Getting a mortgage with bad credit

A bad credit mortgage is a mortgage offered to someone whose credit file shows missed payments, defaults, County Court judgments (called Decrees in Scotland), an individual voluntary arrangement (IVA) or bankruptcy. It is possible to get one: as StepChange puts it, "This does not mean that you cannot get a mortgage. But you may have to pay more in interest and fees"¹. The Bank of England is blunter still: "Having a bad credit rating will make it more expensive and harder to borrow money"².

What that means in practice is that lenders will probably want a larger deposit from you, and for you to pay higher interest rates³. Deals available to people with credit problems may also come with higher up-front fees⁴. The trade-off is real but not permanent: most adverse entries drop off your credit file after six years, and in the meantime there are lenders that specialise in exactly this situation.

Why bad credit usually costs more

Lenders price risk. When someone's file shows missed payments, reduced payments, County Court judgments or Decrees, the lender responds by charging more for the extra risk it is taking on. StepChange explains that lenders may cover their risk of lending to you by increasing the interest rates and the monthly payments³. Which? reports the same from the other side of the counter: as well as higher initial rates, deals available to people with credit problems may come with higher up-front fees⁴.

The larger deposit requirement matters as much as the rate. A bigger deposit means a lower loan to value, which gives the lender a bigger cushion if something goes wrong. If you are planning to buy, our guide to loan to value explains how the ratio is worked out and why it drives the deals you are offered.

Not all bad credit is equal in a lender's eyes. Which? notes that generally, missing a mortgage payment is considered one of the worst types of default, and lenders are likely to be reluctant to lend at any point after one⁴. A single late payment on a mobile phone bill years ago is a very different proposition from a missed mortgage payment last year. Lenders also look at the pattern: one isolated problem with an explanation is easier to accept than a run of missed payments across several accounts.

Bankruptcy is at the severe end. StepChange states that lenders are very unlikely to lend to you during your bankruptcy and while it is on your credit file¹, and that most mortgage lenders will not consider lending in these cases at all⁹. Most lenders will either refuse you credit or charge a higher rate of interest¹⁰. The position improves once the bankruptcy is discharged and time has passed, but the six-year mark on the file is the hurdle to clear.

Specialist lenders and credit repair mortgages

If you have marks on your credit history, you may need to get a mortgage from a specialist lender¹¹. These are the lenders that work in the part of the market sometimes called adverse credit, sub-prime or bad credit mortgages: StepChange lists the products under all three names³. Specialist lenders tend to be more flexible when assessing your mortgage application, but they often charge much higher rates and require larger deposits⁴.

Some building societies run dedicated "credit repair" ranges, designed for borrowers coming out of an adverse period, with the expectation that they can move to a cheaper deal once their record is clean. The names of these ranges change often, so a broker who knows the market is usually the quickest route to finding which lenders are lending in it. Our guide to specialist mortgage lenders explains who they are and how they differ from the high street banks, and mortgage advice: brokers, advisers and applying direct covers how to find one.

One caution applies to any route that promises to fix bad credit quickly. The Financial Ombudsman Service deals with complaints from people unhappy about being charged a fee by a credit broker for finding a loan, sometimes charged even when no loan was offered¹². Be wary of anyone asking for an up-front fee to arrange borrowing, and check a firm's status on the FCA Register before paying anything.

Six years: how long defaults, CCJs, IVAs and bankruptcy stay on your file

The single most important number on this page is six. Some information stays on your credit file for six years, including missed payments, defaults and court judgments⁵. A default will stay on the consumer's credit file for six years¹³. Details of mortgage debts and secured loans stay on the credit reference agencies' files for six years from the date the default was registered¹⁴. Bankruptcy stays on your credit file for at least six years¹⁰, and it is visible to mortgage lenders for that period¹⁵.

Six years is counted from the date the entry was registered, not from the date you took out the credit or fell behind. That matters for planning: a default registered in 2024 sits on the file until 2034, whenever the underlying debt began. Nothing you do removes a correct entry early, but time does the work on its own.

The route from a missed payment to a default follows a recognisable pattern. Lenders typically issue a default notice when the consumer is between three and six months in arrears, and industry guidance says lenders should notify consumers of their intention to register a default at least 28 days before doing so¹³. Once registered, the default is there for the full six years.

