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Having a big deposit in place and a good salary isn't always a guarantee to getting a mortgage. If you have a bad credit history, getting a mortgage can prove to be tricky. But there are options and with some research and the help of a bad credit mortgage broker, you may be able to secure a 'bad credit mortgage', also known as an adverse mortgage or subprime mortgage.
A 'bad credit applicant' is someone that has a bad credit history or adverse credit history. This is determined by a range of contributing factors such as the following:
You are not registered to vote
You have previous county court judgements
You have been involved in bankruptcy proceedings
You have a history of defaulted credit payments
You have made frequent credit applications
You have had many credit applications declined
There is a difference between credit history and credit score but the two are frequently closely related as lenders will review a combination of the two when deciding if they are happy to lend to an applicant.
It might be obvious that you have bad credit because you are being chased by debt collectors or are receiving frequent letters or calls from credit card companies. Or you might be totally unaware that you have bad credit until you are actually declined by a lender for a mortgage
It is advised that you obtain a copy of your credit report early in the mortgage process so that you can then take action to improve your credit score if necessary.
Getting a mortgage with bad credit can be tricky but it depends on what exactly has happened in the past and the reasons behind those events.
For example if you have defaulted on a credit card bill many lenders will not be happy to offer you a mortgage, however, some will be willing to listen to the reasons behind this. Perhaps this was a card with a small balance on that was registered to a previous address and forgotten about. Or perhaps this was a disputed charge with an online shopping company. If you can evidence the series of events and clear the outstanding charges then a lender may be willing to assist.
Mobile phone bill disputes are common and several lenders will be willing overlook these if you repay what is due before your application.
More serious events such as a bankruptcy or entering an Individual Voluntary Arrangement (IVA) will usually lock you out of most high street lenders until many years have passed.
But be aware that each lender has their own set of criteria so a few improvements might make all the difference to one lender but not necessarily to another lender. We suggest you speak to our team of well qualified advisers who will have up to date information about mortgages for bad credit.
Although there will be many mortgages not available to you if you have bad credit, there are however some that are designed specifically for people with a poor credit history and some lenders that are specialist bad credit mortgage lenders. These mortgages are sometimes called 'subprime mortgages' or 'adverse mortgages'.
When applying for a bad credit mortgage, lenders are likely to work out how much you can borrow in the same way as with regular mortgages. They will take into consideration your income and any outgoings such as existing credit commitments, day to day living expenditure and the number of dependants you have.
As you would expect, the rates and fees will be higher for a bad credit mortgage than for a regular mortgage because you will be considered a higher risk borrower.
If you have a mortgage application declined due to bad credit issues or if you already know that you have a bad credit history and it is putting you off from applying, then don’t despair and automatically assume you won’t be able to get a mortgage. There may some simple things you can do to get your credit rating back in shape over a short period of time.
See our FAQs below for answers to some of the major questions you may have about getting a bad credit mortgage.
What is the difference between bad and adverse credit?
There is no difference between the two. They are simply two different ways of saying the same thing.
What causes a bad credit rating?
The credit scoring process looks at a combination of your credit history and factors such as how much debt you have already, whether you have been in your address for a long or short period and whether you are on the electoral roll. If you've missed or were late with any payments, have had county court judgements or defaults registered against you then it will give you a bad credit rating.
Will a bad credit mortgage cost me more?
Due to the perceived increase in risk for the lender, bad credit mortgage deals are usually more expensive.
What do you need to do to get started?
Click here to speak to one of our mortgage advisers now but we suggest you obtain a copy of your credit report first.