Can You Get a Mortgage With Bad Credit?

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Can You Get a Mortgage With Bad Credit?
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Most people are familiar with the idea of a ‘credit score’ – however, many don’t pay too much attention to it throughout our lives.

But when the time comes to purchase a property, your credit score may suddenly become very important. It is in a moment such as this when you may wonder: “can I get a mortgage with bad credit”?

It is an important question to ask yourself – and that’s why we have provided clear answers in this blog below. Read on for everything you need to know.

What is your ‘credit score’?

Your credit score measures how likely you are to pay back a loan on time, based on past information from your credit reports. There are several factors from credit reports which influence your credit score – and these include:

  • Any current unpaid debt
  • Your bill-paying history
  • How many loan accounts you have (and the type of them)
  • Whether you have gone through bankruptcy, foreclosure, or something similar

These details give mortgage lenders a clear idea of how reliable you are with paying back loans. An excellent credit score can therefore translate into a better offer from a mortgage lender, while a poor credit score can have the opposite effect.

What is considered ‘Bad Credit’?

Different mortgage lenders have varying interpretations of what constitutes a ‘bad’ credit score.

As a general rule: the lower your score, the worse your credit is. Therefore, on the typical scale of 300 to 850, you want to be as high as possible. In this case, anything below 600 would generally be considered a low credit score.

You should note that some credit reference agencies use different scoring systems, so the scale may vary.

Can You Get a Mortgage With Bad Credit?

Yes, you can get a mortgage with bad credit – but it may be more difficult to find a mortgage lender willing to give you one. You may also experience higher interest rates on your loans as a result of having bad credit.

It is harder to get a mortgage when you have bad credit, because it indicates that you are less likely to repay all your loans. This makes you more of a ‘risk’ for a mortgage lender.

If you have a bad credit score and you apply for a mortgage, it may take longer than usual. A mortgage lender will want to see evidence of your finances, as this enables them to make an informed decision about whether you can make repayments on a mortgage. Even if you have bad credit, some lenders look beyond just your credit score to assess your situation.

Steps you can take to increase your credit score

It is easy to feel downhearted if you have a bad credit score – but you shouldn’t. There are many ways you can increase your credit score, which can come in useful when the time comes to reapply for a mortgage.

Some key steps you can take to increase your credit score include:

Build a credit history

If you have little or no credit history at all, then it is likely that you will be given a lower score. You should try to build a credit history – and make sure you always pay back loans.

Utilise your credit

You should always aim to use less than 30% of the credit limit provided on your card.

A potential mortgage lender will look at your credit utilisation to get a clearer sense of your spending habits, and how you manage your available credit.

Check your report

Your credit report is important, as it determines your credit score, so any mistakes on it can have a negative impact.

Set up direct debits

Setting up direct debits from your current account can ensure your repayments are always paid on time, helping to boost your credit score.

Join the electoral roll

Something as simple as joining the electoral roll can have a positive impact on your credit score.

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