Mortgage arrears follow the same pattern, with an extra sting. If you agree a reduced payment or interest-only arrangement with your lender during a period of illness or hardship, the shortfall becomes agreed arrears and can be recorded on your credit file¹⁶. Which? warns that mortgage arrears will put a mark on your credit record and may prevent you from buying a house in the future¹⁷. Our page on how long mortgage arrears stay on your credit file covers this in more detail.

Check your credit file with all three agencies first

If you have ever had a credit card, a loan or a mortgage, one of three main credit reference agencies holds a file on you¹⁸. The three main consumer credit reference agencies in the UK are Experian, Equifax and TransUnion⁶. You have the legal right to check your report for free with all three⁷. Because each CRA keeps different records, and lenders can choose which agency they report to, your credit file may not look the same at each one, so checking all three is the way to cover everything¹⁹.

There is no requirement under data protection law for lenders to report data to all the CRAs. It is up to the lender to decide which CRA it wishes to use, if any⁶. That is why a file can look healthy at one agency and show a problem at another, and why a mortgage lender using the second agency may see something the first did not show you.

A credit file contains more than borrowing history. It includes details of your previous addresses and information from public sources such as the electoral roll, public records including county court judgments, and bankruptcy and insolvency data⁶. The agencies also generate financial links, linked addresses and alias information⁶. The information is used not only for lending decisions but to verify identity, age and residency, to identify and track fraud, to combat money laundering and to help recover payment of debts⁶.

What a file does not contain is a verdict on you. The agencies do not have a blacklist of people who should not get credit¹⁴. There is no such thing as a credit blacklist⁵. They hold facts, and each lender interprets them according to its own criteria.

Fixing errors: notices of correction and the 28-day rule

Files go wrong. Debts get recorded against the wrong person, entries outlive their six years, or a settled debt still shows as outstanding. If you find something wrong, the first step is to raise it with the credit reference agency and the lender that reported it. The Information Commissioner's Office says CRAs cannot amend data on credit files provided by other companies without that company's permission²⁰. The agency should remove the information or explain why it will not within 28 days, according to guidance reported by the House of Commons Library²⁰.

Where an entry is correct but the context is missing, you can add a notice of correction. The Consumer Credit Act 1974 gives you the right to require the agency to add to the file a notice of correction, not exceeding 200 words, drawn up by you²¹. Business Debtline describes it as a note on your report of up to 200 words explaining why you got into debt or why you think information on your report is wrong¹⁴. Which? recommends contacting each of the three credit reference agencies to get a notice of correction added to your credit report²², because, as above, the agencies do not hold identical files.

The 28-day rule also appears on the other side of the process. Lenders should notify consumers of their intention to register a default against them at least 28 days before doing so¹³. Under the Consumer Credit Act 1974, a date specified in a default notice for remedying the breach must not be less than seven days after the date of service of the notice²³. These deadlines are the lender's obligation, not yours, but knowing them helps you spot when a default has been registered without proper notice, which is a ground for complaint.

What lenders see: searches, footprints and financial links

When you apply for a mortgage, the lender runs an affordability check. It will usually start by asking you about your household budget: your income, regular bills and spending needs, and it will also check your credit file for details of your debts²⁴. Giving wrong information to a lender can lead to your affordability complaint being refused later²⁴, so accuracy matters as much as a clean file.

The check itself leaves a trace. Hard checks involve a full search of your credit report and leave a footprint on your credit file that is visible to other lenders for at least 12 months, and can impact your credit report and score⁷. This is why multiple full applications in quick succession can count against you: each one adds a footprint, and a cluster of them can look like a borrower in trouble. An agreement in principle may involve a softer search; our page on mortgage in principle explains the difference.

Financial links are the other thing lenders see. If you have a joint account, loan, mortgage or credit card with someone, they become a financial associate, and they can affect your score if they have a bad credit history²⁵. Your partner's poor credit does not always affect you, even if you are married or in a civil partnership: the link only exists where you share credit²⁵. On a joint mortgage application, lenders run a credit check on each applicant, and one party's poor credit score could impact the decision¹¹. A missed mortgage payment will show up on both credit reports, regardless of whose fault it was²⁶.

