Apply and get approved for a mortgage, even with bad credit

If you have paid or unpaid defaults or even bankruptcies on your credit file, mortgages may still be available.

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Your home may be repossessed if you do not keep up repayments on your mortgage.
Applying for a mortgage when you have a history of bad credit can throw up some difficult obstacles. However, by following a number of tips you can help improve your chances of securing a mortgage.

Understand how you ended up with bad credit

There are a number of factors that can lead to poor marks on your credit history. You may find your credit history damaged if you:

  • Have unpaid bills. One of the main ways that people will get a bad credit history will be because they have unpaid bills. Make sure you keep your payments up to date and on time.
  • Have been late on payments. Late payments will also affect your credit history but they will not have as much of an effect as unpaid bills.
  • Have been declined for a mortgage. If you have recently been declined a mortgage this will be recorded on your credit file. Many lenders will see this as a sign of impaired credit.
  • Have applied for credit too often. It is a general rule of thumb that you should only make an application for credit once every six months. Any more than this could raise a red flag to lenders.
  • Have been declared bankrupt. If you have been declared bankrupt then you will have a bad credit rating that will stay on your credit file for seven years.

Tips to apply for a mortgage with bad credit and get approved

When applying for a mortgage with bad credit, there are a number of things borrowers can do to help their chances:

1. Get a copy of your credit file

Before you even apply for a mortgage, you’ll want to ensure that you are familiar with your credit history. All of your prospective mortgage lenders will have a close look at your history before granting you a mortgage, so you want to be able to discuss the negative marks on your credit file with confidence. This will help keep you aware of any incorrect information you might otherwise have not known about.

2. Take steps to settle any outstanding debts

New lenders will want to know what you’ve done to address your past credit mishaps, so ensure that any defaults are paid and you do the right thing by your previous creditors.

3. Apply for a mortgage with a specialist lender who looks beyond the numbers

Certain lenders in the UK specialise in bad credit mortgages. These lenders look at your credit history and take into account that bad credit can result out of a lifestyle change, such as divorce or illness, and will take into account your income and other factors to still grant you a mortgage, even if you have negative listings on your file.

4. Don’t apply for too many loans or mortgages in one space of time

Your credit file includes all previous enquiries for credit, which includes past mortgage applications. Be careful who you apply for a mortgage with if you already have bad credit. Too many applications in the same space of time can present another red flag to prospective lenders, as it could indicate money management problems.

5. Tell your lender about your bad credit listings honestly

As with every lender, a non-conforming lender will look at all the red flags in your credit history. However, they will also ask for an explanation regarding each entry, and you will have to be thorough in the details you provide. If you try to hide something, you won’t improve your credit rating. You will simply make the lender more suspicious. This may lead to your application being declined on the grounds that you were not being transparent enough or fully honest about your circumstances. It is possible to get a mortgage with bad credit, but you will have to be open and transparent with your lender.

6. Avoid applying with a spouse who has bad credit if you can

If your partner is the one with bad credit, sometimes you can avoid rejection and the higher interest rates of a bad credit mortgage by applying as a single applicant. This will obviously reduce your borrowing power, so consider this before applying this tip. Learn more about getting a mortgage if you or your partner has bad credit.

7. Eliminate your other debts to make your file look better

When your lender looks at your application, they’ll take into account all of your current credit accounts, including credit cards and personal loans. If you can pay these off and close them before applying it’ll be one less factor that will work against you when your lender decides whether to approve or reject you. This is because your lender will look at your total capacity to pay off a loan, and if you have a number of credit cards – even if they’re not currently being used or maxed out – your lender could see this as a red flag.

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Bad credit scenarios

Martha's post-divorce triumph

Badcredithomeloanapproval

Martha was married to her husband William for 30 years.

They separated and later divorced over the course of two years. During these two years, the stress of the divorce coupled with the loss of a second income when William moved out meant that Martha fell behind on a number of credit card payments and bills.

After the divorce and the sale of the family home, Martha wanted to purchase a small apartment for her to live in and be near her children and grandchildren.

Having a senior role at her job meant that her income was high – making her a model applicant – but her credit file showed a very different story.

Martha got a copy of her credit file, and using a credit building firm, was able to remove one of the four listings from it.

She then approached a specialist lender who could see that apart from the three listings on her credit file during her divorce period, the rest of her file was spotless.

Three weeks later Martha had pre-approval for a mortgage and was able to purchase a comfortable apartment.

Peter and Mary

Couple with bad credit Peter and Mary had been paying their home off for the past 20 years. Unfortunately, Peter fell ill and had to take four months off work. For the first two months they were able to cover the mortgage repayments with the amount in their savings account and Mary’s wage covering day to day expenses.

It was after this two months that the couple started to struggle. Bills were piling up as the mortgage repayment was deemed more important. Numerous letters from the provider sat on the kitchen table and ended up with a debt collection agency.

It was then one of their friends informed them about debt consolidation options. They enquired online and spoke to a representative the next day who was able to work out a solution for their problems.

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