Getting a mortgage and being able to own a home is a major goal for a lot of people, but if you have bad credit you might be worried about whether you’ll secure a loan, or have mortgage applications declined. This is a concern for many people with poor credit who want to get a mortgage or remortgage, even those with a high income.

Unfortunately, even if you have a higher income, your credit history can still make it more difficult to get a mortgage – particularly at a competitive rate. Your options will depend on the severity of your bad credit, as well as how recent the issues were. You might have to turn to a specialist bad credit mortgage lender or look at other ways to boost your chances of getting a mortgage, such as improving your credit score. Here is our comprehensive guide on how to get a bad credit good income mortgage.

Why Is My Credit Record Important?

All lenders will look at your credit record to gauge whether or not they want to lend to you. Most mainstream lenders will use the information on your credit record to assign you a credit score as an indicator of how risky you are as a lending prospect. Many adverse credit lenders don’t assign you a credit score when assessing your application.

Your credit record will show an overview of your history of borrowing money and repaying it, as well as other financial matters such as how many lines of credit you currently have, including credit cards, loans, car finance and other mortgages. It will also show if you have missed any payments on any loans in the past few years, as well as any serious matters like county court judgements or bankruptcy.

When Do Mortgage Lenders Check My Credit?

There are 2 different kind of credit checks – a soft credit check and a hard credit check.

Some lenders will do a soft credit check at DIP (Decision in Principle), while others may choose to do a hard check this early on in the process.  The DIP is an agreement that the mortgage lender will lend you the money based on the assumption that the information you’ve provided them with is correct.

All lenders will do a hard credit check at some point during the mortgage process before accepting your application.

The main difference between soft credit checks and hard credit checks is that soft credit checks do not show up on your credit history, but hard credit checks do.

Some lenders will not want to lend to someone with too many recent hard credit checks on their file.

What Else Do Mortgage Lenders Consider?

Alongside your credit score, lenders will consider other things when deciding whether or not to lend to you. This includes:

  • Income - your income will determine your affordability for a mortgage. This means that lenders will look at your income to gauge how much they can lend to you, based on how much you can pay back
  • Outgoings - since most people have other outgoings as well as their mortgage payments, lenders will also look at your outgoings to see what you can realistically afford
  • Income security - lenders will also look at how you get your income. They’ll want to know you have a stable source of income that can cover your mortgage payments alongside other outgoings

Mortgage history - while lenders will look at your credit history in general, they will particularly want to see any previous mortgage history. This is because it helps show how you might treat your new mortgage and whether or not you will pay it back – e.g. if you’ve made consistent repayments previously or have any late payments on your record

What Income Will I Need to Get a Mortgage?

There is no one answer to the type of income you need to get a mortgage. This is because your income – among other factors – determines how much you can borrow, and therefore what you can afford to buy. Most lenders will estimate your maximum borrowing for your mortgage at between 3 – 5x your income.

You may find that having a poor credit history will limit the lenders available to you and the maximum LTV (loan-to-value) at which you can borrow – meaning you’ll need a bigger deposit to buy the house you want.

Good income does not usually make up for having adverse credit, but it can improve the options available to you if you’re able to use that income to save up a bigger deposit and secure a lower LTV mortgage. The lower your LTV, the less you’ll need to borrow and the less you’ll pay overall in interest – this is particularly beneficial when securing an adverse credit mortgage as bad credit lenders tend to offer high interest rate products.

What Is a Bad Credit Score?

Your credit score will be based on your past financial history. It is hard to say a specific number that counts as a bad credit score as different credit agencies and lenders calculate them differently – and some adverse credit lenders don’t credit score you at all when looking at your credit record.

You should consider your credit score as an indicator of the overall health of your credit profile and financial history. You can find your credit score online through credit reference agencies such as Experian, Equifax and TransUnion.

If your credit score is poor, this will likely mean that you’ve had some adverse credit issues which may limit the lenders and deals available to you.

It’s still possible to get a mortgage with a poor credit score, but you may have to use an adverse credit lender who charges higher rates and may require a larger deposit amount.

Why Do I Have a Low Credit Score?

There are many things that could contribute to a low credit score.

The most common are:

  • Late repayments - having late repayments on credit cards, loans, or late payments on bills can affect your credit score
  • Missed payments - missing a mortgage, credit card payment or similar can have a huge impact on your credit score. This is especially likely to be an issue if it was recent
  • Being overdrawn - having unauthorised borrowings such as an unapproved overdraft on a bank account or credit card
  • High use of credit - lenders will look at what percentage of your possible credit you’re using. For example, if you have a credit card limit of £2000 and are using £1900 of this it could concern for lenders as it suggests that you’re struggling to manage your finances
  • CCJs - county court judgements can significantly impact your credit score and the number of lenders that can consider you
  • IVAs - if you have an individual voluntary agreement, especially one that’s not settled, you’ll find your mortgage options limited
  • Bankruptcy - this will almost certainly cause you credit issues and reduce your options unless it was more than 6 years ago
  • A lot of recent credit checks - hard credit checks will show up on your credit report. These show lenders that you have looked into getting more lines of credit, which could suggest that you’re struggling with debt
  • Being linked to someone with bad credit - if you’re married or have a mortgage, loan or other financial product with someone with bad credit, this can also affect your credit score
  • Errors - sometimes errors crop up on your credit score which incorrectly gives you a low credit score, which can be corrected by contacting the credit agencies

It’s worth noting that the more recent a bad credit event, the more of a negative impact it will have on your credit score.

