September 11, 2023 4:06 pm

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Nikka Sulton

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Obtaining a buy-to-let mortgage with a poor credit history is possible but poses challenges. Your eligibility hinges on the type, recency, and cause of your credit issues. Smaller problems and a longer time since the issues occurred improve your odds. Late payments, defaults, CCJs, and more can affect your prospects. For expert guidance through this intricate process, consider consulting a specialist mortgage broker. They can assist in credit repair and connecting you with suitable lenders, increasing your chances of securing a competitive buy-to-let mortgage despite your credit background.


What Is Bad Credit History?

Many credit reports provide a numerical rating that encapsulates your credit history, primarily determined by various factors related to your past and present credit obligations. A poor credit history or a low credit score indicates a track record of ineffective credit management, manifested through occurrences such as late payments, defaults, County Court Judgements (CCJs), Individual Voluntary Arrangements (IVAs), or bankruptcy.

A less-than-favorable credit rating doesn’t automatically render you ineligible for securing a buy-to-let mortgage. However, without the guidance of an expert bad credit mortgage broker, your choices could be significantly restricted.


How Do I Know If I Have A Poor Credit Score?

To gain valuable insights into your eligibility for a buy-to-let mortgage, having a clear understanding of your credit profile is essential. If you haven’t previously checked your credit, here’s a straightforward guide to help you:

  • How to Perform a Credit Check: Easily check your credit score within minutes by using one of the readily available credit-checking services such as Equifax, Experian, and TransUnion. Alternatively, you can access your credit report at no cost through our partners at CheckMyFile (offering a 30-day free trial, followed by £14.99 per month, with the option to cancel at any time).
  • Obtaining Your Credit Report: By utilizing credit checking services, you’ll not only receive your credit score but also a comprehensive credit report containing crucial information to initiate the process of improving your credit rating. Should you require assistance in deciphering your credit report,
  • Seek Expert Advice If You Have Poor Credit: A less-than-ideal credit rating doesn’t signify the end of opportunities. If you’ve been assigned a low rating, reach out to Simply Adverse, and we’ll provide guidance on your options for buy-to-let mortgages despite bad credit.
  • Enhance Your Credit Profile: The encouraging news is that most adverse credit ratings can be gradually improved through positive actions. Rectifying any inaccuracies on your credit file will contribute to an enhanced rating, as will staying current with payments and progressively building a positive credit history.
  • Take Our Buy-to-Let Mortgage Bad Credit History Quiz: If you’re considering remortgaging for a buy-to-let property with a less-than-perfect credit history or are a first-time buyer seeking a buy-to-let mortgage under similar circumstances, you can participate in our tailored eligibility quiz designed to assess your mortgage suitability.


How does bad credit affect a buy to let mortgage?

Experiencing adverse credit encompasses various scenarios that vary based on the nature of the credit problem. For example, a simple missed payment differs significantly from a County Court Judgment (CCJ). Similarly, an Individual Voluntary Arrangement (IVA) holds distinct implications compared to having defaults on your credit record. But how does this affect your prospects when you’re in the process of applying for a buy to let mortgage?

Conducting a prior check of your credit file proves advantageous. This step allows you to gain insight into precisely what lenders will perceive during their credit assessments. Additionally, it equips your advisor with more comprehensive information to meticulously prepare your mortgage application.


1. Late payments and mortgage arrears

Late payments, while not severe, can affect your buy-to-let mortgage approval. Some lenders are stringent and view late payments as red flags, with the type of late payments also playing a role.

Mortgage arrears are the most serious form of late payment, but being clear of them can benefit your application. Late payments on unsecured credit, like phone bills, are less concerning. However, some lenders won’t tolerate any late payments.

Lenders examine the number and recency of late payments. Recent late payments have a more significant impact than older ones. Accumulated outstanding arrears are a concern for lenders.

Securing a buy-to-let mortgage after late payments is possible. Consulting a specialist with experience in this area can enhance your chances and reduce the risk of rejection.


2. Defaults

Defaults on your credit file can impact your buy-to-let mortgage approval. If your default is over six years old and your credit has improved, approval is likely, provided you meet buy-to-let criteria like affordability.

Defaults less than six years old may lead to rejections from some lenders, but an advisor can enhance your chances. Your assessment depends on the default’s size, number, and recency. Smaller, older defaults are preferred by lenders.

Large, recent defaults make it harder to secure a buy-to-let mortgage but approval remains possible. Defaults involve various factors, and being declined can affect future mortgage prospects. Consult our experienced advisors to explore suitable lenders.


3. County Court Judgements (CCJs)

Securing a buy-to-let mortgage with a CCJ is feasible with the right strategy. However, it’s not advisable to approach lenders independently.

Lenders typically consider the following regarding your CCJ:

  • Registration date
  • CCJ value
  • Number of CCJs
  • Satisfaction status

Your chances improve significantly if your CCJs were registered more than two years ago. Recent CCJs, within the last year, can hinder mortgage approval. Nevertheless, a few lenders may consider your application if you meet their criteria.

The value and quantity of your CCJs also influence lenders’ decisions regarding your mortgage. Having satisfied CCJs strengthens your buy-to-let application.


4. Debt Management Plans (DMP)

Obtaining a buy-to-let mortgage while in a Debt Management Plan (DMP) is feasible. Typically, a DMP requires a specialist lender. However, if you had a DMP in the past and successfully cleared your debt, mainstream lenders might consider your application.

