Your Guide to Securing a Mortgage Despite Poor Credit
Getting turned down for a mortgage due to bad credit can feel like the end of your homeownership dreams. If high street lenders have repeatedly said no to your mortgage application, you’re not alone, millions of people face the same challenge when trying to get a mortgage with less-than-perfect credit histories.
The good news is that if you have a bad credit history we can often find solutions where traditional lenders see only problems. Our specialist mortgage advisors have access to lenders and products that most people never hear about, specifically designed for borrowers with adverse credit.
In this comprehensive guide, you’ll discover how poor credit mortgage brokers work, what types of credit issues they can help with, and how to choose the right broker for your circumstances. You’ll also learn practical steps to improve your chances of approval and understand the realistic costs involved in securing bad credit mortgages.
Alexander Southwell Mortgage brokers love the challenge of helping clients through this process, we are here to help you find the best mortgage product. If you are first time buyers or looking to remortgage, we can find you the right lender.
What is a Bad Credit Mortgage Broker?
A poor credit mortgage broker is a specialist mortgage advisor who helps clients with poor credit histories secure home loans when high street lenders have turned them away. Unlike traditional mortgage brokers who primarily work with mainstream banks, these specialists focus exclusively on the adverse credit market.
These specialist mortgage brokers have established relationships with many lenders who specifically target borrowers with credit problems. This access gives them opportunities that simply aren’t available through direct applications to high street banks or building societies.
The key advantage lies in their expert knowledge of adverse credit mortgage criteria and application processes. While a typical mortgage advisor might struggle to place a client with bankruptcy history, a adverse credit mortgage broker knows exactly which lenders consider such applications and what specific criteria each lender requires.
Most reputable adverse credit mortgage brokers operate on a success only basis, meaning you pay no upfront fees. Their payment comes only after securing a formal mortgage offer from a lender, aligning their interests with your success.
Specialist Knowledge Areas
Bad credit mortgage brokers understand the nuances of how different lenders assess risk. They know that one lender might accept applicants with recent defaults but reject those with a county court judgement, while another lender has the opposite criteria. This specialist knowledge can mean the difference between approval and rejection.
They also stay current with changing lending criteria, as the adverse credit market shifts more frequently than mainstream mortgages. What’s possible today might not be available next month, making their real-time market knowledge invaluable. There is no minimum credit score you need to hit, even if you have a poor credit rating, some lenders do not factor this in and they will look at the whole file, instead of the score.
Types of Bad Credit Issues Mortgage Brokers Handle
Payment-Related Issues
Missed payments on credit cards, loans, or previous mortgages form one of the most common categories. Even if you’ve had mortgage arrears in the past, specialist lenders may still consider your application, particularly if the issues occurred during specific circumstances like illness or unemployment.
Payday loans and mobile phone bill arrears, though seemingly minor, can also impact the mortgage application process with high street lenders. adverse credit mortgage brokers know which lenders overlook these smaller payment issues when other compensating factors are present.
Legal and Formal Arrangements
County court judgments, whether satisfied or unsatisfied, represent more serious credit issues. However, many specialist lenders will consider applications from borrowers with CCJs, particularly when they understand the circumstances behind the judgment.
Individual voluntary arrangements and debt management plans show that you’re actively addressing debt problems. Many lenders view these arrangements positively, seeing them as evidence of financial responsibility rather than simply bad credit.
Severe Credit Events
Previous bankruptcy, even discharged within the last 6 years, doesn’t automatically prevent mortgage approval. Some specialist lenders will consider applications from discharged bankrupts, though typically with higher deposit requirements and interest rates.
Property repossession history represents one of the most challenging scenarios, but even this doesn’t make mortgages impossible. The key factors include how long ago the repossession occurred and your financial stability since then.
Other Financial Circumstances
Debt consolidation requirements often indicate complex financial situations that high street lenders avoid. Bad credit mortgage brokers can often structure applications to address debt consolidation alongside the mortgage, simplifying your overall financial position.
Self-employed applicants with irregular payment history face particular challenges with traditional lenders. Specialist lenders often take a more flexible approach to income assessment, considering average earnings over longer periods.
