Remortgage with Bad Credit

Mortgages for Self-Employed with Bad Credit

If you’re looking to remortgage with bad credit, you’re not alone and you’re not out of options. As specialist mortgage brokers with decades of experience, we’ve helped countless clients secure a remortgage even after defaults, CCJs, IVAs, or missed payments. The key lies in understanding how lenders view bad credit, knowing who to approach, and getting your finances in order before applying. 

In this detailed guide, we’ll cover everything you need to know from the types of bad credit, how to improve your mortgage prospects, and which specialist lenders may help you get back on track.

What Does Bad Credit Mean When Remortgaging?

Bad credit refers to a track record of missed or late payments, debt management plan (DMP), defaults, County Court Judgments (CCJs), or insolvency-related issues such as an IVA (Individual Voluntary Arrangement) or bankruptcy. It can also mean a low credit score or a lack of credit history.

When you’re remortgaging, lenders will assess your credit profile to determine risk. High street lenders tend to have stricter criteria, whereas specialist lenders are more flexible and willing to look at your individual circumstances.

Specialist mortgage lenders usually have more flexible criteria for applicants with bad credit ratings, making them a viable option for those who may not meet the stringent requirements of mainstream lenders.

Common Types of Bad Credit That Affect Remortgaging

Understanding the specific credit issues on your file is the first step toward finding the right mortgage deal.

1. Missed or Late Payments

Missed or late payments can have a significant impact on your credit report and mortgage prospects. Lenders view these as indicators of financial instability, especially if they’re recent or involve key commitments like mortgages or loans.

Even a single late payment can lower your credit score, so it’s important to keep all payments up to date. If you’ve had missed payments in the past, specialist lenders may still consider your application, especially if you’ve since demonstrated improved financial behaviour.

2. Defaults

Defaults typically occur when a payment is more than 3–6 months overdue. A default will stay on your credit file for six years.

Defaults occur when you fail to make agreed payments on credit accounts for a prolonged period, typically around three to six months. They are a serious marker on your credit file and can significantly damage your credit score, contributing to a bad credit history.

Some lenders will consider you even with active or recent defaults especially specialist lenders.

 3. CCJs (County Court Judgments)

County Court Judgments (CCJs) are issued when you fail to repay debts such as utility bills, credit cards, or loans, even after reminders and final notices. A CCJ can seriously affect your credit profile and stays on your credit file for six years. Missed repayments leading to a CCJ can make it much harder to access mainstream mortgage products.

A County Court Judgement (CCJ) shows that a creditor took legal action against you for unpaid debts. High street lenders may require 3–6 years to pass since the registration, while specialist lenders can offer solutions even sooner.

4. IVAs (Individual Voluntary Arrangements)

Individual Voluntary Arrangements (IVAs) are formal agreements made with creditors to repay debts over a set period, often used as an alternative to bankruptcy. While having an IVA on your credit file can limit your borrowing options, it’s still possible to find a suitable remortgage deal depending on the lender’s criteria.

If you’re in or have recently completed an IVA, most mainstream lenders will decline your application. However, some lenders will consider you if your IVA has been completed and your credit history has shown signs of improvement.

5. Debt Relief Orders (DROs)

Debt Relief Orders (DROs) are a form of insolvency designed for individuals with low income, minimal assets, and unmanageable debt. They provide legal protection from creditors and freeze most debts for 12 months, after which they may be written off if your financial situation hasn’t improved.

While a DRO can offer much-needed relief, it leaves a lasting mark on your credit file and contributes to a poor credit history. This can make securing future credit, including a mortgage application, more challenging, as lenders may view it as a sign of financial instability.

6. Bankruptcy

After discharge (usually 12 months), you’ll need to wait several years before high street lenders will consider you.

Specialist lenders tend to take a more flexible and pragmatic view of past bankruptcies compared to high street banks. While mainstream lenders often require six years or more since discharge with a completely clean credit history, specialist mortgage providers understand that financial difficulties can happen due to unforeseen circumstances.

They typically assess how long it has been since the bankruptcy was discharged. Some may consider applications as early as 12 to 24 months post-discharge alongside your current income, stability, and how you’ve managed your finances since.

If you’ve rebuilt your credit and can demonstrate affordability, many specialist lenders will be open to offering a mortgage, although this may come with a higher deposit requirement and slightly elevated interest rates to reflect the perceived risk.

How Bad Credit Affects Your Remortgage Options

Bad credit limits your access to high street lenders who generally require a clean credit file. However, specialist lenders assess applications more holistically. They’ll consider:

• When the bad credit occurred

• The type and number of adverse entries

• How you’ve managed your finances since

• Your loan-to-value (LTV) ratio

• Your income and outgoings

Having a stable income is a significant factor for lenders when assessing remortgaging applications, as it demonstrates your ability to meet future repayments.

