Martin Lewis and expert explain how to get a mortgage with a bad credit score

With mortgage rates dropping below 4% for the first time in months, many are keen to make the most of the situation. However, financial barriers like a bad credit score, mountains of debt or being on repayment plans often stop people from even checking what they could be eligible for, fearing the answer will be grim.

However, and his mortgage expert of the week, Andrew Montlake from Coreco Mortgages, revealed how these financial difficulties might not put the nail in the coffin of your homeownership dreams. One fan eager to jump on the property ladder dialled into during the mortgage special and explained she was in these exact circumstances.

Sarah, in her late 50s, explained that she had been renting a home with her partner since 2014 and was keen to know what their mortgage options could be considering she has been on a debt repayment plan for years. Her original hefty sum of £25,000 is now down to £5,000, “without missing a payment” she noted, but her credit score was still suffering.

Martin highlighted that her partner has a good credit rating and turned to his expert for some insights first. Andrew noted: “This is very much the space where specialist lenders come into play. These providers specialise in providing mortgages for people who have had issues.”

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This comes with a caveat though as the expert revealed these lenders often have a “myriad of conditions” attached to the products and admitted Sarah likely won’t be getting the sub 4% rates currently ruling the market but would instead be looking at interest rates of 5% to 7%. However, he ensured there are some sympathies in the mortgage market.

He shared: “Some lenders prefer you to be out of the payment plan so you could wait until that’s finished, but it also depends on what were the circumstances behind the debt in the first place. For example, if it was due to a divorce situation or bereavement or life event, some lenders are more sympathetic than others so there are options out there but be prepared you will have to pay more.”

Martin chimed in, keen to point out there is a way Sarah could mitigate this entire ordeal but confessed it is an “extreme” approach. Seeing as her partner has a good credit score, the MSE founder recommended checking with a mortgage broker if her partner could take out the mortgage by themselves until Sarah’s debt was fully repaid and her credit score recovered.

He explained: “Because they will have a good credit score, they will have access to a better mortgage. Your poor credit affects both of you. If your partner has the bulk of the income, is it possible your partner can get the mortgage by themselves for the moment?”

Andrew highlighted that this is a common tactic if the person with a good credit score is the main earner in the household, but warned Sarah would need to take some extra precautions if they go down this route. He said: “(She) will have to take some advice around her rights to the property because she’s not party to the mortgage. It’s about getting independent legal advice on that specific part.”