Full list of mortgage lenders who offer loans to buy home even if you have a bad credit score

MANY people may not realise that it’s still possible to get on the housing ladder even with a less-than-perfect credit score. 

Whether you have missed just one repayment on your credit card, or you’ve been issued with a county court judgement (CCJ), there are numerous reasons why you may have a bad credit rating. 

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It could also be as simple as that you haven’t borrowed money before, so your limited credit history is putting off mortgage lenders.

However, it’s still possible to get a mortgage in these situations.

“There’s a host of specialist lenders that can consider borrowers that have had credit issues,” David Hollingworth, associate director at mortgage broker London & Country Mortgages, explained.

The first two steps to take to secure a mortgage are to get hold of your credit report and speak to a mortgage broker. 

“One of the key things for borrowers is to understand how ‘bad’ their credit file may look to a lender,” Mr Hollingworth said.

“It’s easy to get hold of your file from a credit reference agency and will help your adviser understand how significant an issue it may be.

“An adviser will have access to a wide range of solutions, and if your credit score is strong enough, you may be surprised at the rates you can access.

“Some of the big mainstream lenders could be more forgiving than you may initially think, but there will still be alternatives where borrowers are knocked back.”

Specialist lenders

In fact, there are a long list of mortgage lenders ready to lend to people with a less than perfect credit rating.

You may not have heard of them – many are specialist lenders, but they exist to help people who would struggle to get a mortgage with a mainstream lender. They differ from other lenders in that they use human underwriters rather than computer programmes.

This means they can weigh up the risks of lending to you on a personal basis and assess each application on a case-by-case basis, rather than simply “computer says no”.

While these lenders may approve your application for a mortgage the fact that you have a bad credit history could still cost you.

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You may have to accept a higher interest rate than would be offered to someone else and you also may find you need to put down a larger deposit.

The best possible rate currently available on a two-year fixed rate mortgage where you have at least a 15% deposit is 4.84%. You would need a squeaky-clean credit report to get that.

As you can see from the example rates above having a poor credit history means you may well have to accept a much higher interest rate of over 6%.

But it may only be temporary. Get a mortgage, make your repayments on time and you will improve your credit score.

Then in a few years you may be able to remortgage to a lower rate. The most important thing is to get accepted for a mortgage, then you can start rebuilding your credit rating.

The best way to improve your chances of getting a mortgage is to speak to a broker. They know the market, know the lenders and know the tricks of the trade.

“If you’ve had adverse credit, it’s important that you speak with a bad credit mortgage expert before applying directly to a mortgage lender,” Paul Cross, co-founder of mortgage broker Haysto, said.

“Having someone who lives and breathes these types of applications every day and already has a strong relationship with these lenders will make all the difference between you getting the mortgage you need or not.”

A broker can go through your credit report with you and look for areas that will cause problems with lenders and give advice on how to improve your credit score.

How to improve your credit rating

There are lots of little things you can do to improve your credit rating. You can get hold of your credit report for free from Experian, Equifax or TransUnion.

Check your report for any mistakes. If you spot any contact the credit reference agency and the lender in question to get the mistake corrected.

Also check that all your personal information is correct. A mis-spelled surname or typo in your address can have a big impact.

Another way to increase the chance that a lender will approve your mortgage application is to save a bigger deposit. 

“Generally, the more money you put down up front, the less of a risk you pose,” said Dan Braithwaite, mortgage manager at Haysto.

“This is especially the case if you have a history of bad credit. If you have more serious credit issues such as CCJs or IVAs, lenders may only agree to grant you a mortgage if you put down a larger deposit.

“To put it another way, if you’ve been bankrupt, a lender sees you as more risky than someone who’s missed a few mobile phone payments.”

In some cases, you may need to consider a guarantor mortgage to get a home loan. This is where a family member – usually a parent – agrees to cover the mortgage repayments if you can’t pay.

Whether you need to use a specialist mortgage product, like a guarantor mortgage, or put down a larger deposit, or accept a higher interest rate you can get a mortgage.

Once you have a mortgage, if you make all your repayments on time, it will help you improve your credit score.

By repaying it on time you will show other lenders that you are a reliable borrower. This means in a couple of years you could remortgage and, potentially, get a cheaper deal.