• When the bad credit occurred

• The type and number of adverse entries

• How you’ve managed your finances since

• Your loan-to-value (LTV) ratio

• Your income and outgoings

The more recent or severe the credit issue, the higher the perceived risk. This may result in higher interest rates or a requirement for a larger deposit (or equity if remortgaging).

Loan-to-Value (LTV) Requirements for Specialist Lenders

Below is a table showing current LTV and deposit expectations from specialist lenders who accept applicants with bad credit:

Best Practices to Improve Your Remortgage Prospects

If you have bad credit, there are several steps you can take to make your application stronger:

1. Review Your Credit Reports

Reviewing your credit reports regularly is a crucial step in understanding and improving your financial health, especially if you’re planning to apply for a mortgage or other forms of credit. The main credit reference agencies lenders use are Experian, Equifax, and TransUnion. Each hold slightly different information, so it’s important to check all three.

Using a service like Checkmyfile allows you to view data from all the main credit reference agencies in one easy-to-read report. By reviewing your reports, you can spot any errors, outdated information, or signs of fraudulent activity that could be negatively affecting your credit score.

2. Reduce Existing Debt

Reducing existing debt is an essential step toward improving your financial profile and increasing your chances of securing a competitive deal on future borrowing. Lenders assess your current financial commitments to determine whether you’re a responsible borrower, so paying down credit cards, loans, and other outstanding balances can make a positive impact.

Lowering your debt levels not only improves your affordability for mortgage applications but also demonstrates good financial management, which can lead to better mortgage rates. Consistently making loan repayments on time and keeping your credit utilisation low can further strengthen your position with lenders.

3. Avoid New Credit Applications

If you’re planning to remortgage with bad credit, it’s wise to avoid making new credit applications in the months leading up to your application. Each credit application leaves a mark on your credit report, and multiple recent enquiries can lower your credit rating or signal financial instability to lenders. This can reduce your chances of being approved or result in less favourable terms.

Instead, focus on maintaining your existing accounts responsibly to improve your profile. If you’re trying to raise money through a remortgage, a cleaner credit report can help you access better rates and increase the likelihood of securing the funds you need.

4. Register on the Electoral Roll

Registering on the electoral roll is a simple but effective way to improve your credit rating, especially if you’re dealing with a poor credit rating and looking to access mortgage products. Lenders use electoral roll information to verify your identity and address history, which plays a key role in credit scoring.

Being registered makes you appear more stable and trustworthy to both mainstream and specialist mortgage lenders. If you’re applying for a mortgage with bad credit, this small step can strengthen your application and increase your chances of approval.

5. Speak to a Specialist Mortgage Broker

Speaking to a specialist mortgage broker can make a significant difference if you have bad credit or a complex financial situation. Unlike going directly to your current lender, a broker has access to a wide range of mortgage lenders, including a few specialist lenders who are more willing to work with applicants who don’t meet traditional criteria.

They can assess your unique circumstances and recommend products with the most suitable mortgage rates available to you. A good broker understands which lenders are most likely to accept your application, helping you save time, avoid unnecessary rejections, and secure a more favourable deal.

Pros and Cons of Remortgaging with Bad Credit

Pros:

• Access to funds to consolidate debts

• Potentially lower monthly repayments

• Opportunity to improve credit profile over time

• A fresh start with new terms and a new lender

Cons:

• Higher interest rates from specialist lenders

• Larger deposit or equity requirements

• Fees and charges may be higher

• Fewer options compared to applicants with clean credit

When to Consider Remortgaging When to Consider Remortgaging

• Fixed deal is ending: Avoid being moved to a higher standard variable rate.

• Consolidating debt: Use equity to repay high-interest unsecured debt.

• Home improvements: Release equity to fund renovations.

• Stabilise monthly payments: Fix your rate after a period of instability.

Conclusion

Remortgaging with bad credit doesn’t mean the end of your homeownership journey. In fact, it can be the first step toward rebuilding your credit and financial stability. Whether you’ve experienced missed payments, defaults, CCJs or even bankruptcy, there are lenders who can help and brokers like us who can guide you through every step.

Get help from an experienced mortgage broker.

You can speak to one of our specialist mortgage brokers who would be able to guide you through the process. They will advise if there is a lender available and the maximum loan amount based on your circumstances. We are a whole of market mortgage brokerage with access to all lenders. Call us on 01332 470400 or complete the form with your details for us to give you a call back.

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