Have Bad Credit? Here’s How You Could Still Get a Mortgage

It’s a situation many people in the UK face. Financial difficulties can happen to anyone, and often, a dip in your credit score is the result. If you’re looking to buy a home, you might worry that a less-than-perfect credit history means an automatic ‘no’ from high street lenders.

While having a history of bad credit is an obstacle, it doesn’t have to be the end of your homeownership journey. With the right advice and approach, you might still be able to find a mortgage that works for you.

This blog is for informational purposes only and does not constitute financial advice.

What Does ‘Bad Credit’ Actually Mean?

“Bad credit” is a broad term. It can cover anything from a few missed payments to more serious issues like a County Court Judgement (CCJ), an Individual Voluntary Arrangement (IVA), or even bankruptcy.

• Missed or Late Payments: Life happens. A late payment on a credit card or bill can stay on your credit file for up to six years.
• Defaults: If you fail to repay a debt, the lender may “default” the account. This is a significant red flag for many lenders.
• IVAs and Bankruptcy: These are formal insolvency solutions. An IVA is a legally binding agreement with your creditors to pay back your debts over a period of time. Bankruptcy is a legal process for those who cannot pay their debts.

For clear, impartial information on debt solutions and how they affect your finances, it’s always a good idea to consult a government-approved service like MoneyHelper. They offer free and confidential guidance.

Getting a Mortgage After an IVA or Bankruptcy

Getting a mortgage immediately after an IVA or bankruptcy is very unlikely. These will remain on your credit file for six years from the date they are registered. Most lenders will require this period to have passed before they will even consider an application.

Once this time is up and the record is removed from your credit file, you can begin the important process of rebuilding your credit score and demonstrating your financial stability to lenders.

Specialist Lenders: A Different Approach

The good news is that the mortgage market is bigger than just the high street banks. There are many specialist lenders who are more willing to consider applications from people with a history of bad credit.

These lenders often take a more holistic view of your finances. Instead of focusing solely on your credit score, they will look at your overall affordability. If you can clearly demonstrate that you can afford the monthly mortgage payments and have a solid deposit, you stand a better chance of being approved.

It’s important to be realistic. You may face a few more hurdles, and the interest rates offered might be higher than the best-buy deals you see advertised. However, for many, it’s a welcome opportunity to get onto the property ladder and start building a positive credit history again.

Simple Steps to Improve Your Credit Score

The more you can do to improve your credit score, the wider your options will be. Taking small, consistent steps could make a big difference over time.

• Check Your Credit Report: Before you do anything else, get a copy of your credit report from all three main UK credit reference agencies: Experian, Equifax, and TransUnion. You can often do this for free. Check for any errors that might be pulling your score down. The MoneySavingExpert Credit Club is a great resource for this. Reviewing your credit score is a great way to keep track of your financial wellbeing, and it usually won’t have any impact on your rating as it is a soft credit check; however, checking it too frequently could potentially lower your score, so it’s best to do so occasionally and with purpose.  Although we have mentioned the UK credit agencies by name, we are not affiliated with any of them and do not receive any commission or financial benefit from them.
• Register to Vote: If you’re not on the electoral roll, lenders can find it harder to confirm your identity, which can negatively impact your score.
• Manage Your Existing Credit: Focus on making all your payments on time, every time. If you have credit cards, try to keep your balance well below the limit.
• Avoid High-Cost Credit: Steer clear of payday loans or other forms of high-cost, short-term credit. Lenders often see this as a sign of financial distress.
• Build a Positive History: A “credit-builder” credit card can be a useful tool if used responsibly. By making small, regular purchases and paying the balance off in full each month, you demonstrate that you can manage credit sensibly.

For more tips on improving your credit rating, the BBC’s guide to understanding your credit score offers some excellent, easy-to-understand advice.

How We Can Help – With No Broker Fee

At Yes Mortgage Services, we believe everyone deserves clear, honest mortgage advice. We are committed to helping you find the most appropriate mortgage, and we do not charge a broker fee for our services.

Our team has access to a comprehensive panel of lenders, including specialist lenders who may be able to help even if the high street has said no.

We are dedicated to treating our customers fairly, in line with the Financial Conduct Authority (FCA) guidelines. The most important thing to us is finding a solution that is appropriate for your individual circumstances. We’re flexible too and can arrange to chat at a time that suits you, even in the evenings.

Don’t write off your chances of owning a home because of past credit issues. Get in touch for a friendly, no-obligation chat. You might be surprised at the options available.

Call us for free on 0800 612 5596 or visit us online at www.yesmortgageservices.co.uk to find out more.