Credit Reports & Credit Scores Explained
Technically, there’s no such thing as a general ‘bad credit’ score. Credit scores in the UK are calculated differently by the main credit file reference agencies: Experian, Equifax, and TransUnion. Each agency provides a unique report and numerical score based on its own system, which is unrelated to the others.
Making broad comparisons between them is challenging, as one company may use outdated or unconsidered information.. The view of any score will also vary according to which lender is looking at it, as some lenders will interpret scoring in different ways to others.
Any adverse credit issues themselves that will make a huge difference. Sadly, some lenders will view the slightest fault on your credit history – such as a late payment on a utility bill, or a missed credit card instalment – as being indicative of poor money management, and will consider you a higher risk.
To help companies make better lending decisions, the three main credit agencies listed above will analyse all your credit data to calculate your overall credit rating. They will assign you a score between 300 and 999, and it is this score that will help lenders determine what kind of borrower you are.
The lower the score, the higher the risk to a lender, this is where bad credit mortgage lenders come into their own, there will not just go by the face value of your credit report, they will look into why your credit is the way it is.
Check your credit score today!
Each credit reference agency calculates your credit rating slightly differently and has a different scoring system. Which means that what counts as a good credit score will depend on which of the four major agencies your lender uses.
Experian, Equifax, Crediva and TransUnion, each credit agency could have different information showing, therefore, we have teamed up with Check My File. Their services provide not only a free 30-day trial but also a comprehensive credit report from all four agencies. This ensures our mortgage advisors can easily identify any credit rating issues.
To obtain your report, click the link below for a 30-day free trial with CheckMyFile. After the trial, a monthly subscription fee of £14.99 will apply, with the flexibility to cancel anytime.
Provide us with a credit report today, and uncover the issues that could be affecting your credit file! CLICK HERE to access your free credit report with the four top credit agencies all in one report!
What is a specialist bad credit mortgage?
There is no such thing as a bad credit mortgage. It’s simply a term used to describe the kinds of mortgages for which you are likely to be approved if you have a bad, or poor, credit rating. A lender who deals with bad credit are usually a specialist niche-market lending companies.
While still operating under the same rules and regulations as the mainstream providers, so your rights and your home are no less protected, they use far more flexible criteria, consider all kinds of situations and adopt a realistic approach to each applicant’s case.
How Bad Credit Mortgage Brokers Help You
The process begins with a thorough pre-underwriting service where the broker identifies potential issues before making any formal application. This prevents declined applications from appearing on your credit file, which could harm future mortgage chances.
Access to Specialist Lenders
Adverse credit mortgage brokers maintain relationships with specialist lenders who focus specifically on adverse credit cases. These lenders operate different underwriting criteria from high street banks, often taking a more holistic view of applications.
The broker’s job involves matching your specific credit profile with the most suitable lender. Rather than applying to multiple lenders and hoping for the best, they target the lenders most likely to approve your particular situation.
Deposit requirements typically range from 15-30% instead of the standard 5-10% required by mainstream lenders. Your broker will explain exactly how much deposit you’ll need based on your credit history and help you understand all available options.
Government Scheme Guidance
Many borrowers don’t realise they might qualify for government schemes like Shared Ownership or Right to Buy, even with bad credit. These schemes can significantly reduce the deposit required and make homeownership more accessible.
Joint Borrower Sole Proprietor arrangements allow family members to help with mortgage payments without appearing on the property deeds. Bad credit mortgage brokers understand how to structure these arrangements to maximise approval chances.
Complete Application Management
The mortgage broker handles all aspects of the application process, from document preparation through to completion. This includes managing communication with lenders, solicitors, and surveyors throughout the whole process.
They also provide ongoing guidance about timing. For example, they might recommend waiting six months while you improve your credit profile, potentially accessing better rates and terms as a result.
Whole-of-Market Access
Unlike high street banks that can only offer their own products, bad credit mortgage brokers have unrestricted access to all available lenders. This whole-of-market approach ensures you see every possible option.
Their relationships with both high street banks and specialist adverse credit lenders mean they can compare options across the entire market simultaneously. This often reveals opportunities that wouldn’t be apparent when approaching lenders individually.
Many lenders offer exclusive rates and products only available through broker channels. These deals often provide better terms than publicly advertised rates, making the broker’s fee worthwhile.