The primary concern with a DMP is its association with other credit issues. These credit problems often pose greater obstacles than the DMP itself.

A DMP’s purpose is debt management. Lenders will evaluate your debt management during the DMP. Demonstrating responsible financial conduct can boost your mortgage prospects, while accumulating additional debt can have adverse effects.

Buy-to-let mortgages involving debt management plans are regarded as specialized cases. Advisors must consider various factors within the case before approaching a lender.


5. Bankruptcy

To apply for a mortgage, you must first be discharged from bankruptcy; securing any type of mortgage during bankruptcy is generally impossible.

Obtaining a buy-to-let mortgage after bankruptcy is feasible and potentially more accessible with experienced advisors. Many lenders outright reject applicants with any history of bankruptcy, regardless of the discharge duration.

Advisors can filter out such lenders, concentrating solely on suitable options. If your bankruptcy discharge is recent, a specialist lender may be more appropriate. If your discharge occurred over six years ago, advisors can approach a broader lender base, granting access to more favorable mortgage rates.


6. Home repossession

Obtaining a buy-to-let mortgage after experiencing property repossession can be challenging. The possibility of approval depends on when the repossession occurred and the circumstances surrounding it.

Certain specialist lenders may consider applicants with a history of property repossession, often accompanied by other credit issues. Lenders will scrutinize all credit-related aspects of your application.

If the repossession incident transpired more than six years ago, and you’ve since maintained a pristine credit record, you might be eligible for competitive mortgage deals. Nevertheless, repossession constitutes a severe form of adverse credit, leading buy-to-let lenders to conduct thorough assessments of your application.

In cases involving the repossession of a buy-to-let property, lenders may adopt a more lenient stance. Landlords occasionally encounter difficulties with tenants who fail to pay rent. If you can demonstrate an otherwise sound financial history in such situations, it can bolster your mortgage application.


Can you get a buy-to-let mortgage with bad credit?

Is it possible to secure a buy-to-let mortgage with bad credit? Yes, it’s possible, although premium rates may be elusive. Eligibility largely hinges on the nature, recency, and cause of the credit blemish. Smaller issues with credit and extended time since the incident enhance prospects of securing a favourable buy-to-let mortgage.


It’s possible to get a buy to let mortgage with the following credit issues:

  • Late payments
  • Defaults
  • Mortgage arrears
  • CCJs
  • Debt Management Plan (DMP)
  • IVA
  • Bankruptcy
  • Repossession
  • Use of payday loans
  • Low credit score


How to get a buy-to-let mortgage with bad credit

Your initial step should involve seeking guidance from a mortgage broker who specializes in both bad credit and buy-to-let mortgages. Get in touch with us, and you can submit an inquiry, enabling us to connect you with an advisor possessing the requisite expertise.

Your buy-to-let mortgage advisor will guide you through these critical stages:

  1. Obtaining your credit reports: This can be achieved by taking advantage of a complimentary credit report trial. Your broker will suggest tactics to alleviate the impact of your adverse credit, including strategies for swift repair and enhancement.
  2. Identifying the most suitable buy-to-let lenders for individuals with impaired credit: Pursuing this independently carries a significant risk of rejection or unfavorable terms. Conversely, your broker maintains robust professional relationships with the most suitable lenders for your circumstances and might even secure an exclusive arrangement on your behalf.


How much deposit will you need?

Typically, a buy-to-let mortgage necessitates a minimum deposit of 25%. However, if you have bad credit, you’ll probably need to provide a more substantial deposit. The precise amount hinges on factors like the nature, gravity, and context of your credit problem. Nevertheless, it’s safe to assume that approval is improbable with less than 25-30%.


Which mortgage lenders accept bad credit?

Several lenders extend buy-to-let mortgages to applicants with credit challenges. However, it’s crucial to note that certain lenders have stringent credit criteria, rejecting applicants with any credit issues.

Lenders follow distinct internal procedures for mortgage approval. While some decline applicants with adverse credit, others remain open to considering them. Understanding the two primary categories of lenders can be beneficial:

  • Mainstream Lenders
  • Specialist Lenders

It’s commonly assumed that specialist lenders are the go-to choice for individuals with bad credit. However, this isn’t always the case. Depending on the nature of your credit issues, you might still qualify with a high street lender. Nevertheless, obtaining approval necessitates expert guidance and a meticulously prepared application. Severity varies among credit issues, and some lenders may not even consider older issues, making timing a critical factor.


Traditional banks are generally more cautious. Each lender maintains distinct criteria. A few examples are detailed below:

  • TSB: Applicants with arrears may be assessed, but they will automatically decline those with mortgage arrears exceeding £100 in the past year.
  • Shawbrook Bank: May deem a prior repossession acceptable if it occurred more than two years ago.
  • Leeds Building Society: Requires a minimum six-year gap before considering a buy-to-let mortgage application from someone with a repossession history.
  • HSBC: Does not accept applicants with repossessions, regardless of the time elapsed.


MORE Buy To Let blogs HERE: 

Buy-To-Let VS Residential Mortgage

Is Buy-to-Let Still Viable in 2023?

Tips for First-Time Buy-to-Let Investors UK

How to Choose the Right Buy-to-Let Property

Essential Guide to Buy-to-Let Home Insurance in the UK

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