If a financial link is out of date, for example after a separation, it can be worth asking the agencies to remove it. Our guide to joint mortgages, separation and transfer of equity covers what happens to shared credit when a relationship ends.

Remortgaging with bad credit

Remortgaging means existing borrowers redeem their current mortgage in favour of a new one secured on the same property, but with a different mortgage lender²⁷. People with bad credit remortgage for the same reasons as anyone else: StepChange lists a mortgage term ending, wanting a better deal, interest rates changing, needing to pay for an expense, or needing to as part of an IVA or bankruptcy³.

The bad credit angle changes the options. If you have marks on your credit history, you may need to get a mortgage from a specialist lender¹¹, and the same pricing trade-offs apply: higher rates, larger deposits or equity cushions, and potentially higher fees. A product transfer, switching to a new deal with your existing lender, can be a simpler route because the lender already knows your payment record; our comparison of remortgage or product transfer sets out the differences.

Two situations deserve special care. First, negative equity: if your home is worth less than the mortgage, the lender would be unlikely to approve a new deal, as your property would not be sufficient security¹⁷. A very small number of specialist lenders offer negative equity mortgages, which enable you to transfer the negative equity to a new property¹⁷. Second, bridging loans: FCA rules state that a mortgage lender accepting an expectation that a bridging loan will improve the customer's credit status enough to refinance to a longer-term mortgage, without evidence of a guaranteed offer for that longer-term contract, may be relied on as tending to show a contravention of the rules²⁸. In plain terms, borrowing short-term on the hope your credit improves is not a repayment plan a lender should accept.

If your current mortgage is in arrears, the picture is different again: the priority is dealing with the arrears, not shopping for a new deal. Start with our guide to mortgage arrears.

If a lender turns you down

A refusal is not the end, but it is information. The first thing to do is find out what the lender saw. Check your file with all three agencies⁷, and look for entries you did not expect. One of the warning signs of identity theft is being refused financial services, credit cards or a loan despite having a good credit rating²⁹: if your file shows accounts you never opened, follow the ICO's guidance on identity theft²⁹.

If the refusal is down to genuine adverse history, the realistic options are a specialist lender¹¹, a larger deposit, or waiting for entries to age towards the six-year mark⁵. Each full application leaves a footprint⁷, so it is worth spacing applications out and using an agreement in principle where possible rather than firing off full applications.

If you believe a lender lent to you irresponsibly, or refused you on wrong information, you can complain. The Financial Ombudsman Service can consider complaints about unaffordable lending³⁰. Complaints about credit broking, including fees charged by brokers, also fall to the ombudsman¹². Our page on complaining to the Financial Ombudsman about your mortgage explains the process and the deadlines.

One protection is worth knowing about while you are still with your existing lender. Under the Mortgage Charter, anyone worried about their mortgage repayments can contact their lender for help and guidance, without any impact on their credit file³¹. Asking for help is not the same as missing a payment, and the two have very different consequences for your file.

Where to get free help with debt and credit problems

Bad credit is usually a symptom of a debt problem, and debt problems are best dealt with at the source. Free, impartial advice is available, and it costs nothing to use it.

• StepChange Debt Charity is the UK's largest provider of free independent debt advice and managed solutions, provided via a Freephone helpline³². StepChange's debt advice is free and impartial²⁴.
• PayPlan provides free impartial debt advice, discussing ways to make debt more affordable and helping to find a solution³².
• The FSCS signposts people struggling to repay what they owe to free debt advice from organisations including StepChange, Which? and Citizens Advice³³.
• In Northern Ireland, the Consumer Council lists sources of free help and support including StepChange and PayPlan³².

Many creditors and debt collection agencies have special teams dedicated to vulnerable customers³⁴, so it is worth telling a lender if illness, bereavement or other difficulty lies behind the missed payments. If you are struggling with mortgage payments specifically, our guide to what to do if you cannot pay sets out the steps, and the wider debt guide covers the solutions available, from informal arrangements to insolvency.

A bad credit record also reaches beyond mortgages. A bad credit rating can affect your ability to rent a home, get a mobile phone contract or anything else that requires a credit check². Some landlords and rental companies do credit checks and may not rent to you if you have bad credit⁹. Shelter England offers guidance on renting with a poor credit history²⁵. The six-year clock is always running, and every month of clean credit makes the next application easier.