If you’re hoping to buy a house with bad credit, let’s start with the truth: it’s harder, but it’s not impossible. Bad credit doesn’t automatically disqualify you from homeownership, but it does narrow your options, increase your costs, and require more preparation than someone with a spotless credit file.
The difference between “possible” and “affordable” matters here. You might qualify for a mortgage with bad credit UK, but the interest rates and deposit requirements could make it financially unwise in the short term. This guide cuts through the noise to explain what’s realistic, what’s not, and how to improve your chances if buying a house with bad credit is your goal.
We’ll cover what lenders actually look for, how different types of bad credit affect your mortgage options, the real costs involved, and when waiting might be the smarter move. Whether you’re a first-time buyer or looking to remortgage after credit difficulties, understanding the landscape is essential.
What Counts as Bad Credit in the UK?
When lenders talk about bad credit, they’re referring to a range of financial issues that appear on your credit file. These can include:
Missed payments – Even one or two late payments on credit cards, loans, or bills can affect your mortgage application. The more recent and frequent they are, the more they matter. Understanding how lenders assess your finances is crucial when you have payment history issues.
Defaults – These occur when you’ve failed to repay a debt and the lender has officially registered it. Defaults typically stay on your credit file for six years.
County Court Judgements (CCJs) – Legal rulings made when you haven’t paid money you owe. These are serious red flags for lenders and remain on your record for six years unless satisfied within one month.
Individual Voluntary Arrangements (IVAs) – Formal debt solutions that help you repay what you owe over time. An IVA stays on your credit file for six years, even after you’ve completed it.
Bankruptcy – The most severe form of bad credit. Bankruptcy remains on your credit report for six years and makes securing any form of credit extremely difficult during that time.
It’s important to understand that lenders don’t just look at your credit score. They examine your full credit history, the severity of issues, how recent they are, and whether they’ve been resolved. A missed mobile phone payment two years ago is very different from an active CCJ from three months ago. This comprehensive assessment is particularly relevant for those seeking mortgages for complex finances.
Can You Get a Mortgage with Bad Credit?
Yes, you can get a mortgage with bad credit – but conditions apply. Mainstream high street banks typically decline applications from anyone with recent or serious credit issues. Their automated underwriting systems flag these applications as too risky.
This is where specialist lenders step in. These are mortgage providers who manually underwrite applications, meaning a real person reviews your circumstances rather than a computer algorithm rejecting you outright. Specialist adverse credit mortgage lenders assess the bigger picture: your current income, employment stability, deposit size, and the reasons behind your credit problems.
The key difference between mainstream and specialist lenders is flexibility. Specialist lenders understand that life happens – redundancy, divorce, illness – and they’re willing to consider applicants who’ve had financial difficulties but are now in a stable position.
That said, not all bad credit is treated equally. A single missed payment might be overlooked by some lenders, whilst multiple defaults or a recent bankruptcy will significantly limit your options.
Need expert guidance on your specific situation? Contact Paul Welch at paul.welch@millionplus.com for a confidential consultation on adverse credit mortgages tailored to your circumstances.
How Bad Credit Affects Your Mortgage Options
Bad credit doesn’t just make mortgages harder to obtain – it makes them more expensive and restrictive. Here’s what changes:
Higher interest rates – Lenders price risk into their products. If you’re considered higher risk due to bad credit, you’ll pay higher interest rates, sometimes 2-3% more than standard rates. Over a 25-year mortgage, this can add tens of thousands of pounds to the total cost.
Larger deposits required – Whilst first-time buyers with good credit might secure a 95% loan-to-value (LTV) mortgage with just a 5% deposit, those with bad credit typically need 10-25% or more. The worse your credit, the larger the deposit required to offset lender risk.
Fewer lenders to choose from – Instead of comparing dozens of mortgage deals, you might only have access to a handful of specialist products. This limits your ability to shop around for the best rates.
Stricter affordability checks – Lenders will scrutinise your income, outgoings, and financial behaviour more closely. They want confidence you won’t default again.
Limited product choice – You’re unlikely to access the most competitive fixed-rate deals or attractive features like offset mortgages. Your options will be more basic, with less flexibility.
Mortgage Options for Buyers with Bad Credit
If you’re determined to proceed, these are your realistic pathways:
Specialist adverse credit mortgages – These products are designed specifically for people with poor credit histories. Lenders assess applications individually, considering factors beyond just your credit score. However, expect higher rates and fees.
Joint borrower strategies – If you have a partner, family member, or friend with good credit who’s willing to apply with you, their stronger credit profile can improve your chances. Be aware this makes them equally responsible for the mortgage.
Larger deposits – The more deposit you can put down, the less risky you appear to lenders. A 25% deposit can open doors that a 10% deposit cannot, as the lender’s exposure is reduced.
Bridging loans – In some situations, a short-term bridging loan can help you secure a property quickly whilst you arrange longer-term financing or wait for your credit to improve. These are particularly useful if you’re selling another property or expecting funds in the near future.
Waiting and improving credit – Sometimes the smartest move is patience. Waiting 12-24 months whilst actively improving your credit score can save you thousands in interest and unlock better mortgage products.
Remortgaging later – Some buyers start with a higher-rate bad credit mortgage, then remortgage to a better deal once they’ve rebuilt their credit over 2-3 years. This requires discipline but can work well as a stepping stone.
How Much Deposit Do You Need with Bad Credit?
The standard 5% deposit available to good-credit borrowers is rarely an option for those with poor credit. Here’s what to expect:
Mild bad credit issues (one or two missed payments over a year ago) – You might secure a mortgage with a 10-15% deposit, though rates will still be higher than standard deals.
