Getting a Mortgage with Severe Bad Credit

Having experienced severe bad credit doesn’t mean you’ll never own a home again. It can make things harder, yes. But with time, preparation, and the right lenders who look beyond a ‘computer-says-no’ approach, a mortgage can still be possible.

In this guide, we’ll break down how each of the most serious credit issues affects your chances of getting a mortgage, what lenders look for, and practical steps you can take to give yourself the best chance of success.

Can You Get a Mortgage with Severe Bad Credit?

Yes, it’s possible. Mortgage lenders treat severe credit issues cautiously, but they don’t automatically lock you out forever. It really depends on:

• When it happened. The more time that’s passed since the credit issue was registered on your credit report, the better.  

• If it’s been resolved. Satisfied arrangements hold more weight than any that are still ongoing.  

• Your mortgage deposit. Bigger deposits help offset the risk for the lender and illustrate how serious you are about getting a mortgage. 

• Your recent payment history. Evidence to show you’ve kept up with all your regular outgoings and financial commitments since.

Find the Right Mortgage Lender!

Above all else, the key difference between a successful mortgage application and a rejection in these circumstances is knowing where to look. 

While the larger, mainstream lenders tend to work with rigid, automated criteria, specialist mortgage lenders take a more human approach. They understand that life throws curveballs, and will consider each application on a case-by-case basis, rather than simply basing their decision on your credit score. 

These specialist lenders are the ones who can make your mortgage possible after a severe credit issue, and often much sooner than you might think. By taking this route, you immediately bypass the automated rejection systems and move your application into the hands of someone who can be more flexible.

Which Types of Bad Credit Are Regarded as Severe? 

Not all adverse credit is created equal. While late payments and minor defaults are usually manageable, the following issues are considered the most severe and will have the most damaging effect on your credit score:  

• Debt Management Plans (DMPs): This is an informal, non-legally binding agreement between you and your creditors to make reduced monthly payments. A lender sees a DMP as a high risk because it shows a failure to keep to the original contractual agreement. 

• Individual Voluntary Arrangements (IVAs): An IVA is a legally binding agreement between you and your creditors to pay off a portion of your debts, usually over five or six years, with the remainder being written off. Because it's a form of insolvency, it heavily impacts your credit score. Lenders will usually insist the IVA has been fully completed and 'satisfied' before they will consider your mortgage application.

• Bankruptcy: This is a severe legal process for anyone unable to repay debts over £5,000. It involves the sale of your assets to pay creditors, and it severely damages your credit file for six years from the date of discharge. Securing a mortgage after bankruptcy is all about patience and demonstrating a complete financial overhaul since discharge.

• Repossession: This occurs when a lender reclaims your property due to a failure to keep up with the mortgage repayments. This is arguably the most severe credit issue because it is a default on a previous mortgage. Lenders view it with extreme caution. Getting a mortgage after a repossession is usually the most challenging, requiring significant time and a large deposit.

Each of these credit issues stays on your credit file for six years and signals high risk to most mainstream lenders.

Will You Need a Higher Mortgage Deposit?

Yes, almost certainly. A larger deposit is the single most effective way to strengthen your mortgage application. Lenders use the deposit size to offset the risk associated with your credit history. The higher your deposit, the lower the loan-to-value (LTV) ratio, and the more lenders will be willing to consider you.

As an example, here’s a general guide to the typical deposit requirements for a mortgage after bankruptcy or IVA, based on time elapsed:

Regardless of which severe credit issue you’ve incurred, a larger deposit demonstrates stability, commitment, and improved financial responsibility.

How to Improve Your Chances of Getting a Mortgage

The goal is to show lenders you’ve drawn a line under the past and are now financially stable. By following these steps, you’ll present the strongest possible application to a specialist lender:

1. Download your credit reports and check for any inaccuracies. This gives you a clear picture of what the lender will see and allows you to address any mistakes or ask for any outdated information to be removed. 

2. Satisfy all outstanding debts. If your DMP or IVA is still ongoing, focus on paying it off in full and receiving the completion certificate. A satisfied mark on your report shows the issue is resolved and will significantly improve your options.

3. Rebuild your credit record. Register on the electoral roll immediately (this is non-negotiable for proving your identity and address). Then, focus on consistent, positive action: pay all bills on time and avoid making any new applications for credit, unless absolutely necessary.

