How to get a mortgage if you have bad credit

In the UK, there are three credit reference agencies (CRAs) that lenders use when assessing applications for credit: Equifax, Experian and Callcredit. CRAs work with banks, building societies, mobile phone retailers and other businesses and help them make quick decisions on whether the person applying for credit is likely to pay back. The types of information they store include your electoral roll details, any court records, your address data, account data and records of previous credit searches.

You can now obtain your full statutory credit report for free using the links above to contact the agencies directly.

Once you have your reports, check that all the information they have about you is correct. If you spot any mistakes, such as wrong addresses, incorrect bank details or even fraudulent applications made in your name, you should write to the credit reference agency and ask for it to be corrected immediately. Make sure you include an explanation of why it's wrong and provide evidence if you can.

An agency must start an investigation within 45 days of a free annual credit report request, and has 5 days to notify you of the results after completing an investigation. Accurate information cannot be removed, but providing you have enough evidence, you can dispute any of the information on your credit report.

You can improve your credit rating right now by taking these three steps:

• Get on the electoral register. If your name’s not on the register, you’ll find it much harder to get credit. You can register to vote online. 

• Make no more credit applications. Applying for lots of credit all at once will negatively affect your score. Wait until you’ve sorted out any problems on your file and improved your score before applying for a mortgage.

• Cancel unused credit cards. Lenders look at how much credit is available to you, so reducing this amount will help your cause.

Over the longer term, taking these two steps can help you boost your credit scores further:

• Pay bills on time. Even if you’re struggling, try to never miss a payment as it could cause you problems for years. Set up direct debits to make sure you never forget. And if you’re in real difficulty, contact the lender to see if they can change your repayment schedule.

• Get a ‘credit rebuild’ card. Credit rebuild cards are for people with bad or no credit and are designed to boost their credit score. Their APRs are usually high so make sure you only spend a little and repay in full each month. Take a look at Money Saving Expert’s Guide to Credit Rebuild Cards to find out more, and for their top picks.

In the past, if you had a bad credit history, you needed to apply to a specialist lender. Nowadays, in the current market, some mainstream lenders are offering credit to people with minor blemishes on their credit history. It’s worth enquiring with them, but if you are worried that your credit history might stop you from getting the mortgage you want, it’s best to seek advice from a New Homes Mortgage Adviser (NHMA) on the best course of action to take. 

A mortgage is a huge commitment – particularly if you have had trouble keeping up with payments in the past. Before applying for any mortgage, you need to be sure you can afford the deposit and the mortgage repayments. Remember that not owning a home is better than getting a home repossessed. A New Homes Mortgage Adviser (NHMA) can help and will take the load of your shoulders. They will ensure that you don’t overstretch yourself or get into unnecessary difficulty.  

There are now lenders in the UK specialising in offering mortgages to borrowers with a poor credit history. Your best bet for finding the right lender for your circumstances is most likely to talk to a mortgage broker.

A good broker can search across the market for lenders on your behalf and source the best deal to meet your history, current income and requirements. Best of all, they know the providers’ lending criteria so they can tell you which mortgages you're most likely to get accepted for.

Once you have secured a mortgage, you need to work extra hard to ensure you never miss a repayment. As a general rule, your credit rating will be back in good health if you continue to pay your mortgage and other bills fully and on time.

When your credit rating has recovered, you may be able to remortgage and get a conventional mortgage loan with a much lower interest rate.

This guide to mortgages was produced in collaboration with L&C Mortgages, the UK’s largest fee free mortgage broker and adviser.