Bad Credit Mortgages

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Bad Credit Mortgages

Bad Credit Mortgages

Lee Gathercole from Rebus answers your most frequently googled questions on bad credit mortgages.

What is bad credit and how do I know if I have it?

Bad credit can be anything that’s adversely affected your credit report. It could just be a missed payment on a credit card or a loan, or something as severe as bankruptcy.

The best way of understanding if you have bad credit is looking at your credit report. We do this as part of our mortgage process. You can download your own copy from a company called Checkmyfile, which accesses all three of the main credit reference agencies. You can download your report to understand what information is held about you. 

Your credit record includes your address history, credit card and loan payments over the years. If you’re having trouble understanding the report, just ask us as mortgage advisors. We look at them all the time and help you get to grips with what it all means. 

Can I get a mortgage with bad credit?

A lot of people don’t reach out to a mortgage adviser because they have bad credit and think they won’t be considered for a mortgage. But that isn’t the case. 

There are a lot of banks that consider applicants with bad credit. We’ve managed to give many clients the good news that they can find a mortgage even with bad credit – so just picking up the phone can make a real difference. 

Can you get a mortgage with a 500 credit score?

Credit agencies all have different scoring systems. Lenders generally look not just at the score, but also the history of the applicant. Each bank has a different threshold in terms of your score. 

If you had a 500 credit score with Experian, for example, it would be difficult to approach a high street bank. They typically require a higher credit score, typically around the 700 mark.

However, don’t let that defeat you. There are banks who have a much lower threshold and don’t necessarily look at scores at all. They just look at your history. So yes, you can get a mortgage with a credit score of 500.

Can I get a mortgage with a CCJ, IVA or default?

If you’ve had a County Court Judgement (CCJ) or a default or even even an Individual Voluntary Agreement (IVA) there are still mortgage options available. Lenders look at how old the credit issue is. If the default or the CCJ is very recent it can be more difficult. However, if they’re two to four years old the chances improve. A lot of the CCJs we see are from parking tickets that people were not even aware of. Typically they’re under £500 – which most banks will accept. 

WIth CCJs and defaults it’s generally easier to obtain a mortgage compared with an IVA. Again, it depends how old the IVA is – when it was registered and when it was satisfied. 

WIth bad credit mortgages you do need to speak to a mortgage broker. We will pinpoint the right lender for you based on your credit history. 

Do you have any tips to avoid bad credit?

Phone and utilities companies are notorious for issuing defaults or CCJs. A common issue is when you move house. If you haven’t updated your address and bills haven’t been paid, that’s a common cause of bad credit. So always update your details with your utility and phone companies.

How can I improve my credit score?

Download your credit report and make sure there are no errors on there. Check the address history is correct and that they have the right credit commitments for you. 

I’ve come across clients with a loan on their credit report that they’ve never taken out – or an address they’ve never lived at. Errors can be the difference between you obtaining a mortgage or not. 

Something that will really improve your score is making sure you’re on the electoral roll. Another simple one is to make sure you’re paying your commitments and keeping up with the payments. 

Some clients take out a credit card, put a certain balance on it and repay at the end of every month – that can improve your credit score over time. We can give you more hints and tips based on your specific credit situation.

Is the process any different for First Time Buyers or a remortgage with bad credit?

It’s not too different. For First Time Buyers there’s no real difference in how you obtain a mortgage. Generally with bad credit mortgages you may find they require a slightly higher deposit than normal. 

As of now, June 2022, there are 5% deposit mortgages available on the high street. With specialist banks – which is who we would approach for more severe bad credit – a typical deposit might be 15%. That can be challenging for a First Time Buyer. 

Remortgaging is very much the same in terms of the process. Again it goes back to making sure you’re getting the right deal and the right rate for your situation. Bad credit mortgages can really vary in interest rate. So speaking with an advisor will help you get the best rate based on your credit history.

What other advice do you have on bad credit mortgages?

It can be difficult to talk about your credit issues, but we’re here to help. Our first step is a discovery call with you – 20 to 30 minutes to explore your situation and help you understand your options. We will look through your credit report, find out how much you can borrow and how much deposit you will need. 

You’ll know what’s possible from that first call. So just pick up the phone. Don’t just think if you’ve got bad credit it’s not possible – there are lots of options out there. 


Bad Credit Mortgages

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