How to Get a Mortgage with Adverse Credit
If your credit history isn't perfect, it's natural to wonder whether buying a home or remortgaging is still possible. The good news is that having adverse credit doesn't automatically rule you out. Lenders look at the whole picture, and there are specialist lenders who consider applicants with a past credit problem.
That said, there are no guarantees, and every case is different. In this guide I'll explain what adverse credit means, the kinds of issues lenders may consider, what you can do to prepare, and why the outcome depends so much on your individual circumstances. If you're wondering how to get a mortgage with adverse credit, this is a good place to start.
What is adverse credit?
Adverse credit is a term used for a credit history that includes negative marks. It can range from a single missed payment to more serious events. Lenders don't treat all of them the same way. A small, old issue that's been fully resolved is usually viewed very differently from a recent or serious one.
The kinds of credit issues lenders may consider
When you apply, a lender will check your credit file and may ask about anything it finds. Common issues include:
Missed or late payments on credit cards, loans, mobile contracts or even your existing mortgage or rent.
Defaults. When a lender has closed an account because of unpaid debts.
County court judgments (CCJs). Court orders relating to unpaid debt. In Scotland the equivalent is a decree.
Debt management plans (DMPs). An informal arrangement to repay debts over time.
Individual voluntary arrangements (IVAs). A formal agreement to repay debts.
Bankruptcy. A more serious insolvency event.
Previous mortgage arrears or repossession. Lenders will often want to know what happened and when.
A thin credit file. Not adverse as such, but having little credit history can make it harder for lenders to assess you.
What lenders look at
For each issue, lenders tend to consider:
How recent it is. More recent problems are usually viewed more cautiously than older ones.
How serious it is, including the type and the amounts involved.
How many there are. A one-off is often seen differently from a pattern.
Whether it's been settled. Showing that the debt has been repaid or satisfied can help.
What caused it. A clear, genuine explanation, such as illness, redundancy or a relationship breakdown, can make a difference to some lenders.
What your situation is now. Stable income, a reasonable deposit and affordable borrowing all count in your favour.
Because lenders each have their own criteria, a case that one lender declines may be acceptable to another. That's why speaking to a broker who knows the market can save time.
What to expect from an adverse credit mortgage
Mortgages for applicants with adverse credit are usually offered by specialist lenders. Compared with a standard mortgage, you may find:
A larger deposit is requested.
Higher interest rates or fees, reflecting the higher risk to the lender.
A narrower choice of lenders and products.
Closer checks on your income, spending and the reasons for your credit history.
You may also see this as a stepping stone. Some borrowers take an adverse credit mortgage and move to a mainstream deal later, once their credit record has improved. That's worth discussing with your adviser.
How to prepare before you apply
A little preparation can make your application stronger and avoid unnecessary delays.
Check your credit reports. Look at your reports from all of the main credit reference agencies, so you know what lenders will see. Check them for mistakes or accounts you don't recognise, and ask for errors to be corrected.
Register on the electoral roll. Being on the roll at your current address helps lenders verify who you are.
Settle or arrange outstanding debts where you can. Lenders generally like to see issues resolved, and any documents confirming this, such as a satisfaction certificate or discharge paperwork, can be useful.
Keep up with payments. Paying everything on time, from bills to existing credit, shows current good conduct.
Avoid applying for lots of credit. Several credit applications in a short time can leave extra marks on your file. Speak to a broker before you apply to individual lenders.
Save a deposit. A bigger deposit can open up more options and may improve the terms on offer.
Gather your documents. Typically proof of ID, proof of address, payslips or accounts if you're self-employed, and several months of bank statements.
Be ready to explain. Prepare a short, honest summary of what happened, what's changed and how you've managed since.
Why the outcome depends on your circumstances
People with similar credit issues can get quite different results. The type, age and size of the problem matter, but so do your income, your deposit, the property, how much you want to borrow and which lenders you approach. A lender that's a good fit for one person may not be for another.
This is also why it's not possible to say in advance whether a particular application will be accepted. What a broker can do is look at your situation, explain realistic options and approach lenders that are more likely to consider your case.
How we can help
At 1st Choice Mortgages, we work with a wide range of lenders, including those who consider applicants with a less-than-perfect credit history. We'll listen to your story, look at your circumstances and explain your options clearly, with no judgement.
If you'd like to talk it through, call us on 020 8095 9030 or email ricky@1cms.co.uk, and we'll be happy to help.
Frequently asked questions
Can I get a mortgage with adverse credit? Often it's possible, depending on the type, age and size of the credit issue, along with your wider circumstances. It's not guaranteed.
Will I need a bigger deposit? Often yes. Lenders commonly ask for a larger deposit when there's adverse credit, though it varies from lender to lender.
Will the interest rate be higher? It may be, as adverse credit lending is more specialist. Over time, as your credit record improves, you may be able to move to a more competitive deal.
Does a CCJ or default stop me getting a mortgage? Not necessarily. Some lenders will consider applicants with these, particularly if they're older or have been settled.
How long do I have to wait after an IVA or bankruptcy? There's no single answer, as lenders' rules differ. It's best to speak to a broker about your own case.
Will checking my own credit report harm my score? No. Checking your own report is a soft search and doesn't affect your score.
This article is for general information only and isn't personal advice. Lenders' criteria vary and approval is never guaranteed. Your home may be repossessed if you do not keep up repayments on your mortgage.
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