Moderate bad credit (defaults, settled CCJs, or multiple missed payments) – Expect to need 15-20% as a minimum. Some lenders may require 25%.
Severe bad credit (recent CCJs, IVAs, or discharged bankruptcy) – You’re looking at 25-40% deposits, and even then, options will be extremely limited.
The deposit isn’t just about qualifying – it’s about offsetting risk. A larger deposit lowers the loan-to-value ratio, which directly reduces the lender’s risk if you default and they need to repossess and sell the property.
For buyers with complex income structures or those who are self-employed, deposit requirements may be even higher when combined with bad credit issues.
How Long Should You Wait After Bad Credit?
Timing matters enormously when applying for a mortgage with bad credit. Here’s why waiting can save you money:
Missed payments – Most lenders want to see at least 12 months of clean credit since your last missed payment. Some may accept 6 months if it was a one-off.
Defaults – Expect to wait at least 12-18 months after a default is settled. The further in the past it is, the less impact it has.
CCJs – Many lenders require 12-24 months since a CCJ was satisfied. Some won’t lend until it’s completely off your credit file (six years).
IVAs – You’ll typically need to wait until the IVA is completed, then another 12-24 months for better rates.
Bankruptcy – Most mainstream lenders won’t consider you until bankruptcy is discharged and at least 3-4 years have passed. Specialist lenders may consider you sooner, but at significant cost.
Applying too early doesn’t just risk rejection – it leaves a footprint on your credit file that can make things worse. Each mortgage application is recorded, and multiple rejections suggest desperation to lenders.
How to Improve Your Chances Before Applying
If you’re serious about buying a house with bad credit, take these steps before applying:
Check your credit reports – Obtain reports from all three UK credit reference agencies (Experian, Equifax, and TransUnion). Errors are common and can be disputed.
Fix any mistakes – If you spot incorrect information – a payment marked as missed when it wasn’t, or an old default that should be removed – challenge it immediately.
Reduce existing debts – Pay down credit cards and loans where possible. High utilisation (using a large percentage of your available credit) damages your score.
Avoid new credit applications – Every credit application leaves a mark. Stop applying for credit cards, loans, or even mobile phone contracts in the months before your mortgage application.
Register on the electoral roll – This simple step proves your address and boosts your credit score.
Demonstrate stable employment – Lenders prefer borrowers who’ve been in the same job for at least 6-12 months. If you’re self-employed, having 2-3 years of accounts strengthens your position.
Use a whole-of-market mortgage broker – A specialist broker with access to adverse credit lenders can find products you’d never locate yourself. They understand which lenders accept which issues and can position your application for the best chance of success.
For personalised guidance on credit repair and mortgage readiness, the government-backed MoneyHelper service provides free, impartial advice on managing debt and improving your credit score.
Ready to explore your financing options? Visit our financing page to discover the specialist mortgage solutions available through Million Plus, including adverse credit mortgages and alternative lending options.
Common Mistakes Buyers with Bad Credit Make
Avoid these pitfalls:
Applying to multiple lenders directly – Each application damages your credit further when you’re declined. Use a broker to identify the right lender first.
Using comparison sites blindly – Most comparison sites don’t include specialist adverse credit lenders. You’ll waste time applying for products you won’t qualify for.
Ignoring the long-term cost – Securing a mortgage at 6-7% might feel like a win, but over 25 years, you could pay double what someone with good credit pays. Run the numbers carefully.
Overstretching affordability – Just because a lender will lend you £200,000 doesn’t mean you should borrow it, especially at elevated rates. Leave breathing room in your budget.
Falling for “guaranteed approval” claims – If it sounds too good to be true, it is. Legitimate lenders never guarantee approval without assessing your circumstances.
When Buying with Bad Credit Is a Bad Idea
Sometimes, the honest answer is: don’t do it yet. Consider waiting if:
Interest rates are prohibitively high – Paying 7% when you could pay 4% in 18 months with improved credit means tens of thousands in unnecessary interest.
You’re financially unstable – If your income is uncertain or you’re still struggling with debt, adding mortgage pressure could push you into worse financial difficulty.
The deposit requirement is crippling – Scraping together a 25% deposit by emptying savings and emergency funds leaves you vulnerable. What happens if the boiler breaks or you lose your job?
Payment shock is severe – If your proposed mortgage payment is dramatically higher than your current rent, think hard about whether you can sustain it long-term, especially with higher rates.
Renting for another year or two whilst you repair your credit and save a larger deposit isn’t failure – it’s financial prudence. If you’re looking to invest in property once your credit improves, explore our guide to buy-to-let mortgages as a future wealth-building strategy.
Conclusion
Buying a house with bad credit is possible in the UK, but it requires realistic expectations, patience, and preparation. You’ll face higher costs, limited options, and stricter requirements than borrowers with clean credit files.
The key is understanding your specific situation, knowing which lenders might consider you, and weighing the true cost of borrowing now versus waiting to improve your credit position. A specialist mortgage broker can be invaluable in navigating this complex landscape and finding the best available deal for your circumstances.
If you’re committed to homeownership despite bad credit, focus on rebuilding your credit score, saving the largest deposit possible, and demonstrating financial stability over time. The path is harder, but with the right approach, it’s achievable.
For high-net-worth individuals seeking large mortgage loans or those interested in private bank mortgages with more flexible underwriting criteria, Million Plus specialises in securing financing for complex scenarios where traditional lenders decline.
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