Contractor Mortgage Bad Credit

Podcast approved by The Openwork Partnership on 22/07/2025.

Can I get a mortgage with bad credit as a contractor? How does it work?

Yes, there is absolutely a possibility of a mortgage if you’ve got bad credit. It does depend on the type of bad credit – it could be anything from one or more missed payments on a utility bill to a low credit score, all the way up to a County Court Judgment (CCJ), a default or maybe even bankruptcy.

There are options available and some lenders are accepting of these. It depends how old the issues are and other factors, but if you’re listening to this and you have a CCJ or a few defaults, there may be some options out there for you as a contractor.

Do I need a larger deposit for a mortgage with bad credit as a contractor?

If you’ve had a default in the last few years, or multiple missed payments – or you’ve ever been in an IVA, bankruptcy, or you have CCJs on your report – those would normally be defined as bad credit. Typically with these, you will struggle to get a mortgage with a smaller deposit.

A 5% or 10% deposit – even 15% at times – can be more difficult. The reason is that there’s a higher risk for the lender to lend to you based on your credit, so in return, they ask for a larger deposit.

If you’re buying a property, that can be quite difficult, especially if you’re a First Time Buyer. Gathering a 5% deposit alone is often quite a challenge. But you may need 10%, 15%, sometimes 20%.

It will depend on the lender, the severity of your bad credit and how recent it is. Every bank has slightly different criteria around that. You might find that one lender will only consider you if you have a 25% deposit. But another might take you with a 15% deposit, because they’re more relaxed on their credit scoring or criteria.

Generally, yes, you will need a bigger deposit or more equity in the property if you’re remortgaging. But that’s not always the case. Don’t just look up one lender – there are multiple lenders that might consider you and their criteria will all differ.

What if I’m a First Time Buyer contractor and have bad credit? Will this affect me getting a mortgage?

There are lots of challenges there. The big one is that you’re a First Time Buyer. You’ve never been through the process before and you might not know where to start. That’s the same for most First Time Buyers – but when we add contracting and bad credit into the mix as well, it’s a challenge.

That’s particularly true if you’re trying to do it yourself. But there are options if you’re a First Time Buyer, you’re contracting and you have bad credit. You might not be able to walk down the high street and approach the local bank – you might have to look at other options.

This is really where someone like ourselves would come in – we’re specialists in dealing with contractors, but also bad credit. We have access to specialist lenders that are more accepting of this, so we can guide you to the right ones based on your credit history and your contracting experience.

Are there many bad credit mortgage lenders for contractors?

Yes, there are some lenders out there, again, depending on the severity of your bad credit and your credit profile.

We would ask for a copy of your credit report and analyse it, to see what’s stopping you from getting a mortgage on the high street. Then we can explore more specialist lenders. As a contractor, you are more restricted, because you need to meet not just the adverse credit policy and lending criteria with that lender, but also their contractor lending policy and criteria.

There are two different sets of rules to meet, which obviously reduces the options available to you. But once we’ve got a full understanding of your credit report, the key is to be transparent and upfront about it. Any explanations you can give are really helpful to us, because we can find out which lender will be suitable for your situation.

Often there are multiple lenders to narrow down. There are instances where there’s just one option, perhaps for the more severe bad credit. This often applies where there are more recent issues, such as falling behind on your mortgage in the past year. We just need to find a lender where you meet both those sets of lending criteria.

Can I be declined a remortgage as a contractor? How do I remortgage as a contractor with bad credit?

It depends on what you want to do. Are you looking to raise some money to do something to your property or are you just looking for a new interest rate as a contractor with bad credit? You can be declined, like anyone. People without bad credit who aren’t contractors can be declined for a mortgage.

The key is just speaking to a specialist mortgage broker that has experience dealing with contractors, particularly with bad credit. We’ll be able to guide you on which mortgage lenders will be available based on your credit history and everything else.

Can I get a Buy to Let mortgage as a contractor with bad credit?

Parking the contractor side for a moment, getting a Buy to Let mortgage to buy an investment property with bad credit can be more difficult.

Generally, lenders are a bit more flexible on the residential side, where you’re buying a property to live in. There are more lenders on residential than in Buy to Let, which opens up more options. When you’re looking at Buy to Let mortgages, banks and building societies want you to be on top of your credit. They’re not keen on lending to people with missed payments, defaults and CCJs.

