Credit Building > How to get a mortgage with bad credit but good income

How to get a mortgage with bad credit but good income

Wollit Team3 minute read · Updated 1st July 2024

If you have bad credit, it can be hard to get a mortgage. Having a good income can make it easier, especially if you can show that it’s been improving steadily.

Still, it’s not the only thing you can do: adding a guarantor or even getting a joint mortgage, saving for a larger down payment, and improving your credit score can also help.

What do mortgage lenders care about?

Credit score and income are important, but lenders don’t consider them alone when deciding whether to approve your mortgage application.

Here is what they actually care more about:

Credit report: Your credit score gives lenders an idea of your credit history, but they need more than that. They’re more interested in your credit report, which contains details of your payment history.
Reliability: If you have many missed payments or any CCJs, bankruptcy rulings or IVA records, you’ll be less likely to be approved for a mortgage.
Steady income: For most lenders, a steady income is more important than a high one. This is why, for example, self-employed people have a harder time getting a mortgage than people who are employed full-time.
Monthly debt-related expenses: The more you spend on repaying debt each month, the less likely you are to get approved for a mortgage. Having lots of debt could potentially impact your ability to pay your mortgage.
Address history: Lenders will also verify your address history. The main reason is to verify your identity, but they also want to see how stable your situation is. Moving house often might make them think you’re struggling to pay rent.

What is the minimum credit score and income needed for a mortgage?

There isn’t a specific minimum credit score required to get a mortgage in the UK. Different lenders have different criteria; some may even approve mortgages with poor credit scores. Income, employment status, and savings matter more.

When it comes to minimum income, lenders care about two things:

How stable your income is: self-employed or contract workers usually find it harder to get approved than people employed full-time.
How long you’ve been earning: if you’re self-employed, you must have been trading for at least three years. If you’re employed, you’ll ideally have been with the same employer for at least 12 months.
How large your income is compared to what you’re asking for: Lenders usually multiply your income by around 3-5 times to estimate how much you can borrow.

Having a good income can also help in other ways:

You can save faster for a larger down payment.
A larger down payment means a lower loan-to-value ratio (LTV). Lenders see lower LTVs as less risky.
With a lower LTV mortgage, you’ll pay less total interest over the life of the mortgage.

This information can be helpful if you’re applying for a bad credit mortgage, as lenders tend to lend less and charge higher interest rates due to the increased risk.

What else can I do to increase my chances of getting a mortgage?

If you have a good income, you should make the most of it despite your bad credit. Here are some tips:

Save more for a larger deposit. Lenders may require a higher deposit, often 20-25% of the property value because they see you as risky. Putting down even more than 25% can significantly increase your chances.
Add a Notice of Correction to your credit report. If, in the past, you had to miss a few payments or even default because of job loss or illness, but since you saw your income improve, contact the credit reference agencies and ask them to add a Notice of Correction to your credit report. This can help lenders understand the context.
Ask a family member or friend to be a guarantor or joint borrower.
Buy a cheaper property. The less money you need to borrow, the higher your LTV and the less risk you are to the lender. If you cannot save a bigger deposit to lower your LTV, look into cheaper properties to decrease the loan size you need.

Finally, continue working on your credit score. Even with a good income, improving your credit score can make a big difference.

Here are a few things you can do to improve your credit score, especially if your income is better now than it used to be:

Pay down debt and keep credit card balances low.
Don’t move home too often, even if it means you’re paying slightly more on rent.
Make all payments on time, including utility bills.
Consider downloading a credit-building app like Wollit. Wollit reports your fixed-fee subscription as a loan repayment to credit reference agencies, helping you build your credit history and potentially boosting your credit score.