Getting a Mortgage With Bad Credit: What You Need to Know

Bad credit and mortgages don't have to be a brick wall. You'll probably need a bigger deposit, you'll usually pay a higher rate, and you may need a specialist lender — but for most people with credit issues, a mortgage isn't out of reach.

Here's exactly what's possible, how to make the most of your situation, and how to position yourself for the best possible deal.

Can you get a mortgage with bad credit?

In most cases, yes. The UK mortgage market includes a tier of specialist lenders who work specifically with borrowers whose credit files have issues — missed payments, defaults, CCJs, even past IVAs or bankruptcies in some cases.

The trade-off is straightforward. These lenders take on more risk, so they:

• Want larger deposits (typically 15-25%)
• Charge higher interest rates (often 1-2% above mainstream)
• Apply tighter affordability checks
• Are usually only accessible through mortgage brokers

The good news: a specialist mortgage is rarely a permanent state. Two or three years of clean payments typically opens up mainstream remortgage options at much better rates.

What counts as bad credit for mortgage lenders?

Mortgage lenders care about specific kinds of negative data on your credit file. In roughly increasing order of seriousness:

• Late payments — minor issue, especially if isolated or old
• Missed payments (30+ days late) — more serious; mainstream lenders may decline if recent
• Defaults — significantly serious; usually disqualify mainstream lenders if recent
• County Court Judgements (CCJs) — very serious; specialist lenders required for several years
• IVAs (Individual Voluntary Arrangements) — usually require waiting until the IVA has ended plus a clean period after
• Bankruptcy — most lenders won't consider applicants until at least three years after discharge

What looks "bad" to a mortgage lender isn't always what feels bad to you. A great credit score can still be undermined by a single recent default. A so-so score with a clean recent payment history can be quite acceptable. Our credit score guide covers the underlying data lenders see.

How bad credit affects your mortgage options

The impact shows up in three ways:

1. Which lenders will consider you. Mainstream lenders apply strict cutoffs. Specialists are more flexible but charge for the flexibility.
2. The rate you're offered. Higher risk means higher rates — usually 0.5-2.5 percentage points above mainstream pricing.
3. The maximum loan-to-value. Mainstream lenders might lend up to 95% LTV. Specialists for bad credit usually cap at 85% or even 75%.

Use our mortgage repayment calculator to see how a higher rate affects the monthly payment. The numbers can be sobering — but they're temporary if you can refinance after a few years.

The type of bad credit that matters most

Not all credit issues are weighted equally. Three things matter:

• Age: Recent issues hurt much more than older ones. A default from five years ago is much easier to work around than one from last year.
• Status: Settled defaults (debts you've paid off) are looked at much more favourably than active unsettled ones.
• Size: A £150 phone bill default carries far less weight than a £15,000 loan default.

So an older, smaller, settled default is the easiest type of bad credit to work around. A recent, large, unsettled default is the hardest.

If you're not sure exactly what's on your file, check it before applying. Our credit improvement guide covers what to do about errors and how to clean things up.

Specialist bad credit mortgage lenders

Specialist (sometimes called "adverse credit" or "subprime") mortgage lenders are insurers, building societies and challenger banks who price for risk rather than refusing it.

Names you'll come across (rarely advertised directly to consumers, often only available via brokers):

• Bluestone
• Pepper Money
• Vida Homeloans
• Kensington
• The Mortgage Lender
• Precise Mortgages

Each has its own appetite — some specialise in borrowers with CCJs, some in self-employed with credit issues, some in former bankrupts. The right lender for you depends entirely on the specifics of your file. This is why brokers matter so much in this space.

How much deposit will you need?

Bigger than you'd need with clean credit, in most cases. Typical requirements:

• Minor credit issues (late payments, small old defaults): 10-15% deposit may be enough
• Moderate issues (defaults under 3 years old, CCJs over 3 years): 15-25% deposit needed
• Serious issues (recent CCJs, recent IVAs): 25-30%+ deposit required
• Very serious issues (recent bankruptcy): Often 30-40% deposit, plus strict criteria

The bigger the deposit, the better the rates available and the wider the pool of lenders willing to consider you. If your deposit is at the smaller end, spending another six months saving can dramatically improve your options.

Our savings goal calculator can help you plan how long it'll take to bridge the gap.

How to improve your credit before applying

The few months before a mortgage application matter more than ever for bad-credit borrowers. The standard credit-improvement steps apply:

• Register on the electoral roll at your current address
• Pay down high-balance credit cards to under 30% utilisation
• Don't apply for any new credit in the 3-6 months before applying for a mortgage
• Set up direct debits on all credit accounts to prevent accidental missed payments
• Settle any outstanding defaults if you can — settled defaults look much better than active ones
• Check all three credit files for errors and dispute anything wrong

The longer-term goal is to age out the bad data. After six years, most negative information drops off your file completely. But even a few months of clean recent activity makes a measurable difference.

Using a mortgage broker with bad credit

For bad-credit applicants, a broker isn't just useful — it's almost essential. Specialist lenders often only accept applications via brokers and don't appear on comparison sites at all.

A good broker for bad credit will:

• Review your full credit file before recommending lenders
• Know which specific lenders are most likely to accept your particular situation
• Run soft searches with multiple lenders before any hard application
• Help you present your case effectively (e.g. explaining the circumstances of past issues)
• Save you from multiple rejections and the credit-score damage they bring

Look for a broker who specifically advertises adverse-credit or specialist mortgage experience. Most charge a fee (typically £400-£999), but it's almost always worth it for this kind of application.

Government schemes that might help

A few government schemes are worth knowing about, though most aren't specifically for bad credit:

• Mortgage Guarantee Scheme — encourages lenders to offer 95% mortgages by providing a government backstop. Some specialist lenders participate.
• Shared Ownership — buy part of a property, pay rent on the rest. Lower deposit requirement and lower mortgage. Some shared-ownership providers are more flexible on credit history.
• Help to Buy ISA / Lifetime ISA — boost your deposit savings with a 25% government bonus.
• First Homes scheme — discounted new-builds for first-time buyers in some areas.

None of these eliminate the bad-credit barrier on their own, but they can make the overall package more affordable.

How long before bad credit stops affecting you?

The rule is generally six years. After six years from the date a default, CCJ or bankruptcy was registered, it drops off your credit file entirely.

But you don't have to wait the full six years to access better deals. The pattern most borrowers follow:

• Years 0-1 since the issue: Specialist lenders only, high rates, large deposit needed
• Years 1-3: Wider specialist options, slightly better rates
• Years 3-6: Some mainstream lenders may consider you, especially with clean recent payment history
• Year 6 onwards: Issue drops off file. Fully mainstream options open up.

Many bad-credit borrowers take a specialist mortgage now and then remortgage to a mainstream one after two or three years of clean payments. The temporary higher cost buys you time on the property ladder.

Frequently asked questions