If you’re thinking about buying your first home, moving house or you want to remortgage, you might be worried about what happens if you have a poor credit rating. Find out what your options are and the steps you can take to repair your credit score.

What is bad credit?

When people say that they have bad credit they usually mean they have a low credit score, or markers in their credit report that will make it more difficult or expensive for them to get a loan, credit card or mortgage. The factors that can add to a poor credit rating could be late or missed payments, county court judgements (CCJs) or lots of applications for credit over a short amount of time. Your credit score can also be low if you’ve never taken out credit before.

How does bad credit affect a mortgage?

When banks and mortgage lenders decide whether or not to offer you a mortgage, they take a number of different factors into account. You could be rejected if your credit rating isn’t good enough. If there are recent missed or late payments on your credit report, this is usually a red flag for lenders. However, the impact of late or missed payment markers reduces the older they are, and they’ll be totally wiped from your report after 6 years. Some lenders might be willing to accept someone with missed payments from many years ago, so you might think it’s worth waiting a bit longer to buy. 

You should check your own credit report to make sure there are no errors before you start thinking about applying for a mortgage. Look at your whole report, not just your score, and apply for a correction if you see something on your report that isn’t right. Many credit reference agencies will also offer tips to help you improve a bad credit score.

What is the lowest credit score to buy a house?

It’s true that having a better credit score will usually make it easier to get a mortgage, but the answer to this question is that every lender has their own list of requirements for all the different mortgages they offer. They take a number of factors into account, including your age, your income, the property and the deposit you have available.  They will also look at affordability and whether you are in a good position to keep up with repayments. There isn’t a minimum credit score you should aim for.

Can a mortgage broker help with bad credit?

If you’re worried about your credit affecting you being able to get a mortgage, using a broker who can access the whole of the market can be a big help. Lenders have different lending criteria for their mortgages, and a broker will be able to point out the ones that are more likely to accept you.

You can damage your credit score if lenders make hard searches on your credit report, so it’s better to avoid making multiple applications and only apply to lenders where you have a good chance of being given a mortgage agreement in principle. It’s wise to choose a credit broker that only charges you a fee on successful completion of your mortgage application.

Can I get a joint mortgage with bad credit?

If you’re applying for a mortgage with someone else, your bad credit rating could affect theirs, or their bad credit could affect yours. Any joint accounts, loans or credit cards shared with a person with poor credit could also affect your credit score so it’s worth checking the ‘association’ section of your credit report. 

Getting a joint mortgage when one of you has bad credit can mean that you’ll be offered a mortgage with a higher interest rate than advertised, asked for a larger deposit or even turned down completely.

Lenders will want to consider your overall financial position as a couple, especially if you’re married, so as long as you and your partner don’t have any recent credit issues you should have a good chance of finding a lender prepared to give you a mortgage. This is where seeking professional advice through an experienced credit broker could be useful.

Is it easier to get a shared ownership mortgage if I have bad credit?

When you buy a shared ownership house or flat, your monthly payment is split between your mortgage and the rent you pay to the housing association that owns the other part of your property. Because you’re applying for a smaller mortgage that’s only 25-75% of the purchase price, you might find that lenders are more willing to accept you. This isn’t always the case, and your existing credit commitments could mean a shared ownership property is still unaffordable. 

If you are accepted, once your credit improves, you could remortgage for a larger share or the full value of the property. This is called ‘staircasing’. 

How else can I get ready to apply for a mortgage?

It’s important to remember that your credit score or report aren’t the only factors your lender will look at when they’re checking if you qualify for a mortgage. Use our mortgage affordability calculator to see what size mortgage you could get. 

Lenders don’t just look at your salary, they also pay attention to your monthly outgoings. You will usually be asked for three or four months of bank statements so they can double check that you’ll afford your mortgage payments.

Before you start applying for mortgages, it’s a good idea to clear debts, cut back on spending and try to avoid opening new lines of credit or using your overdraft so that your bank or mortgage lender can see you’re responsible with money. In the long run, this could help you build up your credit score too.