What actually decides the rate you pay with bad credit?
Few pages say this plainly, so here it is: more than the rates in the adverts, and usually less than you have convinced yourself. What follows is what moves the number, because any figure quoted before anyone has seen your file is a guess at what you would qualify for.
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David Bourne
Why there is no number on this page
Every lender in this part of the market reprices constantly, and each one bands its pricing differently by how recent your credit event is, how large it was, and how much deposit you have. A figure published today would be wrong within weeks, and a reader who budgets around a stale number and then gets a different offer is worse off than one who was never given it.
What does not change much is the shape of it: the four things below are what move your rate, in roughly the order they matter.
1. Your deposit, or how much equity you hold
This is the biggest lever, and the one most people underestimate. Lenders price in bands, so crossing from one band into the next — rather than simply saving a bit more — is what changes the number. Getting from a small deposit into the next band down is often worth more than anything else you could do in the same six months.
It is worth asking me where the next band sits for your situation before you decide whether to buy now or wait, because the gap is sometimes small and occasionally not worth waiting for.
2. How recent the credit event is
Age matters more than size. Most lenders in this market price by how many months have passed since the event was registered, and they step down at intervals — so something approaching one of those thresholds can be worth waiting out. If you are close to one, I will tell you the date, and you can decide.
3. How severe it was, and whether it is settled
A satisfied CCJ is read differently from an outstanding one. A missed payment on a mortgage is read far more seriously than the same on a mobile phone account. Several unrelated events across a short period are read as a pattern, and priced as one, even where each is individually small.
4. Which lender ends up looking at it
The specialist lenders who take this business are mostly broker-only, which is why the rates are rarely advertised directly. They price for the extra underwriting work — a human reads your case rather than a system scoring it — and that work is the reason a case gets approved at all.
What it is reasonable to expect
Expect to pay more than the headline rates advertised to people with clean files, and expect a lender or broker fee in some cases, which I will always tell you about before you commit to anything. Whether that is worth paying depends entirely on what you are trying to do, and for some people the honest answer is that waiting is better value. You will get that answer from me if it applies.
The other half of the picture is what happens next. Two years of mortgage payments made on time is the strongest evidence a lender can have about you, and many people who start on a specialist rate are in a materially better position when that deal ends. It is not a promise — it depends on what your file looks like then — but it is the reason a higher rate now is often a step rather than a destination, and it is worth planning for from the start rather than discovering later.
What people ask about cost
Can you tell me a rate over the phone?
I can give you a realistic range once I know your deposit, what is on your file and when it happened. Before that, any number is a guess.
Do you charge a fee?
Sometimes, depending on the case. If so, you will be told exactly what it is, and when it is payable, before you commit to anything. No fee ever appears at the end as a surprise.
Is it cheaper to wait?
Sometimes, clearly so — particularly if you are near a lender threshold or close to a bigger deposit band. Sometimes not. It is worth ten minutes to find out which.
Will I be stuck on this rate forever?
Not necessarily. A clean payment record on the mortgage itself is the strongest thing you can build, and it is worth planning the exit at the outset. The risk runs the other way too: if you cannot remortgage when the deal ends, you move onto the lender's variable rate, which with specialist lenders can be a good deal higher.
Tell me your deposit and what happened. I'll tell you what it costs.
Does one of these describe your situation?
What happened, how long ago, and whether it is settled decides more than almost anything else.
Can I get a mortgage at all?
Eight questions, answered in your browser. No details stored, no email needed.
How long it stays on your file
Six years is the famous answer. It is rarely the date that actually decides your options.
A mortgage after bankruptcy
Lenders count from discharge, not from the order. Most people wait for the wrong date.
A mortgage after repossession
The shortfall usually outlives the repossession, and it is the part that stops applications.
Back to mortgages with adverse credit · The broker people ring after being declined