Buy-to-let mortgages with bad credit

A bad credit score will affect your ability to be approved for a buy-to-let mortgage, but that doesn't mean it's impossible.

When you apply for a buy-to-let mortgage, lenders will perform the same affordability checks as when you’re buying your own home. That means a bad credit score will harm your chances of accessing the best mortgage deals.

However, there are specialist lenders who will consider applicants with credit problems.

These specialist lenders tend to offer higher interest rates than traditional lenders, but you’ll at least have the opportunity to add to your buy-to-let portfolio, provided you can afford to do so.

Which types of bad credit will affect my application?

Lenders will run a credit check on you when you apply for a buy-to-let mortgage. The lower your credit score, the tougher you’ll find it to be approved for a great deal. Below, we list some tips to help you improve your credit score.

There are certain scenarios that occur when you fall into serious debt which will be recorded on your credit report and harm your application even further. These include defaults, CCJs, IVAs, debt management plans and bankruptcies.

Some lenders will flat-out refuse to approve applicants who have any of these registered on their credit report. Others will only consider you if these situations weren’t in the recent past. Ideally, your credit report is clear of these scenarios within the last three years.

It’s important to understand a lender’s attitude to working with customers in your situation before submitting an application. This will normally be detailed in its minimum eligibility criteria.

A professional mortgage adviser will be able to point you in the direction of lenders willing to consider your application.

How to improve your chances of being approved

There are several factors that can improve your chances of being approved for a buy-to-let mortgage, even if you have bad credit.

  • High income. It’s up to you to prove you can comfortably afford to take on the monthly repayments of a buy-to-let mortgage. As well as your credit history, a lender will compare your income to your regular outgoings. The healthier this looks, the more likely you’ll be approved for a mortgage.
  • A large deposit. Most buy-to-let mortgage providers require a deposit worth at least 15% of the property value. If you can stump up more than this, it will aid your application.
  • A clean credit history in the past three years. A lot of lenders won’t consider your application if you’ve suffered serious debt problems (such as those mentioned in the previous section) in the past three years. The cleaner your recent credit history, the more deals you’ll potentially have access to.
  • Own a least one other property. Some buy-to-let mortgage providers will only consider applicants who already have a mortgage on the property they live in.

Tips to prepare for a mortgage application

Follow these steps to ensure the process of applying for a buy-to-let mortgage is as smooth as possible.

  • Get your accounts in order. Lenders will want to see recent bank statements in order to assess your affordability. If you’re self-employed, they’ll typically want to see at least three years of recent accounts.
  • Check the accuracy of your credit report. Check your credit report for mistakes and amend any you find. You can do this for free by contacting any of the UK’s three major credit reference agencies: Experian, Equifax or TransUnion (Callcredit).
  • Work with a professional mortgage adviser. Mortgage advisers will be able to identify the best deals from lenders most likely to approve applicants in your financial position. By working with these professionals, you save time and damaging your credit score further via rejected mortgage applications.
  • Work on improving your credit score. If you’re not in a mad rush to purchase a buy-to-let property, consider building your credit score before applying for a mortgage. This will improve your chances of accessing a better deal, potentially saving you thousands of pounds over the life of your mortgage. Learn more about and check your credit score here.

Speak to a specialist lender

If you are struggling to get a mortgage via the traditional methods you could speak to a specialist lender. They can provide the expertise on a particular area of lending where you’re looking for assistance.

Simply Adverse

Simply Adverse | Bad Credit Mortgage Brokers

  • No upfront fee
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Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

Tips for building your credit score

By taking steps to repair your bad credit score, you can improve your chances of being approved for a great mortgage deal, and other financial products in the future. Here are some tips to help you build your credit score quickly and efficiently.

  • Make debt repayments on time. Your credit score increases whenever you make timely repayments on bills or debts. Set up all your household bills to be paid by direct debit, ensuring there’s enough in your bank account to cover them. Also, consider making small purchases on a credit-builder credit card, then paying it off in full each month.
  • Don’t apply for additional credit. Every time you apply for a financial product, the company will run a credit check on you. This produces a short-term knock to your credit score, so it’s best not to apply for any credit in the months leading up to a mortgage application.
  • Fix your credit report. It’s possible there are mistakes on your credit record. These can have a detrimental effect on your credit score, so it’s worth checking for errors and amending them. You can do this for free by getting in contact with any of the three major UK credit reference agencies: Experian, Equifax or TransUnion (Callcredit).
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