Bad credit mortgage guide

Can you get a mortgage with bad credit?

Yes. Missed payments, defaults, CCJs, debt management plans, IVAs and even a past bankruptcy are all considered by some lenders. Each lender has its own criteria for each type of issue, including the amount, how long ago it happened, whether it’s been settled and how you’ve managed your money since.

That’s why being declined by one bank doesn’t mean the answer is no everywhere, because one lender’s criteria can be very different from another’s. Keyholder has helped hundreds of people with bad credit get a mortgage, and we help clients every week who have been turned down elsewhere.

Our bad credit mortgages page explains how Harry, our complex credit specialist, helps. Below are answers to the most common questions about getting a mortgage with each type of credit issue.

What do we need to know about your credit history?

To find a lender whose criteria fit, we need the details of each issue on your credit file: the type of issue, the account it was on, the amount, when it was registered and whether it has been settled. Once we know what’s on your file, we can match you with lenders whose criteria fit your situation.

Every lender has its own criteria for each type of credit issue. With the full picture, we look for the lenders whose criteria fit you.

Can you get a mortgage with a default?

Yes, a default doesn't rule you out on its own. They look at how many defaults you have, the amounts, when they were registered, the type of account they were on and whether they’ve been settled. Your options could open up the further away the default is, but each lender has its own criteria for defaults.

A default is recorded when a lender closes an account after several missed payments. It stays on your credit file for six years from the date it was registered, even after it’s been paid off, but once settled it’s marked as satisfied.

Criteria differ from one lender to the next.

Can you get a mortgage with a CCJ?

Yes, a CCJ doesn’t automatically rule out a mortgage. What matters is the amount, when the CCJ was registered, whether it has been satisfied and whether there’s more than one. A CCJ stays on your credit file for six years from the judgement date, and each lender has its own criteria for CCJs.

A county court judgement (CCJ) is a court order to repay a debt. Once it has been paid, it’s marked as satisfied on your credit file. If a CCJ is paid in full within one month of the judgement, it can be removed from the public register altogether.

It all depends on the individual lender’s criteria and your circumstances.

Can you get a mortgage with a debt management plan?

Yes, both while a plan is running and once it’s complete, depending on the lender. Key factors include when the plan started, whether it’s still running or has been completed, your payment record and any defaults linked to the debts in the plan. Criteria for debt management plans vary between lenders, whether the plan is active or completed.

A debt management plan (DMP) is an informal agreement to repay your debts through one affordable monthly payment, often arranged through a debt charity or company. Debts in a DMP are often recorded as defaults or arrangements to pay on your credit file, and once the plan is complete they’re usually marked as settled.

Each case is assessed against the lender’s own criteria.

Can you get a mortgage after an IVA or bankruptcy?

Yes. Applications after an IVA or bankruptcy can be looked at by specialist lenders. They take into account when the IVA or bankruptcy started, whether the IVA has been completed or you’ve been discharged, and how you’ve managed your credit since. IVA and bankruptcy criteria can differ a lot from one lender to the next.

An individual voluntary arrangement (IVA) is a formal agreement to repay part of your debts over a set period, usually five or six years. Bankruptcy is a formal process that writes off most debts. Both are recorded on your credit file for six years and appear on the public Individual Insolvency Register while they’re active.

Lenders usually ask for your IVA completion certificate or your bankruptcy discharge date as part of the application.

Can you get a mortgage with missed payments or arrears?

Yes, missed payments or arrears don’t automatically stop you getting a mortgage. What lenders check is how many payments were missed, when they were missed, what type of account they were on and whether the account is now up to date. Missed mortgage or secured loan payments are looked at separately from other accounts, and each lender has its own criteria.

Missed payments are shown month by month on your credit file for six years. Mortgage arrears, where you’ve fallen behind on a mortgage or secured loan, are recorded in the same way, and lenders look at how many months were missed, how recently and whether the account is now up to date.

What’s possible depends on the lender and your full credit profile.

Can you get a mortgage after a repossession or payday loans?

Yes, although fewer lenders will consider a past repossession or payday loans. For a repossession, lenders look at when it happened and the circumstances behind it. For payday loans, lenders look at when they were taken out, how many there were and whether they were repaid. Rules on both vary from lender to lender.

Lenders also look at how your finances have been managed since, so the full picture of your credit file matters, not just one entry.

Lending decisions depend on each lender’s individual criteria.

How much deposit do you need for a mortgage with bad credit?

Options are available from a 5% deposit with bad credit. The deposit needed depends on your individual credit profile and the lender selected for your situation. For buy-to-let, lenders usually ask for a deposit of at least 20% to 25%, and which lender suits you depends on your circumstances.

We’ve helped clients with bad credit buy with 5%, 10% and 15% deposits. On a free call, Harry can tell you which deposit levels are realistic for your situation.

How do mortgage lenders check your credit?

Lenders check your credit file with one or more of the three main credit reference agencies: Experian, Equifax and TransUnion. Lenders review your full report, not the score shown on an app, and use their own scoring to decide. Each agency can hold slightly different information about you.

The credit score you see on an app is a guide made by the credit agency, not a lender’s decision. Your full report is reviewed, and each lender uses its own scoring.

Before we look at lenders, we ask for a Checkmyfile credit report. It covers Experian, Equifax and TransUnion in one report, so we can see what’s on your file, including the dates, amounts and status of any issues.

Each full mortgage application leaves a hard search on your credit file, which other lenders can see. For this reason, we match your credit profile to lenders’ criteria before an application is made.

How do you get a mortgage with bad credit, step by step?

Getting a mortgage with bad credit usually follows six steps: get your full credit report, note the dates, amounts and status of each issue, speak to an adviser, match your profile to lenders whose criteria fit, get a mortgage in principle, then make the full application through to your mortgage offer.

1. Get your credit reportsYour full reports from Experian, Equifax and TransUnion show what lenders will see.
2. Note the details of each issueThe type of issue, the account, the amount, the date it was registered and whether it’s been settled.
3. Speak to an adviserA free, confidential call with Harry to talk through your credit history, income and deposit.
4. Match your profile to lendersWe compare lenders’ criteria for each type of issue to find the ones that fit your situation.
5. Get a mortgage in principleWhere possible, with a lender that uses a soft search, so your credit file isn’t affected at this stage.
6. Make the full applicationWe submit the application and documents, and keep you updated through to your mortgage offer.

Bad credit mortgage questions, answered