What About If I Have No Credit Score?

Having no credit score is also a problem when it comes to getting a mortgage. While having a bad credit score shows that you struggle with making repayments, having no credit score means that the lender will have no idea whether or not you can make your payments on time. Many lenders will consider it too high a risk to lend to someone with no credit history.

It’s worth noting that you probably have more of a credit history than you first thought. Especially if you’ve paid for things like your phone bill or Council Tax. You may still have a low score if you don’t have much of a credit history but it’s likely it won’t be non-existent.

Ways To Help You Get a Mortgage with Bad Credit but Good Income

If you’re struggling to get a mortgage due to having a poor credit rating, there are still some ways that you can look at improving your odds of being accepted.

Saving Up a Larger Deposit

Having a larger deposit amount will often increase your chances of getting a mortgage and give you access to more deals. This is because the less that you have to borrow from a lender, the lower your LTV and the lower risk you are. This also has the benefit that you will pay less overall in interest compared to if you borrowed a higher amount – particularly useful when you consider the high interest rates attached to adverse credit mortgages.

Reduce Outgoings and Other Loans

You can often increase your affordability by reducing your other outgoings and paying off loans you have. Plus, paying off loans or finance plans can help boost your credit rating.

Buy a Cheaper Property

The less money that you need to borrow, the higher your LTV and the less of a risk you are to the lender. If you’re unable to save a bigger deposit to lower your LTV, perhaps consider cheaper properties to decrease the size of the loan you need.

Mortgages Without a Credit Score

Some lenders will offer mortgages without giving you a credit score. While they’ll still credit check, they won’t have as strict rules as mainstream lenders who use a credit scoring system. These types of mortgages are available through adverse credit lenders who can assess applications on a case-by-case basis. These specialist mortgages often have higher interest rates, and you might be required to save up a higher deposit than the normal 5%- 10% minimum.

Use a Mortgage Broker

Using a mortgage broker like John Charcol will make the process a lot simpler. We can direct you towards a lender with criteria that aligns with your situation, giving you the best chance of securing a more competitive deal.

Furthermore, most adverse credit lenders only work with intermediaries like John Charcol, so you’ll likely need a broker to access a more suitable deal.

Building Your Credit Score

If you’re still struggling to get a mortgage despite having a high income, you should look at ways that you can improve your credit score. While this could take more time compared to finding a suitable specialist mortgage, you’ll probably find that improving your credit score gives you access to a wider range of lenders and better mortgage products. This could mean that you can get a mortgage with a smaller deposit requirement and a lower interest rate.

Ways to improve your credit score include:

  • Paying off debts and loans on time - making it a priority not to miss any payments can help improve your credit score significantly over time
  • Not using all your line of credit - lenders want to see that you’re not going to struggle if you have unexpected issues, so you should avoid using almost all of your available credit
  • Settling CCJs, IVAs, defaults and more - you ideally want to have issues such as CCJ and defaults settled before you start looking for a mortgage. Most lenders will not consider lending to people with active CCJs

Avoid hard credit checks - hard credit checks show up on your credit report and can put off lenders if multiple have been carried out over a short period of time

How Can a Broker Help Me Get a Mortgage with Very Bad Credit but Good Income?

Using an independent mortgage broker like John Charcol can help you get a mortgage more easily despite having bad credit. This is because our experts know which lenders to approach and who can offer you the best deal for your situation. Brokers also have access to lenders who do not deal with homebuyers directly.

Summary: Good Income Bad Credit Mortgage

Working on getting a mortgage when you have poor credit can be difficult whatever your income level is, but it’s not impossible. The main factors are how severe your credit issues are and how long ago they occurred, as well as your affordability.

Using a mortgage broker can be a great way to improve your options and secure a suitable mortgage deal for bad credit but good income. Here at John Charcol, we have experience helping people get adverse credit mortgages for all kinds of properties. Get in touch today to see how we can help you.

First-Time Buyer Mortgages

If you’re thinking of buying your first home, discover the latest advice and the best first-time buyer mortgage rates available on the market with John Charcol today.

Applying for a Mortgage

Applying for a mortgage couldn’t be simpler with our easy and simple guide from application to accepting your offer.

How Much Can I Borrow?

This mortgage calculator examines your income and works out how much money a mortgage lender might provide you with

House Buying Mortgage Guide

Are you looking to buy your first home? Or perhaps want to move to a new area? Our step-by-step guide will tell you everything you need to know about buying a house.

Help to Buy Guide

Support from the government-backed Help to Buy initiative is available for first-time buyers and existing homeowners who are finding it difficult to move up the housing ladder.

House Mortgage Deposit

Saving a mortgage deposit for a house is definitely one of the biggest hurdles you face as a buyer. In our guide we explain how deposits work and ways you can save.

Mortgage Deposit Amounts

Learn all about the different mortgage deposit amount options, how they affect your mortgage, how they vary depending on what type of borrower you are & more.

Funding Home Improvements

There are a few ways to finance work on a house: get a home improvement loan, remortgage for home improvements, ask your lender for a further advance & more

Mortgage Glossary

On this page you’ll find our detailed mortgage terminology glossary. There’s a lot of jargon out there but we’re here to make it easy.