This guide was last updated 29 August 2024
Taking the steps to being a homeowner can be a daunting task, particularly if your credit history is less than stellar. However, a less-than-perfect credit score doesn’t necessarily spell the end of your homeownership dreams. At Coreco, we believe in providing clear, actionable advice to help you secure a mortgage, no matter your credit history. Here’s our helpful guide on how you can still achieve your home-buying goals, even with bad credit.
Firstly, let’s demystify what “bad credit” means. In the UK, your credit score is a numerical representation of your creditworthiness, calculated by credit reference agencies like Experian, Equifax, and TransUnion. A low credit score can result from various factors, including:
Before diving into the mortgage application process, it’s crucial to get a clear picture of your credit situation. Obtain your credit report from one of the major credit reference agencies. Look for any inaccuracies and dispute them if necessary. This preliminary step can sometimes yield a surprising boost to your credit score.
Specialist Lenders
High street lenders might be wary of offering mortgages to those with bad credit, but specialist lenders cater specifically to this market. These lenders assess applications on a case-by-case basis, often taking a more holistic view of your financial situation.
Higher Deposits
A larger deposit reduces the lender’s risk, making them more likely to approve your mortgage. While the typical minimum deposit is around 5-10%, with bad credit, you might need to provide at least 20-30%.
Guarantor Mortgages
Having a guarantor – usually a close relative with good credit – can bolster your application. The guarantor agrees to cover the mortgage payments if you default, providing the lender with additional security.
Credit Repair Mortgages
Some lenders offer specific products designed to help individuals with poor credit rebuild their scores. These mortgages may have higher interest rates, but they provide a path toward financial rehabilitation.
While pursuing a mortgage with bad credit is possible, improving your credit score can significantly enhance your options and terms. Here are some strategies:
At Coreco, we understand the intricacies of the mortgage market and are adept at finding solutions tailored to your unique circumstances. Consulting with a mortgage adviser can provide you with invaluable insights and access to exclusive deals not available on the high street.
Securing a mortgage with bad credit is undeniably challenging, but far from impossible. By understanding your credit situation, exploring specialised mortgage products, and taking steps to improve your credit score, you can navigate this journey with greater confidence. Remember, the road to homeownership is a marathon, not a sprint. With patience, diligence, and the right guidance, you can achieve your dream of owning a home.
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.