Can I get a mortgage with a Low Credit Score?

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Article created by Christian Duncan, Director – Mortgage and Protection Adviser
Last updated 22nd December 2023

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Getting a mortgage with a low credit score

When your credit history is less than perfect, stepping onto the property ladder can feel like an uphill battle. Common financial blips like CCJs, defaults, or a general poor credit history can cast a long shadow over your homeownership dreams. However, it’s crucial to understand that a low credit score doesn’t necessarily slam the door on your mortgage goals. With the right strategies and knowledge, you can navigate through the maze of mortgages to find one that fits.

Understanding Your Credit Position

For starters, understanding credit scores is essential. Your credit score – a figure credit reference agencies like Experian, Equifax, or TransUnion use to summarise your creditworthiness.

This isn’t the be-all and end-all in the eyes of lenders. Instead, each lender uses their own criteria to gauge if you’re mortgage material. So, while one lender may turn you away, another could welcome you with open arms.  Lenders have their own internal score cards.  These change frequently.  A contributing factor to the score required to pass with a lender is the LTV commonly referred to as mortgage loan to value. 

What Factors Influence Your Credit Score?

Several elements impact your credit score, including:

  • Your credit report details.
  • Payment history
  • Lack of previous credit (commonly found with first time buyers).
  • Outstanding debts
  • Financial obligations.
  • The frequency of credit applications.
  • Associations with financially linked individuals.

To bolster your chances of mortgage approval, managing debts prudently and ensuring timely payments are non-negotiables.  Maintaining a stable income and minimising unnecessary outgoings can paint you in a favourable light to potential lenders.

The Reality of Bad Credit Mortgages

The truth is, entering the world of bad credit mortgages can sometimes mean you will require a slightly higher deposit.  You can also expect to pay a slightly higher rate of interest as you pose a higher risk to that lender.  This shouldn’t deter you from securing a mortgage but is certainly something to be aware of.  What it will influence is the advice you receive.  For example, if Mr and Mrs Smith have a CCJ that is due to be removed from their credit profile in 18 months time.  Securing a mortgage with an adverse lender at a slightly higher rate on a 2 year fix would be advantageous over a 5 year fix.    Fixing Mr and Mrs Smith into a long fixed term product with a subprime lender usually wouldn’t be the best way forward but everybody’s circumstances are different.  

Can I Improve My Credit Score?

Yes, this can take time to implement small changes and proactive steps to enhance your credit score include:

  • Regular bill payments without delays.  Something as simple as paying your mobile phone bill on time.  
  • Credit management and using a minimum proportion of your available credit.  Often referred to as credit utilisation. 
  • Closing dormant accounts and limiting credit applications ahead of a mortgage.
  • Rectify any inaccuracies on your credit reports.
  • Sever financial ties with past partners or individuals who might negatively influence your rating.

The Role of Mortgage Brokers in Your Quest to Secure a Mortgage

Engaging with a mortgage broker can be a game-changer and will give you access to lenders off the high street that might be better suited to your circumstances.  The Manchester Mortgage Centre can provide tailored advice and have a profound understanding of various bad credit lenders criteria. 

Exploring Joint Mortgage Opportunities

What about getting a mortgage with a partner who also has a low credit score? Transparency between both applicants is paramount.  When a lender underwrites a mortgage application, they are looking at both applicants.  They will base their lending decision and product availability on the worst of the two applicants. 

  • Paying off existing debts to bolster your joint credit standing.
  • Amassing a larger deposit to counterbalance the credit risk.
  • Relying on a skilled mortgage broker to scout for friendly lender territories.

Remember, securing a joint mortgage with bad credit might stipulate higher interest rates and stricter terms, but it’s not an impossibility.

Myth-Busting in the Credit World

When it comes to credit scores, misconceptions are plentiful:

  • Myth 1: Less debt always means better credit – Lenders need to see your repayment track record.
  • Myth 2: Never checking your credit report – Regular checks are essential. Mistakes happen and fixing them can make a significant difference.
  • Myth 3: The existence of a credit blacklist – Lenders don’t blacklist; they assess your individual financial conduct.
  • Myth 4: Your address’s credit history impacts you – Only financial associations, like shared accounts, influence your credit application.

Final Words and Steps Forward

Facing bad credit roadblocks shouldn’t strip away your hopes for a mortgage. In many cases, the path ahead may be less about waiting for an impeccable credit score and more about seeking advice to find the correct lender and products to suite your financial circumstances. 

It’s important to reflect on your current credit situation and future financial plans. While “mortgage with low credit score” might be your present, it doesn’t have to stop you becoming a home owner and securing a mortgage.

Speak to a bad credit mortgage adviser at the Manchester Mortgage Centre to see how we can help you.  

 

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