If you’ve had bad credit in the past, you could still be able to get a bad credit mortgage. Banks and building societies have a range of bad credit mortgages that may be available to those with a poor credit rating.
How to find a bad credit mortgage
You might still be able to get a mortgage if you have a bad credit rating, but it will be harder than usual to find a lender. Most bad credit mortgages are only available through brokers, who will assess your individual circumstances and try to find a bad credit mortgage for you.
Bad credit mortgages often have a significantly higher interest rate (and thus larger monthly repayments) than a normal fixed or tracker mortgage, and you’ll probably need a larger deposit as well: instead of a 5% or 10% deposit, which is usually enough for a fixed or tracker mortgage, bad credit mortgages want a deposit of 15% – LTV of 85% – or more.
Some bad credit mortgages use an interest rate that tracks the LIBOR – the London Inter Bank Offered Rate, which is the rate used by banks when they lend money to each other. If you get a LIBOR tracker mortgage, your interest rate will track the LIBOR for a set amount of time – and then, like other mortgages, it will revert to the lender’s standard variable rate (SVR), which is usually a couple of percentage points higher.
Can you get a mortgage with bad credit?
Yes, you might still be accepted for a mortgage, even if your bad credit record might put off many lenders.
Do you have bad credit?
When it comes to banks and building societies, there are are a few things that are likely to give you a bad credit record:
- Missing payments on other lines of credit (loans, credit cards, overdrafts, etc.)
- Generally high levels of debt
- Too many recent applications for credit cards, mortgages, store cards, etc.
- Exceeding an agreed credit or overdraft limit
- Being financially linked (a join bank account, a mortgage) to someone who has bad credit
- County court judgments and bankruptcy
How can you improve your bad credit record?
If you want to improve your credit record and gain access to better mortgages and other credit products, there are a number of things you can do – but be aware that building up your credit rating is usually quite a slow process. For example, if you’ve recently applied for a few credit products, your credit rating may dip down – and not bounce back for about six months. If you haven’t borrowed much in the past, you could obtain a credit building card and use that consistently for a while – and your credit record should improve.
Perhaps most importantly for building up a positive credit record, always be on time with your your loan and credit card payments – and don’t exceed your agreed credit and overdraft limits.