Benefits of Using a Bad Credit Mortgage Broker
The statistics speak clearly about the value of professional help. Bad credit mortgage brokers achieve significantly higher approval rates compared to direct applications to high street lenders, particularly for borrowers with complex credit histories.
Time and Stress Savings
Rather than spending months researching lenders and facing potential rejections, a good mortgage broker can identify suitable options within days. They handle all the research, applications, and lender communication, saving you considerable time and stress.
This expertise prevents the frustration of multiple credit searches that could further damage your credit score. Each mortgage application typically triggers a hard search on your credit file, and multiple searches in short succession can lower your credit score.
Protection and Future Planning
A declined mortgage application can affect future mortgage chances, as lenders often ask about previous applications. Adverse credit mortgage brokers help prevent declined applications by pre-screening your eligibility before formal submission.
They also provide expert advice on improving your credit profile for future remortgage opportunities. Many clients initially secure higher-rate mortgages but later refinance to better deals as their credit improves.
The broker relationship often continues beyond your initial mortgage, providing ongoing support for future property purchases or remortgaging as your circumstances change.
Market Knowledge and Timing
Lending criteria change frequently in the adverse credit market. What’s available today might disappear next month, while new opportunities constantly emerge. Bad credit mortgage brokers stay current with these changes, ensuring you access the best available deals from all mortgage lenders.
They understand the optimal timing for applications. Sometimes waiting a few months while addressing specific credit issues can unlock significantly better mortgage terms, and experienced brokers provide this strategic guidance, we try an avoid having to go bad credit mortgage lenders.
Preparing for Your Bad Credit Mortgage Application
Success often depends on thorough preparation before approaching any lender. The more organized and prepared you are, the stronger your application becomes.
Credit Report Analysis
Start by checking your credit report using free services like Experian, Equifax, or TransUnion. You need to understand exactly what lenders will see when they assess your application. Look for any errors or outdated information that might be corrected before applying. If you have a low credit score and we see this early, we can point you in the right direction to get a mortgage and make sure we improve your credit record.
Your credit file should show recent improvements in your financial behavior. If you’ve been paying all bills on time for the past six months, ensure this positive payment history is clearly visible.
Income Documentation
Gather comprehensive proof of income covering the last 3-6 months. This includes payslips, bank statements, and employment contracts. Self-employed applicants need more extensive documentation, often including tax returns and business accounts.
Bank statements should show consistent income and responsible spending patterns. Lenders scrutinize your bank statements for gambling, excessive spending, or other financial behaviors that might indicate risk.
Financial Improvement Evidence
Document any improvements to your financial situation since your credit issues occurred. This might include salary increases, debt reductions, or changes in employment status that demonstrate improved stability.
Prepare clear explanations for past credit problems with supporting evidence where possible. Lenders often accept adverse credit when the circumstances were temporary or beyond your control, such as illness or redundancy.
Deposit Requirements
Save for a larger deposit, as adverse credit mortgages typically require 20-25% deposits compared to 5-10% for standard mortgages. The larger your deposit, the more lenders become available and the better rates you can access.
Ensure all current bills and commitments are paid on time leading up to your application. Even minor late payments during the application process can result in rejection.
Required Documentation
Beyond standard mortgage documentation, bad credit applications often require additional paperwork:
Your full credit report showing all adverse entries and their current status provides the complete picture lenders need. Don’t attempt to hide any credit issues, as these will be discovered during underwriting.
Proof of deposit source is crucial – lenders need to verify where your deposit comes from. This includes savings statements or properly documented gift letters from family members.
Employment contracts and recent payslips demonstrate current stability, while bank statements show your actual income and spending patterns over recent months.
Details of any ongoing financial commitments or support payments help lenders assess your true affordability. This includes maintenance payments, student loans, or other regular commitments.
Mortgage Options for Specific Bad Credit Scenarios
Different types of adverse credit require different approaches. Understanding what’s realistic for your specific situation helps set appropriate expectations and timelines.
Recent Bankruptcy (Discharged 1-3 Years)
Recent bankruptcy represents one of the more challenging scenarios, but mortgages are still possible with the right approach. Limited lender options typically require deposits of 15-25%, significantly higher than standard mortgage requirements.
