between.
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How far back does your credit history go?
Your credit history is a rolling six years, so anything registered over six years ago drops off your credit report, regardless of whether or not it’s satisfied. It no longer has any impact on your credit score.
That being said, bankruptcies, IVA’s and repossessions are recorded on a separate register from your credit history, and with some lenders, if you have ever had one of those in your life they still won’t consider lending to you. You could have been bankrupt 30 years ago and you could have a credit score of 999, but those lenders wouldn’t take you on.
What happens if I need to remortgage with bad credit? So again, any differences here in that process?
The main difference is that most of the bad credit lenders, with the exception of one or two, aren’t direct-to-consumer. They only work through brokers. They’re not High Street banks, they are specialist lending companies who only work with financial intermediaries like ourselves.
The first thing to do if you’re looking to get a remortgage with bad credit is get hold of a copy of your full credit report, not just the score. Any broker who looks at your credit file will need to know the specifics – what you had, when you had it, how much it was, things like that.
It’s what we do on a daily basis, and just by looking at that credit report we will automatically get a shortlist in our head of lenders that will and won’t consider you. And because they are not direct-to-consumer, they’re only available through intermediaries, they’ll almost certainly be lenders you’ve never heard of..
How do I rebuild my credit score?
The easiest way to do that is to have credit and maintain it correctly. Credit issues are a sign that in the past you’ve not been able to adhere to a credit agreement. More often than not, it’s due to life events and when we look at a credit report, you can often read between the lines and tell that..
Once you’ve got that black mark on your credit report, be it a default or a county court judgement, lenders will always be pleased to see things have improved. If you’ve had credit since then, even phone contracts, it shows that whatever happened is in the past, and you now can be trusted again to maintain a credit agreement.
Lenders want to be comfortable that lightning isn’t going to strike twice. So taking a small credit card and paying it off at the end of the month, having a phone contract, paying your utility bills, they will all contribute to bringing your credit score up.
You’ve demonstrated clearly how a mortgage broker can help – have you got anything else to add?
First of all, the lenders who consider these adverse credit issues are not direct-to-consumer. You’ll have never heard of them, but myself and my colleagues have vast amounts of knowledge and experience in dealing with these lenders. We know who will do what.
It’s also about knowing how the underwriting process works. Each lender has their own criteria on the size, age and type of debt. Meeting the criteria doesn’t automatically mean you’ll get the mortgage, but it means the lender will consider a mortgage application from you. There’s still underwriting to be done and additional checks the lender will do.
Often you can have two lenders with very similar criteria, but one is much more of a go-to choice than the other. If you were to try getting a mortgage on your own and navigating that, it’s a minefield even without credit issues. Credit issues add a whole new level of difficulty.
So use the knowledge and expertise of financial professionals like ourselves, who’ve been doing this for years. It not only makes the process a lot more simple and straightforward, it can save ridiculous amounts of time, effort and research. We know how the lenders work, what they want and what they will do.
We can make sure you get a deal from one of the many lenders across the country and make sure it’s the most suitable one for your needs and expectations.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
