Getting a no deposit mortgage with bad credit

Couple looking at a house

If you’re applying for a mortgage, you’ll need to demonstrate that you are able to keep up with the monthly repayments. A mortgage is like any other type of loan. Your ability to repay and your credit history will play a role in whether a lender will accept your application.

Because mortgages are usually far bigger than the amount of credit you would get from an overdraft, personal loan or credit card, they require an even greater level of proof. This means demonstrating how much you’ve saved, how much you earn and a good credit history. It will often also require a deposit which will usually range from 5 to 20%.

But, what if you have a poor credit history or none at all? Is it still possible to get a mortgage, and what kind of deposit would you need?

Can I get a mortgage with no credit history?

It may be possible to get a mortgage without having credit history, but it will be more difficult. It may mean you need a larger deposit, or have to accept less favourable terms such as higher interest rates.

There are specialist lenders that will work with people who have limited or poor credit history. So, if you do have things like County Court Judgements (CCJs), Individual Voluntary Arrangements (IVAs) or bankruptcy in your credit history, it might be necessary to find a lender who matches your particular circumstances.

It will also depend on how much debt you had and how long it has been since the CCJ or insolvency solution has been resolved. Some lenders may be more willing to lend if the amount was below a certain threshold and has been fully satisfied.

If you have no credit history because you haven’t needed credit in the past or are a younger buyer, you may still be able to get a mortgage with a high street bank. It may also be possible to establish a credit history by using credit available to first-time credit users.

Can I get a zero-deposit mortgage with bad credit?

Finding a 100% mortgage where there is no deposit required can actually be quite difficult. Even if you have an excellent credit history, you will most likely need to provide at least a 5% deposit. So, although it may not be impossible for someone to get a mortgage with bad credit and no deposit, it’s very unlikely.

If lenders have no evidence in the form of a deposit or credit history as to how likely you are to pay it back, there’s no motivation for them to offer the loan. Other factors may affect the decision though, such as your income and the size of the mortgage.

What should I do after being rejected for a mortgage?

If you’re rejected for a mortgage or any other type of credit, you should try and get as much information as possible about why your application was turned down. If your credit history influenced the decision there are steps you can take to try and help improve it.

You can read more about credit hygiene in this article about factors that affect your credit score. The key things to tackle are making repayments on time, settling outstanding debts, getting on the electoral register and making sure you don’t have an excessive amount of credit available.

You should also avoid making multiple applications in a short space of time, as this can suggest that you’re desperate for credit. If you’re rejected for a mortgage, you might want to wait and assess your situation before trying again. Taking time to save for a bigger deposit or establishing a credit history could help improve your chances of a successful mortgage application.

If you’re interested in checking details of your credit history, you can get online access to your Equifax Credit Report & Score which is free for 30 days and £14.95 monthly after that.

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