Can You Remortgage with Bad Credit?

If you have adverse credit history, you might think remortgaging is impossible. The good news: it’s not. Thousands of homeowners with credit issues successfully remortgage every year.

While bad credit makes remortgaging more challenging, specialist lenders exist specifically to help borrowers in your situation.

What Counts as Bad Credit?

Lenders consider these as adverse credit:

• CCJs (County Court Judgments) — Court orders for unpaid debts
• Defaults — Accounts marked as defaulted for non-payment
• Missed Payments — Late or skipped mortgage, loan, or credit card payments
• Arrears — Currently behind on payments
• IVAs — Individual Voluntary Arrangements (formal debt repayment plans)
• Bankruptcy — Previous bankruptcy proceedings
• Debt Management Plans — Informal payment arrangements
• Repossession — Previous property repossession

Can You Remortgage with Bad Credit?

Yes — but your options and rates depend on:

1. Severity of the Issue

• Minor: 1-2 missed payments → Many lenders will consider
• Moderate: Defaults, CCJs under £1,000 → Specialist lenders available
• Severe: Bankruptcy, repossession → Fewer lenders, higher rates

2. How Recent

• Last 6 months: Very limited options
• 6-12 months ago: More lenders become available
• 2+ years ago: Significantly better options
• 6+ years ago: Falls off credit report entirely

3. How Much Equity You Have

More equity = better rates. Lenders are more comfortable with adverse credit at lower LTVs.

• 90% LTV (10% equity): Very difficult with bad credit
• 75-85% LTV (15-25% equity): Specialist lenders available
• 60-70% LTV (30-40% equity): More competitive rates possible

How Lenders Assess Bad Credit

Specialist lenders look at:

Current Situation

• Are you currently in arrears?
• Have you made recent payments on time?
• Is your income stable?

The Credit Issue

• What type of credit issue?
• How long ago did it occur?
• What was the amount involved?
• Has it been satisfied/settled?

Mitigating Circumstances

• Redundancy, divorce, illness
• Explanation for the issue
• Steps taken to resolve it

What Rates Can You Expect?

Standard Rates (Good Credit): 4.0-5.0%

Adverse Credit Rates: 5.5-9.0% (varies by severity)

Example: £200,000 mortgage over 25 years

• Good credit rate 4.5%: £1,111/month
• Adverse credit rate 6.5%: £1,350/month
• Difference: £239/month

Remember: A higher rate now is better than being stuck on your lender’s 6-7% SVR.

Improving Your Chances

1. Check Your Credit Report

Get your report from Experian, Equifax, or TransUnion. Check for:

• Errors or inaccuracies
• Outdated information
• Fraudulent activity

Dispute any errors immediately.

2. Build a Clean Payment History

Make all payments on time for at least 6-12 months before applying. This shows lenders you’re back on track.

3. Reduce Your LTV

If possible, increase your deposit or wait until your mortgage balance reduces. Moving from 85% to 75% LTV significantly improves options.

4. Clear Outstanding Debts

Pay off credit cards and small loans before applying. Lower debt-to-income ratio = stronger application.

5. Register to Vote

Being on the electoral roll improves your credit score and helps lenders verify your identity.

6. Use a Specialist Broker

Brokers who specialize in adverse credit know which lenders accept specific credit issues and can present your application in the best light.

Common Scenarios

Scenario 1: One CCJ from 2 Years Ago

Situation: £1,200 CCJ from unpaid utility bill, now satisfied

Options: Several specialist lenders available at 5.5-6.5% rates if you have 25%+ equity and clean payment history since.

Scenario 2: Recent Missed Mortgage Payments

Situation: 3 missed mortgage payments in last 12 months due to redundancy

Options: Limited. Wait 6-12 months with perfect payment history, then approach specialist lenders. May need 30-40% equity.

Scenario 3: Discharged Bankruptcy

Situation: Bankruptcy discharged 4 years ago, clean credit since

Options: Specialist lenders available at 6-8% rates with 25-35% equity. Rates improve significantly after 6 years.

When to Wait vs When to Apply

Apply Now If:

• Your current deal is ending and you’ll go onto expensive SVR
• You’ve had 12+ months of clean payment history
• Credit issues are 2+ years old
• You have significant equity (30%+)

Wait If:

• Credit issues are very recent (under 6 months)
• You’re still in arrears on any accounts
• You can improve your LTV by waiting
• Waiting 3-6 months would move you past a key threshold (e.g., 2 years since default)

Alternative Options

Product Transfer with Current Lender

Your existing lender may offer a product transfer without re-assessing your credit. Not always the cheapest option, but faster and easier.

Second Charge Mortgage

If you need to release equity but can’t remortgage, a second charge mortgage sits behind your main mortgage. Higher rates but doesn’t require replacing your first mortgage.

Wait and Improve

Sometimes waiting 6-12 months while building clean payment history opens up significantly better options.

Documents You’ll Need

• 3-6 months of bank statements
• Last 3 months’ payslips (or 2-3 years accounts if self-employed)
• ID (passport or driving licence)
• Proof of address (utility bill)
• Credit report (bring your own copy)
• Letter of explanation for credit issues — very important!

The Letter of Explanation

This is crucial for adverse credit applications. Write a brief letter explaining:

• What happened (redundancy, divorce, illness, etc.)
• Why it won’t happen again
• Steps you’ve taken to improve (new job, budget plan, etc.)
• Your clean payment history since

Keep it honest, concise, and professional.

Key Takeaways

• Bad credit doesn’t mean you can’t remortgage
• Specialist lenders exist for most credit situations
• More equity = better rates and more options
• Recent, clean payment history is crucial
• Use a specialist adverse credit broker
• Prepare a letter explaining your credit issues

Get Expert Adverse Credit Advice

We specialize in helping homeowners with credit issues find suitable remortgage options.

Call us on 0800 612 3367 or request a callback for a confidential discussion about your situation.

Your home may be repossessed if you do not keep up repayments on your mortgage.