Key Takeaways:
- Bad credit doesn’t automatically mean you can’t get a mortgage.
- Your overall financial situation matters.
- Specialist lenders may offer greater flexibility.
- Working to improve your credit score can boost your chances of acceptance.
- Speaking to a mortgage adviser can help you to understand all available options.
What is a low credit score?
There is no universal credit score in the UK. The three main credit reference agencies, Experian, Equifax and TransUnion, each use a different scoring system set against a different scale. This means your score can vary depending on the agency you use.
A number which may be considered good with one agency may be considered average with another.
More importantly, mortgage lenders don’t just look at the headline score. They review your entire credit history, considering:
- Missed or late payments.
- County Court Judgements (CCJs).
- Defaults.
- Bankruptcies or Individual Voluntary Agreements (IVAs).
- Payday loan usage.
- Existing debts and credit card usage.
These considerations are not equally weighted. A missed payment, for example, will not be considered with the same severity and a CCJ, for example.
Can you still get a mortgage with bad credit?
Yes.
Many lenders offer mortgages for applicants with adverse credit, although the products available will depend on your individual circumstances.
Factors lenders will consider include:
- How severe the credit issue was.
- How long ago it happened.
- Whether the issue has been resolved.
- Your current financial situation.
- Your income and affordability.
- The size of your deposit and your Loan-to-Value ratio.
For example:
Someone who missed a mobile phone payment three years ago is likely to be viewed very differently to someone with multiple CCJs.
Each lender has specific criteria. Speaking to a mortgage adviser can help you to understand your position and the options available to you.
Typical credit score brackets
“Excellent”
An excellent credit score will allow access to the best rates and products available to someone in your financial situation.
“Good”
A good credit score may be a result of minor discrepancies, such as a history missed payment, or limited credit history. Most high street lenders are likely to consider an application, particularly where affordability and deposit contributions are strong.
“Fair”
A fair credit score may involve a history of missed or late payments or higher levels of borrowing. Your product options may be more limited, and lenders may apply stricter affordability checks, deposit requirements and interest rates.
“Poor”
A poor credit score typically results from more serious credit issues, such as a pattern of missed payments, defaults or CCJs. In cases of poor credit, options tend to be far more restricted, if at all possible, and applications may require a more detailed assessment from a specialist lender.
Does your credit score impact how much deposit you need?
In general, the stronger your application the smaller deposit you’ll need.
If you have a lower credit score, lenders may require a larger deposit to hedge against the increased risk you pose as a borrower.
Typical deposit requirements may be:
| Credit Profile | Typical minimum deposit required |
| Excellent credit | 5% |
| Good credit | 5-10% |
| Fair credit | 10-15% |
| Poor credit | 15-25% or more |
These figures act only as a guide and are indicative, not guaranteed. Deposit requirements will vary from lender to lender, and some specialist lenders may offer more flexible options depending on your circumstances.
What do lenders look at aside from your credit score?
Your credit score only tells a part of your complete story, and lenders will consider several other factors when assessing your affordability.
Income
Lenders want to see that you can comfortably afford the monthly repayments.
Employment
Permanent, stable employment is generally considered more favourably as regular income means less risk to lenders. However, self-employed applicants are equally able to secure a mortgage but may need to provide additional information and history to prove financial stability.
Existing financial commitments
Outstanding loans, credit card balances and finance agreements all affect affordability.
Spending habits
Lenders may review your recent bank statements to assess how responsibly you manage your money.
How to improve your credit score
If you’re planning to buy a home, we recommend reviewing your credit score 6 months before applying to ensure you have enough time to make the necessary improvements.
There are several steps that you can take to improve your credit score, including:
Checking your score regularly
Review your reports with all three major credit agencies. Ensure there are no errors and dispute any inaccuracies with the relevant agency.
Register on the electoral roll
One of the quickest and easiest ways to boost your credit score is to ensure you’re on the electoral roll. This helps lenders to verify your identity.
Ensure your bills are paid on time
Consistent payments remain one of the key factors in building a healthier credit score.
Reduce outstanding debts
If you have outstanding credit cards, personal loans or finance agreements, emphasise paying these debts down to boost your credit utilisation and improve your affordability.
Avoid making credit applications
Credit applications result in a hard check on your credit score, which can have a negative impact on your credit score. Multiple hard searches as you hope to secure a mortgage may raise red flags with lenders.
How do specialist lenders help with bad credit?
Specialist lenders assess each mortgage application on its own merits rather than relying entirely on automated credit scoring.
Your credit history is rarely straightforward, and life events or changes in your personal circumstances can have a lasting impact on your credit profile. Unlike many high street lenders, specialist lenders often take a more flexible approach, considering the reasons behind any past credit issues rather than simply focusing on your credit score.
As a result, they may be willing to consider applicants with:
- Previous defaults.
- County Court Judgements (CCJs).
- Debt management plans.
- Past bankruptcies.
- Irregular employment.
- Complex income.
Should I wait for my credit score to improve before approaching a mortgage broker?
Not necessarily.
Waiting for your score to improve may make sense if you’re only a few months away from clearing debts or removing a recent default from your credit file.
However, delaying may not always be the correct move in your situation.
House prices, mortgage rates and your own circumstances may all change over time. Sometimes, securing a mortgage now is achievable, even with an imperfect credit score.
Working with a mortgage adviser will help you to understand your current position, the options available to you, and the potential financial impact between acting now versus waiting for improvements.
Frequently Asked Questions
What credit score do I need to buy a house in the UK?
There is no minimum credit score that guarantees mortgage approval. Each lender uses their own criteria when assessing your overall financial situation.
Can I get a mortgage with a CCJ?
Yes. Many lenders will consider an application from a borrower with a CCJ, particularly if the judgement is historic and has been satisfied.
Can I get a mortgage after a default?
Potentially. The age, value and circumstances of the default are all taken into consideration in a lender’s decision.
Will checking my credit score affect it?
No. Checking your credit score if a soft search and won’t impact your score.
How can Cooper Associates Mortgages help?
At Cooper Associates Mortgages, we understand that every situation is different. Whether your circumstances are straightforward or a little more complex, our role is to give you a clear understanding of your options, so you feel informed and confident.
Our whole-of-market advisers are able to search across a wide range of lenders and help you find a mortgage that suits your individual circumstances. We will take the time to understand your situation and provide straightforward, tailored guidance, supporting you throughout the process and beyond.
If you would like to speak with an adviser for fee-free, zero-obligation advice, get in touch and explore your options today.