Interest rates usually run 2-4% above standard mortgage rates, reflecting the additional risk lenders perceive. However, these rates often improve significantly once you can demonstrate 2-3 years of financial stability post-discharge.
Evidence of financial rehabilitation becomes crucial – lenders want to see that you’ve learned from the experience and rebuilt your financial management skills. Stable employment and consistent savings patterns strengthen your application considerably.
The application process often involves detailed explanations of the circumstances leading to bankruptcy and evidence of changed financial behavior since discharge.
CCJs, IVA’s and Defaults
Satisfied CCJs under £500 may not significantly impact mortgage availability, particularly with specialist lenders who focus on the overall credit picture rather than individual items.
Multiple defaults indicate higher risk and may require deposits of 20-30%. However, the age and circumstances of defaults matter significantly – older satisfied defaults have much less impact than recent ones.
Lenders often distinguish between different types of defaults. Utility bill defaults might be viewed more leniently than credit card defaults, as they might indicate temporary financial difficulty rather than poor credit management.
The total value of defaults relative to your income also influences lending decisions. Small defaults on a high income might be overlooked entirely by some specialist lenders.
Property Repossession History
Property repossession represents the most challenging adverse credit scenario, requiring a specialist approach and realistic expectations about available options.
Most lenders require a minimum 3-year gap since repossession before considering applications. This waiting period demonstrates that you’ve had time to rebuild your financial stability.
Deposits of 30-40% are often necessary, with very limited lender choice initially. However, as time passes and you demonstrate financial stability, more options become available.
Strong current financial position and employment stability become crucial factors. Lenders need confidence that you can maintain mortgage payments long-term without facing similar difficulties.
Costs and Fees for Bad Credit Mortgages
Understanding the true cost of bad credit mortgages helps you budget appropriately and compare different options effectively.
Interest Rate Premiums
Higher interest rates represent the most significant cost difference, typically running 1-5% above standard market rates. A standard mortgage might be available at 4%, while adverse credit mortgages could range from 5-9% depending on your credit profile.
These rate differences mean significantly higher monthly payments. On a £200,000 mortgage, a 2% rate increase adds approximately £240 to monthly payments – £2,880 annually.
However, many bad credit mortgages offer rate improvements after demonstrating good payment history. Some products automatically reduce rates after 2-3 years of successful payments.
Lender Fees
Arrangement fees for adverse credit mortgages typically range from £999 to £2,995, significantly higher than standard mortgage fees. These fees reflect the additional underwriting work and higher administrative costs involved.
Some lenders allow you to add arrangement fees to the mortgage balance, though this increases your total borrowing and monthly payments. Others require upfront payment.
Early repayment charges often run higher and for longer terms – typically 3-5 years compared to 2-3 years for standard mortgages. These charges can be substantial, sometimes reaching 5-7% of the outstanding balance.
Improving Your Mortgage Prospects
Taking a strategic approach 6-12 months before applying can significantly improve your mortgage options and reduce costs.
Credit Repair Strategies
Pay all bills on time for at least 6 months before your mortgage application. This recent positive payment history carries significant weight with lenders, often outweighing older negative marks.
Use credit builder cards responsibly to demonstrate improved credit management. Make small purchases and pay them off in full each month, showing lenders you can manage credit responsibly.
Register on the electoral roll and maintain stable address history. Lenders view address stability as an indicator of general stability and reliability.
Reduce existing credit limits and close unused credit accounts. Having excessive available credit can indicate potential overcommitment risk to some lenders.
Avoid multiple credit applications that create hard searches on your credit file. Each search slightly reduces your credit score, and multiple searches suggest financial stress to lenders.
Timeline Approach
Address outstanding credit issues systematically over 6-12 months. Pay off small debts entirely where possible, as satisfied accounts show better than ongoing payment arrangements.
Build a larger deposit during this period. Every additional £10,000 saved opens up more lender options and potentially better interest rates.
Document your financial improvement journey. Regular savings, stable employment, and consistent bill payments create a positive story for lenders.
Alternative Solutions
Guarantor mortgages allow family members to provide additional security without owning the property. This arrangement can help access better rates or higher loan amounts.