Again, it comes back to how recent they are, how many you’ve got, the balances and the circumstances that led to them. All those things get looked at by banks, and there are generally more limited, restricted options.

You usually need to pass credit scoring and to meet their lending policy on the bad credit side. They might say you can have a certain number of defaults in the last 36 months, as long as the balance on the default doesn’t exceed £500. Or they might say you can have one CCJ if it doesn’t exceed £200. If you don’t meet that straight away, they’ll decline you.

The Buy to Let side is more challenging. As a contractor, it depends on how long you’ve been contracting and what income evidence you can provide. Most Buy to Let lenders want you to earn a certain income to qualify with them, usually around £20,000 or £25,000 a year.

You also need to meet their contractor policy, which might mean you need to have been doing it for two years, or they might want your self-employed documents, such as your tax calculations and tax year overviews to evidence that income.

On the whole, it’s probably more difficult to get a Buy to Let mortgage as a contractor with bad credit than on the residential side. But there are potentially some options, depending on the severity.

Can you consolidate debt twice as a contractor?

We’re going into the depths of specialist advice here, on contractors with bad credit plus debt consolidation. Debt consolidation is a big decision, and there’s a lot to consider in consolidating debt such as credit cards and loans within your mortgage.

Yes, it might help with your potential outlay on a month to month basis, but over the long-term you pay more interest on that debt. As brokers we need to understand how those debts have built up, and also whether you have consolidated before and why.

It’s difficult to consolidate debt twice – we can only look at it if you are under financial pressure and you urgently need help.

Can I use a guarantor for a mortgage as a contractor with bad credit?

First you need to meet a lender’s contractor policy, which is probably the easier side. A lot of banks want around two years’ contracting experience, depending on the documents they look at.

Some will see you as self-employed, while others will look at your actual contract and whether you’re paid a day rate, a weekly rate or a salary. As long as you’re meeting those criteria, there might be one or two options for you on what’s called a Joint Borrower Sole Proprietor mortgage. This is a form of guarantor mortgage where someone comes onto the mortgage to support you.

We use their income to boost affordability, which helps you achieve the mortgage amount you’re looking for. But you are restricted again as you’re really narrowing down your options.
As a broker we’ve got over 75 banks and building societies available to us, so while it depends on the detail, potentially there are options to do that.

How do I improve my credit rating before getting a mortgage or before remortgaging as a contractor?

Just continue to pay things on time. If you’re taking out credit cards or loans, or new utilities, all of these will be on your credit file. Paying them on time will improve your credit score.
One big thing to check is that you’re on the electoral roll, giving you the right to vote.
That can have a big impact on your credit rating.

Getting a copy of your credit report is a great start, to understand what’s on it – we do sometimes see errors on those. It could be that your bank hasn’t updated your address or a utility bill isn’t up to date. Checking for errors is a good starting point.

If your remortgage is coming up in the next year or so, get a copy of that report now. If you need help understanding it, we can arrange a call where we’ll explore your situation and talk you through your remortgage options.

Part of the process when we gather documents is obtaining a copy of your credit report to understand what’s there – we’ll go through that with you.

How do I apply for a mortgage or remortgage with bad credit as a contractor?

The simple answer is to speak to a broker who’s experienced in helping people in your circumstances. Contractors applying for a mortgage are not in the most straightforward situation. If you approach a bank on your own and you don’t fully understand how they’re going to assess you, you can easily be turned away because you don’t meet their criteria.

That’s really disheartening. But actually, it might just take a call to a broker like us to understand the options. We use our experience and knowledge of the lenders to obtain you a mortgage based on your circumstances.

There’s a cost to taking expert advice, but we would confirm that in our discovery call, with no obligation to proceed. A discovery call, booked in with us from our enquiry form, answers your questions and gives you more clarity. We can tell you what the criteria is, whether you meet it and what kind of interest rates you’re looking at.

We explain how you can prepare to apply for a mortgage and the documents you’ll need. You’ll then know what information you need to get an Agreement in Principle, and hopefully we can help you on from there.

Approved by The Openwork Partnership on 22/07/2025.