Table of Contents
1. Introduction
2. What is Bad Credit and How Does It Affect Mortgage Applications?
3. Common Reasons for Mortgage Rejections: CCJs, Defaults, and More
4. Can You Still Get a Mortgage with Bad Credit?
5. Specialist Lenders for Bad Credit Mortgages
6. Steps to Improve Your Chances of Getting a Mortgage with Bad Credit
7. The Role of Independent Mortgage Advisors Like EHF Mortgages
Introduction
Many people assume that having a poor credit history automatically means they won’t qualify for a mortgage. However, while it can make things more difficult, it doesn’t mean it’s impossible. If you’ve struggled with bad credit, there are still options available, especially with the rise of specialist lenders who focus on helping people in your situation. In this article, we’ll look at what bad credit is, the various reasons you might get turned down for a mortgage, and how you can still secure one despite your credit history.
What is Bad Credit and How Does It Affect Mortgage Applications?
Bad credit can refer to a poor credit score, typically resulting from missed payments, defaults on loans, or other financial issues that suggest you may be a higher risk for lenders. Mortgage providers use a credit score to assess the likelihood that you’ll repay your loan on time, which will differ with each lender. A low credit score can result in being offered less favourable mortgage terms, higher interest rates, or even being turned down altogether.
Common factors that contribute to bad credit include
• Missed credit card or loan payments
- Late or Missed Mortgage Payments
• Defaulting on previous loans
• High levels of existing debt
• Bankruptcy or individual voluntary arrangements (IVAs)
• County Court Judgments (CCJs)
Common Reasons for Mortgage Rejections: CCJs, Defaults, and More
Mortgage applications are rejected for a variety of reasons, many of which are linked to credit issues. Here are some of the most common reasons:
1. County Court Judgments (CCJs)
A County Court Judgment (CCJ) is issued by a court when you fail to repay a debt. Having a CCJ on your credit file can significantly affect your ability to get a mortgage. Lenders view it as a sign that you may struggle to meet financial commitments, making you a higher-risk borrower.
2. Loan or Credit Card Defaults
If you’ve defaulted on loans or credit card payments, this will be reflected on your credit report. Mortgage lenders are wary of applicants who have a history of missing payments, as it signals some financial instability.
3. High Levels of Existing Debt
Even if you’ve managed to make your payments on time, having a large amount of existing debt can negatively impact your mortgage application. Lenders assess your debt-to-income ratio, and if you owe too much relative to your income, they may see this as a red flag.
4. Bankruptcy or IVAs
Declaring bankruptcy or entering an Individual Voluntary Arrangement (IVA) can stay on your credit report for several years and significantly reduce your chances of being approved for a mortgage, especially with traditional high street lenders.
5. Debt Management Plans (DMP)
Similar to an Individual Voluntary Arrangement (IVA), a Debt Management Plan (DMP) can reflect on your credit report for up to 6 years, making it much harder to obtain a mortgage with popular high street lenders.
Can You Still Get a Mortgage with Bad Credit?
Yes, it is possible to get a mortgage even if you have bad credit. The key is to explore your options and work with the right lender. Traditional high street banks may be less willing to offer you a mortgage, but there are specialist lenders who cater to people with bad credit. These lenders understand that a poor credit score doesn’t necessarily mean you’re a financial risk today—it may simply reflect financial difficulties in the past.
In fact, many lenders recognise that people can rebuild their financial situation after events like a CCJ, default, or IVA, and are willing to offer mortgages with more flexible terms.
Specialist Lenders for Bad Credit Mortgages
If you’ve been turned down by traditional lenders, it might be time to explore specialist lenders who offer mortgages to people with bad credit. These lenders are more experienced in dealing with applicants who have:
• CCJs
• Defaults
• Bankruptcy
• IVAs
- Debt Management Plans
• Missed payments
How Specialist Lenders Work
Specialist lenders take a more flexible approach when assessing your application. While your credit history is still considered, they will often focus on your current financial situation, your income, and how much you can afford to repay. They may offer higher interest rates initially, but if you manage your mortgage well, you may be able to refinance to a more favourable rate later on.
These lenders often have access to products that aren’t available on the high street, offering bespoke solutions for people with unique financial circumstances.
Steps to Improve Your Chances of Getting a Mortgage with Bad Credit
Although getting a mortgage with bad credit is possible, there are steps you can take to improve your chances:
1. Check and Improve Your Credit Score
Before applying for a mortgage, it’s essential to check your credit report and understand your score. Services like Experian or Equifax provide free reports. Once you know your score, take steps to improve it by paying off outstanding debts and ensuring you don’t miss any future payments. Ensure that the credit report has accurate information about your finances too, and that there is no fraud or wrongly reported data.
2. Save for a Larger Deposit
Having a larger deposit can increase your chances of getting approved for a mortgage. If you can put down at least 15-25% of the property’s value, lenders will view your application more favourably, as you’re reducing their risk.
3. Work on Reducing Debt
Reduce your existing debt before applying for a mortgage. Lenders look at your debt-to-income ratio, so paying off loans or credit cards can help improve your chances of getting a mortgage. Prioritise credit cards with high interest rates over personal loan.
4. Apply with a Parent (or Guarantor Mortgage)
If your credit score is particularly low, consider applying for a mortgage with a parent or family member. As a guarantor, usually a close family member, they agree to cover your payments if you can’t. This reduces the lender’s risk, making them more likely to approve your application.
The Role of Independent Mortgage Advisors Like EHF Mortgages
When you’re navigating the complex world of bad credit mortgages, working with an independent mortgage advisor like EHF Mortgages can be incredibly beneficial. Unlike high street lenders, independent advisors have access to a whole of market range of products, including those from specialist lenders.
EHF Mortgages understands the challenges of securing a mortgage with bad credit and can help you find a lender that meets your specific needs. Whether you’re dealing with CCJs, defaults, or other credit issues, EHF Mortgages will work to find a solution tailored to your circumstances.
Conclusion and Next Steps
While having bad credit can make it more challenging to secure a mortgage, it doesn’t mean it’s out of reach. With the right guidance and access to specialist lenders, you can still find a mortgage that fits your needs. At EHF Mortgages, we specialise in helping people with complex credit histories get the mortgage they need.
Ready to explore your bad credit mortgage options? Contact EHF Mortgages today to book a consultation and find out how we can help you take the next step towards homeownership.
