Does adverse credit mean I can’t get a mortgage?

Getting a mortgage is one of the most significant financial decisions you’ll ever make, and for many in the UK, the process can feel daunting—especially if you have a history of adverse credit. But does having adverse credit automatically mean you can’t get a mortgage? The short answer is no, but it might make things a bit more challenging. Let’s explore what adverse credit means for your mortgage application and how you can still secure a home loan.

Table of Contents hide

1 What is adverse credit?

2 Can I still get a mortgage with adverse credit?

3 What factors do lenders consider?

4 Tips for securing a mortgage with adverse credit

5 Summary

6 FAQs

What is adverse credit?

Adverse credit refers to a less-than-ideal credit history that may include missed or late payments, County Court Judgments (CCJs), Individual Voluntary Arrangements (IVAs), or even bankruptcy. Essentially, it’s a record of borrowing issues that could make lenders see you as a higher risk.

Credit agencies like Experian, Equifax, and TransUnion keep track of your credit history, and lenders will review this when you apply for a mortgage. If you’ve had financial difficulties in the past, you may be classified as having “adverse credit” or being a “subprime borrower.” But, even with these black marks, it doesn’t mean homeownership is off the table.

Can I still get a mortgage with adverse credit?

Yes, you can still get a mortgage with adverse credit, but it may be harder and more expensive. Here’s how it typically works:

Specialist lenders: Traditional high street banks may turn down applications from people with adverse credit, but there are specialist lenders who focus on helping those with poor credit histories. These lenders understand that people can recover from financial setbacks and may be willing to offer you a mortgage, albeit with higher interest rates and stricter criteria.

Higher deposits: If you have adverse credit, lenders may ask for a larger deposit—typically around 15-30% of the property’s value. This is because a higher deposit reduces the risk for the lender, as they’re lending less money compared to the property’s overall value.

Credit repair: If you’re not in a rush to get a mortgage, you could spend some time improving your credit score. Paying off outstanding debts, avoiding missed payments, and not applying for too much credit in a short space of time can all help improve your credit rating. After six months to a year of good financial behaviour, your chances of getting a mortgage may improve.

Adverse credit mortgages: Also known as bad credit mortgages, these products are designed for individuals with poor credit histories. The terms may not be as favourable as standard mortgages—expect higher interest rates and stricter affordability checks—but they can help you get on the property ladder when traditional lenders turn you away.

What factors do lenders consider?

Even with adverse credit, each mortgage application is considered on a case-by-case basis. Here’s what lenders typically look at when deciding whether to approve your mortgage:

Severity of credit issues: A missed phone bill payment five years ago won’t affect your mortgage application as much as a recent bankruptcy. The more severe and recent the credit issues, the more difficult it may be to get approved.

Income and affordability: Lenders want to see that you can afford the mortgage repayments, regardless of your credit history. They’ll assess your income, outgoings, and any existing debts to calculate affordability. Having a stable income and strong affordability can help offset the risk posed by adverse credit.

Time since the adverse event: The older the credit issues, the less impact they typically have on your application. For instance, a default from six years ago may no longer affect your credit score or mortgage eligibility, whereas a CCJ from last year could still be a red flag.

Type of credit issue: Some lenders are more lenient with certain types of adverse credit. For example, missed payments on unsecured loans may not weigh as heavily as missed mortgage payments.

Tips for securing a mortgage with adverse credit

If you’re worried about adverse credit affecting your mortgage application, here are a few tips to improve your chances:

Get a copy of your credit report: Before applying, check your credit report from all three major agencies (Experian, Equifax, TransUnion). Make sure there are no errors and that everything is up to date.

Work with a specialist mortgage broker: Brokers who specialise in adverse credit mortgages can help you find lenders more likely to accept your application. They can also advise on improving your credit score and preparing for the mortgage application process.

Save a larger deposit: The bigger your deposit, the better your chances of being accepted. Aim for at least 15-20% if possible.

Wait if you can: If your adverse credit issues are recent, consider waiting a year or two to allow your credit score to improve before applying.

Summary

Having adverse credit doesn’t automatically mean you can’t get a mortgage, but it does make the process more complicated. The key is to be prepared, know your options, and work on improving your financial situation if you can. Specialist lenders and adverse credit mortgages exist specifically for people in your position, so don’t lose hope. With the right strategy, you can still achieve your goal of homeownership.

If you’re concerned about your ability to get a mortgage due to adverse credit, seeking advice from a specialist broker could be the best step forward. They can help you navigate the market and find the most suitable deal for your circumstances.

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