Getting a Mortgage With a Low Credit Score

If you have a low credit score, you might be wondering whether it’s worth applying for a mortgage. But despite what you may have heard, having a low credit score won’t necessarily stop you from getting a mortgage.

First of all, it depends on whether you have a low score on your credit file due to having bad credit, or you’ve just never used credit before. But the good news is, neither excludes you from getting a mortgage entirely. Even those borrowers with poor credit could still get a mortgage with the right help. We explore how below.

What do mortgage lenders class as a low credit score?

There is no specific credit score that lenders universally class as low, for a number of reasons. Firstly, each mortgage provider has their own process for assessing risk when it comes to lending, so what one lender finds too risky, another may find perfectly acceptable.

Secondly, there are three major credit reference agencies in the UK - Equifax, Experian and TransUnion - each of which uses a completely different scoring matrix. This means that the actual numbers related to your credit score are largely irrelevant to mortgage lenders, and most look at your entire credit file, rather than just the score.

Can you get a mortgage with a low credit score?

Yes, you can, but depending on the reason for this, you may need a bad credit mortgage specialist. If you’re a first-time buyer with a strong income and substantial deposit, but have never used credit in the past or are new to the UK, having a low score is less likely to impact your application. However, some high street lenders can still be stricter with the LTV (loan-to-value) ratios in these circumstances.

If your low credit score stems from having a history of credit issues, you’ll likely need a lender who specialises in bad credit mortgages, however, the reason for and severity of your credit issues will play a pivotal role in whether or not this is the case. If you’re unsure, then it’s a good idea to speak to a mortgage broker with plenty of knowledge in securing mortgages for applicants with low credit.

Keep in mind that bad credit mortgages can have higher interest rates, and/or offer lower loan-to-value borrowing than other deals. You may need a larger deposit or more equity if you’re looking to remortgage. Speaking to a specialist like ourselves can ensure that you find the most competitive deal for your circumstances.

Check your eligibility

Bad credit mortgage lenders have varied criteria, much like any other lenders. What’s acceptable to one lender may not be to another, so it’s important to ensure that the lender you apply with matches your circumstances.

If you already have a low credit score, repeated declined mortgage applications can further impact it, so knowing which lenders are most likely to approve your application can help you prevent making it more difficult for yourself.

Some of the criteria lenders are likely to look at if you have a low credit score are:

• The reason for your low credit score - if this is because you have bad credit, they will also look at the severity of the credit issues. Most lenders use a sliding scale where missed payments are at the least severe end, whereas IVAs and bankruptcy are among the most severe

• The age of any credit issues - if you do have bad credit, the more recent credit issues tend to be the most problematic. More lenders tend to accept certain less severe credit issues that occurred 2-5 years ago, such as CCJs, so long as they are now resolved

• Deposit size - you may need to provide a slightly larger deposit if you have a low credit score, and many lenders cap the LTV at 85% for bad credit applications, so they’ll expect a deposit of at least 15% of the property

• Standard mortgage criteria - such as those factors that apply to any mortgage applicant, such as age limits, income, and property type - will also be considered alongside criteria specific to having a low credit score. Applicants are typically scrutinised more strictly on these aspects of the criteria when their credit score is low

How to get a mortgage with a low credit score

If you’re hoping to get a mortgage loan with a low credit score, then you’ll improve your chances by speaking to a broker with experience in this lending niche. They can assess your circumstances and advise whether a specialist bad credit (or subprime) lender will be required, or if not, which high street lenders would most likely consider you.

It’s always a good idea to obtain your credit file before speaking to a mortgage broker or lender, so you know what to expect. If your score is lower than you expected, this will help you manage your expectations and focus on the right lenders for your needs. You may even be able to improve your credit score before you apply in some circumstances.

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Tips to help you build credit fast

If you don’t have poor credit, but your score is low due to not having used any credit facilities in the past, it may be possible to improve your credit score fairly quickly before making a mortgage application. Here are some top tips on how to do so:

1. Download your credit files by accessing a free trial with Checkmyfile

2. Ensure you appear on the electoral register at your current address

3. Make sure all of the details held by the credit reference agencies are accurate and apply to them to make changes where this is not the case. Having the same address on all accounts can help; this can sometimes be amended online, depending on the reference agency

4. Break any financial links with people you are no longer connected to, where applicable. This might be a joint bank account, for example

5. Consider a credit builder card, which can improve your score over a few months, if used responsibly

6. Speak to a mortgage broker with specialist knowledge in low-credit mortgage applications

Which lenders accept borrowers with low credit scores?

Low-credit-score mortgage loans vary in availability, depending on the reason for the low credit score. Those lenders who have more flexible criteria surrounding a low credit score tend to be the same who are more likely to accept bad credit applications, especially given that this is often the reason for a low score.

Some examples of mainstream lenders that are more likely to consider a low credit score are:

• Barclays

• Halifax

• HSBC

• Natwest

However, if your low score is the result of bad credit issues, it’s most likely that you will need a specialist bad credit lender.

Will a low credit score stop you from remortgaging?

It’s possible to refinance your mortgage with a low credit score, but it depends on why your score is low. If your score is low due to missed mortgage repayments, for example, it can be difficult to secure a remortgage.

The level of equity held in your home will also be an important factor, as much like a deposit, this can be used by the lender to mitigate some of the risk. If you’re looking to remortgage with a low credit score, it’s best to seek advice from a mortgage broker with experience in this area of lending.

Why choose Teito for your mortgage needs?

At Teito, we have access to the entire market, meaning your low-credit-score mortgage options are all available to us, including those only accessible through an intermediary. We can provide support and advice, whether that’s on how to improve your score before you apply, or which lenders will be most accommodating of your circumstances.

Other mortgage applicants with a low credit score came to us because:

• We have experience in securing mortgages for people with all sorts of credit issues

• Exclusive deals are often available through us

• Our brokers are rated 5 stars across multiple review platforms

• Your first consultation with us will always be free of charge

Ready to take advantage of a free, no-obligation chat with a broker who specialises in low credit score mortgages? Get started here.