Bad credit does not automatically prevent you from getting a contractor mortgage. Many specialist lenders consider your current income, affordability, and overall financial profile, helping contractors secure competitive mortgage options despite past credit issues.
The specialist lending market covers a wide range of adverse credit circumstances. Missed or late payments on credit cards, loans or utilities are the most minor form of adverse credit and are often acceptable to a wide range of lenders, particularly where they occurred some time ago.
Defaults where a creditor marks an account as defaulted are more significant but widely accommodated by specialist lenders. The amount, how long ago it occurred, and whether it has been satisfied all affect which lenders will consider your application.
County Court Judgments are more serious, particularly recent, unsatisfied ones. Debt Management Plans, Individual Voluntary Arrangements and discharged bankruptcy are accommodated by a smaller number of specialist lenders but are not necessarily disqualifying, particularly where a significant period has passed.
Before applying for a contractor mortgage with adverse credit, there are several practical steps that may improve your options and increase lender confidence.
The principal adverse credit contractor lenders include Kensington Mortgages, Kent Reliance, Bluestone Mortgages, Pepper Money, Precise Mortgages and Foundation Home Loans. Each has different thresholds for the type, amount and age of adverse credit they will consider, and different appetite for contractor income structures.
Matching your specific combination of income structure and adverse credit history to the most appropriate lender is the most important step in the process. We know the criteria of every major adverse credit contractor lender and match you accordingly.
Adverse credit mortgage rates are higher than standard residential rates, reflecting the additional risk that lenders price in. The premium depends on the severity and recency of the adverse credit, the LTV, and the lender’s risk appetite.
As adverse credit ages and your credit profile improves, you will typically be able to remortgage onto progressively better rates. A mortgage arranged today with an adverse credit lender is not permanent; most contractors use it as a stepping stone, establishing a payment track record and then remortgaging to a more competitive product.
No — CCJs do not automatically disqualify you. Specialist lenders consider the amount, age and satisfaction status of the CCJ alongside your overall credit profile and income. A satisfied CCJ from two or more years ago is viewed very differently from a recent, unsatisfied one.
Generally yes — most adverse credit lenders require a larger deposit, typically 15% to 25% depending on the severity of the credit issues. A larger deposit reduces the LTV, which reduces the lender’s risk and improves the rate you can access.
Some specialist lenders will consider applications from borrowers currently in a DMP, though options are limited and rates will be higher. In most cases, completing the DMP produces significantly better mortgage options.
Most specialist lenders require a minimum of one year from discharge, and some require three years. Aldermore and some other specialist lenders are willing to consider discharged bankruptcy cases after twelve months, subject to other criteria being met.
A mortgage application typically involves a hard credit search. We recommend a single carefully selected application to the most appropriate lender rather than multiple applications, which protects your credit score while maximising your chance of approval.