Ten ways to maximise your mortgage chances
Here are ten top tips to help improve your likelihood of being accepted for a competitive mortgage deal.
Discover more about bad credit mortgages
A bad credit mortgage is usually offered to a borrower with a poor credit history. Learn more with MoneySuperMarket.
Your mortgage is likely to be your biggest financial commitment, so shopping around for the best deal is vital. We can help by comparing thousands of products from a wide variety of lenders, covering the whole of the market. This way, you can be confident you’re getting the right deal.
A bad credit mortgage is aimed at borrowers with a poor credit history and rating.
Tendentially, these types of mortgages come with higher interest rates. It’s also likely that if you’re hoping to take out a mortgage with bad credit, you’ll be offered a lower amount of money. This is because mortgage providers want to ensure they will get back the money they lend, so they’ll minimise their risk by offering less favourable deals.
Bear in mind that lenders don’t usually promote rates that are specific to bad credit mortgages. Instead, they will evaluate each applicant’s personal circumstances and decide on a case-by-case basis once they have all the information they need.
There are many different factors that can determine whether you have bad credit or not. For example, even a one-off late payment could have an impact on your credit rating. However, more serious credit problems include having a county court judgement (CCJ) or being declared bankrupt.
Yes, mortgages for people with poor credit or not enough deposit to put down on their houses still exist. But they are not as common as they used to be.
Lending to individuals with poor credit histories was widespread in the run-up to the global financial crisis. Arguably, it was also a contributing factor.
Banks lent money to ‘subprime’ borrowers – people who could not always be relied upon to repay the loans they took out. These were also people whose loans were too big to be realistically affordable, as opposed to ‘prime’ borrowers with impeccable borrowing pasts and a clear ability to repay.
Now, taking out a mortgage with bad credit can be more challenging, and these types of deals are harder to find in general. Bear in mind that, if you do find them, they are usually more expensive than standard mortgages.
Possibly. But if you have a poor credit history (or have no history of borrowing), you might find any mortgage you are offered is very expensive.
So-called ‘bad credit mortgages’ also tend to demand higher deposits from borrowers. So if you have less than a 35% or 40% deposit to put down on your future home, you might be disappointed.
If you're concerned about your credit history and how it might affect your ability to get a mortgage, you can use MoneySuperMarket's Credit Monitor tool. This way, you can check what information the three main credit reference agencies in the UK (Experian, Equifax, and TransUnion) hold on you.
Ensure that whatever is contained in their files is correct, doing whatever you can to help build up a more positive credit history.
Taking steps such as getting yourself on the electoral roll can make a big difference in how favourably you are viewed by a potential lender. If improving your credit rating is a long-term project, you might also want to consider the careful use of a credit builder credit card.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Applying for a mortgage with bad credit can have its own array of advantages. Here are some of the most prominent positives you could benefit from:
This is a big plus, as you can actively purchase the house you want. By paying your monthly instalments on time, you will then have the chance to improve your credit rating too
They may not be the easiest type of mortgage to find, but by scouring the market, you’re bound to find a deal that can help you buy a home. MoneySuperMarket can help you shop around
If the housing market is slowing down, it could be the right moment to get a mortgage with bad credit. It’ll allow you to purchase a property and negotiate a favourable price
As with everything, however, taking out a mortgage with bad credit does come with a number of drawbacks too. Here are a few to take into consideration:
Since this type of mortgage is seen as high-risk for lenders, if you have a bad credit score, you won’t be able to borrow as much as you could with no credit problems. You’ll also need to put down a bigger deposit
Likewise, bad credit mortgages tend to come with higher interest rates. As well as the high-risk factor for lenders, there are fewer bad credit mortgages on the market, meaning rates won’t be as competitive
If you opt for a bad credit mortgage, you will have fewer opportunities to improve your credit rating. This also means that you could miss out on better mortgage deals
Using a mortgage comparison tool can help you get a good idea of the kind of mortgage deals available. When you enter your information into MoneySuperMarket’s mortgage comparison tool, you’ll be able to compare example mortgage quotes from different providers.
Just tell us a bit about yourself, your financial situation, and your plans. We’ll help you scour the market in search of the mortgage deal that is right for your pockets and requirements. Then, feel free to use our mortgage calculators to find out how much each deal would cost you overall.
Bad credit history means that you have records on your credit score of late or missed payments, several financing applications, and serious credit problems such as bankruptcy.
As for low or no credit history, this is when you haven’t built up a credit rating yet, meaning that you can’t actively prove that you’re a responsible borrower. In fact, if you don’t have a credit card or have never taken out a loan, mortgage providers won’t be able to see if you’re able to manage your finances effectively.
Yes, you can. But there is no hiding that it can be challenging. In fact, not all mortgage providers will be ready to lend money to people who have not been able to repay their debts in the past.
If you’ve had the opportunity to build up your credit score over the years, you’re more likely to be taken into consideration. That said, you probably won’t be able to benefit from the most favourable, competitive deals on the market.