Rent-to-own schemes provide stepping stones to traditional mortgages. These arrangements allow you to build equity while improving your credit profile for future mortgage applications.
Shared ownership options reduce both deposit requirements and credit risk. Government-backed schemes often have more flexible lending criteria than standard mortgages.
Frequently Asked Questions
Can I Get a 95% Mortgage with Bad Credit?
Very limited options exist for high loan-to-value mortgages with adverse credit. Some government guarantee schemes might offer 95% mortgages to borrowers with minor credit issues, but these are rare.
Most bad credit applicants require deposits of 15-30%, with 20-25% being typical for most scenarios. High street lenders rarely offer high LTV mortgages to adverse credit applicants due to risk concerns.
Specialist lenders’ maximum loan-to-value typically reaches 85% for minor credit issues, dropping to 65-75% for more serious adverse credit. The worse your credit profile, the larger deposit you’ll need.
How Long After Bankruptcy Can I Apply?
Minimum waiting periods vary by lender, but some specialist lenders consider applications just 12 months after discharge. However, better options typically become available 3+ years after discharge.
The bankruptcy automatically drops from your credit file after 6 years, but some lenders still ask about historical bankruptcy even after this period. Honesty remains important throughout the application process.
Your financial behavior post-bankruptcy matters more than the time elapsed. Demonstrating stable employment, regular savings, and responsible financial management can overcome bankruptcy history more effectively than simply waiting.
Will My Interest Rate Improve With A Higher Credit Score Over Time?
Many adverse credit mortgages include rate improvement mechanisms. Some products automatically reduce rates after 2-3 years of successful payments, while others offer remortgage opportunities without penalties.
Your credit score should improve over time with responsible financial management. This improvement, combined with building equity in your property, often enables remortgaging to significantly better rates within 3-5 years.
Working with a mortgage broker throughout this process helps you identify optimal remortgage timing. They can monitor market conditions and your credit improvement to maximize your refinancing benefits.
Choosing the Right Bad Credit Mortgage Broker
Selecting the right broker significantly impacts your success chances and overall experience. Not all mortgage brokers have the expertise or lender relationships necessary for adverse credit cases.
Essential Qualifications
Look for CeMAP qualified advisors with specific adverse credit specialisation. The Certificate in Mortgage Advice and Practice ensures they understand current regulations and lending criteria.
Check their experience with cases similar to yours. A broker who specialises in bankruptcy cases might not be best for CCJ situations, and vice versa. Verify their regulatory status through the Financial Conduct Authority register. All mortgage brokers must be properly authorised and regulated.
Ongoing Support With Bad Credit Mortgage Lenders
Ask about pre-underwriting services and their application success rates. Good brokers should be able to give you realistic expectations based on your specific circumstances.
Verify they provide ongoing support for remortgaging and future property purchases. Building a long-term relationship often provides better outcomes than one-off transactions.
Confirm their availability and communication methods. Mortgage applications can move quickly, and you need responsive communication throughout the process.
Next Steps to An Adverse Credit Mortgage
Taking action starts with understanding your current position and realistic mortgage prospects. Begin by gathering all relevant information about your credit profile and financial circumstances.
Complete an online eligibility checker to assess your initial mortgage prospects. Many bad credit mortgage brokers offer these tools, providing immediate insight into potential options.
Book a free consultation with a specialist bad credit mortgage broker. Use this meeting to discuss your circumstances openly and understand what’s realistically achievable.
Gather all required documentation including your full credit report and recent financial statements. Being prepared speeds up the application process and demonstrates organization to potential lenders.
Discuss realistic property budgets based on your credit profile and available deposit. Don’t assume you need to compromise significantly, many adverse credit borrowers successfully purchase the homes they want.
Begin the formal mortgage application process with professional broker support. Their expertise navigates the complex adverse credit market, maximizing your chances of approval at the best possible terms.
Remember, having bad credit doesn’t mean giving up on homeownership dreams. With the right broker and realistic expectations, most credit issues can be overcome. The key lies in working with specialists who understand the adverse credit market and can match your specific circumstances with suitable lenders.
Your credit history represents your past, not your future. Taking positive steps today towards securing a mortgage despite poor credit starts your journey back onto the property ladder.
