How to get a mortgage if you have bad credit
Getting on the property ladder with a poor credit history can be tough. Here are some ways to improve your chances of getting a mortgage with bad credit.
How does bad credit affect your mortgage application?
Having a poor credit history makes you a riskier option in the eyes of mortgage lenders and affects:
What checks do lenders make?
When you apply for a mortgage, the lender will run a check on the Central Credit Register to see your credit history.
This credit report shows the lender your past and current credit commitments, and the way you’ve managed them.
Your outstanding credit, other outgoings, income, and number of dependants, will help them assess your affordability, and affect the amount you could borrow.
Find out more about credit checks, credit scores and your credit check rights in our guide How to check your credit record.
What information is on the Central Credit Register?
Loans for €500 or more are included on the Central Credit Register, as well as more detailed information about your credit history.
It includes:
It does not include:
How long does bad credit last in Ireland?
The Central Credit Register keeps a record of your loans for 5 years after the last payment is made, though lenders will usually assess the last two years of the loans performance in detail and an overview of the three years before that.
How to get a bad credit mortgage
Getting a mortgage with bad credit is more difficult, but there are steps you can take to improve your chances.
1. Find a flexible lender
Research different lenders’ lending criteria and choose one that’s less strict.
Finance Ireland is more flexible around previous credit issues, but they don’t offer a quick fix and will still have set lending criteria, for instance, arrears on unsecured loans must be more than two years ago, and more than four years ago for secured loans.
Credit unions say they are also flexible and personal when it comes to reviewing lending applications, and review each one individually. But every branch is different, so they may also have specific criteria you have to adhere to.
2. Get help from a broker
You could use a mortgage broker (mortgage credit intermediary) who has a good knowledge of the main lenders and their criteria, to find you a suitable lender.
This is likely to save you time, and avoid additional credit checks that can damage your credit record further. Too many credit checks in a short space of time raises the alarm to other lenders as it shows you’re struggling to get credit.
Find out more about using a mortgage broker in our guide, Should you use a mortgage broker?
3. Apply for a government scheme
The Rebuilding Ireland Home Loan is a mortgage scheme that can make buying a home more affordable for first time buyers, providing you meet the eligibility criteria.
One of the key criteria is proving that you have been declined for a mortgage by two banks or building societies. Find out more about eligibility for a Local Authority Home Loan at localauthorityhomeloan.ie
The two fixed rate mortgage options lasting 25 or 30 years, make it easier to budget for your payments, as they won’t change for the entire mortgage term.
To apply for the Rebuilding Ireland Home Loan, you’ll need to complete an application on the Rebuilding Ireland website.
4. Save a bigger deposit
The more you can save up, for example by reducing your spending, the easier it will be to apply for a mortgage. Our mortgage deposits guide has tips to help you cut costs and save for a deposit.
5. Be prepared
Don’t apply for a mortgage or approval in principle until you’ve done your homework. Here’s how to prepare for a mortgage application.
6. Get the timing right
Waiting for as long as possible to apply after clearing any arrears, could increase your likelihood of getting:
- Approved by more lenders
- Approved more credit
- A better interest rate
A cheaper interest rate will make payments more affordable, and you could even overpay your mortgage.
Ways to improve your credit rating
There are things you can do to boost your credit rating and improve your chances of being approved for a mortgage:
Credit report explanatory statement
You have the right to place an explanatory statement on your credit report, which will be visible to a lender.
The statement can explain an event or circumstances about previous lending. It must:
- relate only to you
- relate only to your information held on the Central Credit Register
- be no longer than 200 words
How to choose the right mortgage
If you’re approved for a mortgage, make sure you can afford the payments long term. It’s likely you’ll have been offered a high interest rate product which will increase the cost.
If you choose a fixed rate mortgage, your payments will stay the same but if it’s a variable rate mortgage, your payments could go up as well as down.
If you do go ahead and borrow, make sure you have the right mortgage protection and other insurances for your mortgage.
Compare mortgage rates & deals
Find a range of first time buyer and home mover mortgage deals in Ireland using our comparison.
Bad credit mortgages FAQs
What does having bad credit mean?
Bad credit is usually caused by missing payments or making late payments on your credit agreements e.g. loans and credit cards.
Our guide: How to check your credit record covers more on this and credit scores.
What happens if I fall behind on my mortgage payments?
If you miss any mortgage payments and can’t catch up, your mortgage will go into arrears.
As soon as you know you’re in financial difficulty, you should contact your lender or the Money Advice and Budgeting Service (MABS).
They can offer free, independent advice and help you to understand the next steps.
Never ignore the problem as you could face losing your home.}