4. Save as much deposit as you can. As covered above, increasing your deposit is the fastest way to get your application taken seriously by a specialist lender.

5. Seek the help of a specialist broker. Don't waste time applying to high-street banks that will instantly reject you. An unsuccessful application leaves a mark on your file, which only makes things harder. Work with a broker experienced in severe bad credit cases (like Haysto!) from day one.

Can You Get a Mortgage with a Debt Management Plan (DMP)?

Yes, it’s possible. Lenders view a running DMP as manageable, provided you have a clean payment record for at least 12 months. However, the most favourable position is having a DMP that is fully settled and satisfied.

Specialist lenders will want to know:

• The status: Is the DMP current (still making payments) or satisfied (completed)? Satisfied DMPs are viewed much more favourably.

• The size: How much was the original debt? Smaller debts are easier to overlook.

• The reason: Was there a mitigating circumstance, such as a temporary illness or redundancy? Context matters hugely in these cases.

If your DMP is still ongoing, expect to need a deposit of at least 15% to 20%. 

Can You Get a Mortgage with an IVA?

An Individual Voluntary Arrangement (IVA) is one of the more challenging credit issues, but it is entirely possible to secure a mortgage after an IVA.

The critical factor is time and completion status. Nearly all lenders will insist that the IVA is completed and discharged. It is extremely rare (almost impossible) to get a mortgage while an IVA is still running.

• 1–2 years post-completion: Some highly specialist lenders may consider you, but the deposit required will be very high (likely 30% or more).

• 3+ years post-completion: Your options increase significantly, and the deposit requirement drops, typically into the 15%–20% range, depending on your overall application strength and income.

Even though an IVA stays on your credit file for six years from the start date, proving 2–3 years of responsible financial conduct since it ended is often enough for specialist lenders to move forward.

Can You Get a Mortgage After Bankruptcy?

Like an IVA, getting a mortgage after bankruptcy is completely achievable once you're discharged and have allowed sufficient time to pass.

Bankruptcy is seen as a severe credit event because all unsecured debts are effectively written off. Therefore, the lender's focus shifts entirely to your current behaviour and the time elapsed since discharge:

• Less than 2 years post-discharge: Very difficult at this stage. Only a handful of specialist lenders might consider you, and the deposit required would be 35% or higher.

• 3 years post-discharge: This is the sweet spot where most specialist lenders will begin to consider applications. The required deposit starts to fall into the 20% to 25% range.

• 4–6 years post-discharge: Your application has a much better chance, and you can expect deposit requirements to align with the table in the previous section (10%–15%).

By waiting at least three to four years, you give yourself a stronger opportunity of success, access to a wider range of competitive products, and lower deposit requirements.

Can You Get a Mortgage After a Repossession?

Getting a mortgage after repossession is usually the most complex challenge because it involves a default on a previous mortgage, which lenders see as the highest risk. However, the same principles apply: time is your greatest ally.

• Minimum waiting period: You will typically need to wait a minimum of three years from the date of repossession before any specialist lender will consider your application. Some may insist on five or six years.

• Deposit requirement: Due to the risk involved, most lenders will insist on a minimum deposit of 25% or more. The more you can put down, the better.

• Mitigating circumstances: Lenders will scrutinise the circumstances that led to the repossession. If you can provide evidence that the event was due to an isolated event (e.g., job loss or a serious illness) and not chronic mismanagement, it will help your case significantly.

The most practical plan is to use the first three to five years after repossession to rebuild your credit history completely and save a substantial deposit.

Why Pick Picnic?

You shouldn’t have to navigate this maze alone. Dealing with severe bad credit requires a specialist approach, and that's exactly what we provide.

Through our sister brand, Haysto, we’ve made mortgages possible for thousands of people with more complex mortgage needs, particularly those with severe adverse credit records. 

As a result, we already have strong ties with some of the U.K.’s most respected specialist mortgage lenders, such as Bluestone Mortgages, Pepper Money, Aldermore, Kensington Mortgages and West One Loans. 

When you choose Picnic, we’ll match you with a Mortgage Expert who has the right experience to help with your specific situation. For severe adverse credit applicants, that means you’ll have up to four members of Haysto’s mortgage team working exclusively on your application from start to finish.