Buying a House with a Bad Credit Score
Owning your own home is a milestone for many people in the UK, but if your credit history is less than perfect, the path to homeownership can feel daunting. The good news is that buying a house with bad credit is possible — it just requires more preparation, patience, and the right approach.
This guide will walk you through what “bad credit” means in the UK, the challenges it presents, strategies to improve your chances, and the mortgage options available to you.
Understanding Bad Credit in the UK
Your credit score is essentially a numerical summary of how risky you are as a borrower, based on your past financial behaviour. It’s compiled by credit reference agencies (CRAs) like Experian, Equifax, and TransUnion.
What Causes Bad Credit?
Common reasons include:
- Missed or late payments on credit cards, loans, or utility bills.
- Defaults (where the lender closes your account due to non-payment).
- County Court Judgements (CCJs) for unpaid debts.
- Bankruptcy or entering an Individual Voluntary Arrangement (IVA).
- Frequent applications for credit within a short time frame.
- High levels of outstanding debt compared to your income.
It’s worth noting that each lender has its own definition of “bad credit” — one bank might reject you, while another might approve you with different terms.
Can You Get a Mortgage with Bad Credit?
Yes, but it’s often more complicated and expensive. High street lenders tend to prefer applicants with strong credit histories, but there are specialist lenders who work specifically with people who have adverse credit.
How Lenders View Bad Credit Applications:
- Increased Risk – Lenders may fear missed mortgage payments.
- Higher Interest Rates – To offset this risk, they’ll often charge a higher interest rate.
- Bigger Deposits – You may need 15–30% of the property’s value upfront, compared to the 5–10% that good-credit buyers often put down.
- Stricter Checks – Expect more questions about your income, expenses, and the causes of your bad credit.
Steps to Improve Your Chances
If your credit score isn’t great, here’s how you can make yourself a more attractive borrower.
1. Check Your Credit Reports in Detail
Get your full reports from all three major CRAs. Mistakes are surprisingly common — such as old debts still showing or accounts marked as open when they’re closed.
➡ Tip: Use free services like ClearScore, Credit Karma, or Experian’s free account to track your score.
2. Correct Errors Promptly
If you find inaccurate information, contact the lender first, then raise a dispute with the credit reference agency. Even small corrections can improve your score.
3. Pay Down Debts and Keep Balances Low
Aim to reduce your credit card balances below 30% of your limit. This shows lenders you’re not reliant on borrowing to get by.
4. Save a Larger Deposit
The more cash you can put down, the lower the risk for the lender.
For example:
£200,000 house at 5% deposit = £10,000 deposit.
£200,000 house at 20% deposit = £40,000 deposit.
A bigger deposit might also get you a lower interest rate, even with bad credit.
5. Demonstrate Financial Stability
Lenders want to see:
- Regular, reliable income (often at least 12 months with your current employer).
- A history of paying rent or bills on time.
- No recent large, unexplained withdrawals or gambling transactions.
6. Avoid Multiple Credit Applications
Every application leaves a footprint. Multiple hard checks in a short time can lower your score further.
7. Use a Specialist Mortgage Broker
Brokers experienced in bad credit cases know which lenders are more flexible. They can match you with lenders who will assess your situation more holistically.
The Mortgage Process with Bad Credit
When applying, expect the lender to ask for more documentation than usual. You’ll likely need:
- 3–6 months of bank statements
- Payslips or self-employment accounts
- Proof of deposit source (lenders want to ensure it’s from legal, verifiable means)
- An explanation letter if you’ve had major credit issues (e.g., illness, redundancy, divorce)
Honesty is key. Trying to hide financial issues is likely to result in a decline when the lender finds out.
Alternative Routes to Homeownership
If getting a traditional mortgage right now is proving difficult, you could consider:
Shared Ownership Schemes
Buy a percentage of a property and pay rent on the rest. Later, you can “staircase” up by buying more shares.
Guarantor Mortgages
A family member guarantees your mortgage payments, reducing lender risk.
Joint Mortgages
Partnering with someone who has a strong credit score could help you access better rates.
Government Help-to-Buy (limited availability)
Mainly for new builds, offering an equity loan to boost your deposit.
Rent-to-Buy Schemes
Rent a property with the option to buy it later, often with part of the rent going towards your deposit.
How Long Will Bad Credit Affect You?
Most negative marks disappear from your report after six years, even if you haven’t repaid the debt (although unpaid debts could still be chased separately). Improving your score can happen much faster — often within 12–18 months of consistent good behaviour.
Final Thoughts
Buying a home with bad credit in the UK is more challenging, but far from impossible.
The process will require:
- Careful preparation
- Patience while improving your financial profile
- Possibly paying more upfront or accepting higher interest rates
By checking and improving your credit report, saving a larger deposit, and working with the right lenders or brokers, you can still achieve your homeownership goals — even if your credit history isn’t perfect.