The Comprehensive Guide to Securing a Mortgage as a Contractor with Bad Credit

Navigating the mortgage market as a contractor with bad credit can appear daunting at first glance. You have the double challenge of proving your contractor income as well as your reliability to maintain future mortgage payments because of your credit history. Yet, with the right approach and guidance, achieving your goal of obtaining a competitive mortgage for your situation is within reach. This guide will answer the main questions contractors will have, so you understand your options and take confident steps towards securing the best mortgage for your situation.

Can Contractors with Bad Credit Get a Mortgage?

Yes, securing a mortgage as a contractor, even with a less-than-perfect credit history, is possible.

The uniqueness of a contractor's income and bad credit history may limit the available lenders and mortgage products, but finding a competitive deal is not out of reach. The key challenge lies in locating an adverse credit lender willing to consider your individual circumstances as a contractor, including the stability and proof of your income.

Contractors often face scrutiny anyway, because their income can be irregular or project-based, making traditional lenders hesitant. However, there are specialist lenders who understand the nature of contract work and are willing to evaluate your financial health more holistically, including your credit history.

Whilst getting a contractor mortgage with bad credit history is achievable, the challenge is to approach the right lenders with the appropriate level of detail about your credit history. Patience and persistence are essential, as the process will require more documentation and negotiation compared to traditional salaried employees with a perfect credit profile.

What type of credit history is considered 'bad' by lenders

When a lender does a credit search there are certain results that can hinder a mortgage application, or even cause a decline

If you have an imperfect credit history you should understand what lenders can find and how these things are viewed for mortgage assessment purposes

Several types of bad credit can complicate your mortgage application, making it more challenging to secure approval. Lenders closely examine your credit history to assess the risk of lending to you. Here are some common credit issues that can affect your mortgage application:

  • Low credit scores: A low credit score indicates a history of financial instability or missed payments.
  • Excessive use of available credit: High credit utilisation suggests that you rely heavily on borrowed funds, which can be a red flag for lenders.
  • Late or missed payments: Consistently paying bills late or missing payments altogether signals poor financial management.
  • Bankruptcies or repossessions: Having a bankruptcy or foreclosure on your record significantly lowers your creditworthiness in the eyes of lenders.
  • High levels of debt: Carrying a substantial amount of debt can make it difficult for you to manage monthly mortgage payments.
  • Recent credit enquiries: Multiple recent credit inquiries can indicate that you are seeking new credit, which can be seen as a risk factor.

These factors suggest to lenders a higher risk of missed mortgage payments, influencing their decision on your application. It is essential to address these issues to improve your chances of securing a mortgage.

Despite there being lenders out there for most types of adverse credit history, when you combine this with being a contractor the list of lenders may shrink down to very few

Is it hard to get a mortgage as a contractor regardless of bad credit?

Obtaining a mortgage as a contractor can be straightforward with the right preparation and knowledge. Your history of contracting and the expertise of a specialist mortgage broker play significant roles in this process. For more information on how to get a mortgage as a contractor, Cleerly have put together this useful guide.

What Can a Mortgage Broker Do to Help Me Get a Contractor Mortgage with Bad Credit?

A specialist contractor mortgage broker, like Cleerly, can be instrumental in navigating the complexities of securing a mortgage with bad credit. With access to lenders and products that are not always directly available to borrowers, Cleerly's experienced Mortgage Consultants can tailor the application process to your advantage, ensuring you receive the best possible deal based on your income and circumstances.


If there are lenders willing to help based on credit history and contracting, could a a reduced list of lenders could mean worse terms?

What kind of rate can I expect as a contractor with bad credit?

Expect higher interest rates and potentially larger deposit requirements compared with the terms you will get from mainstream banks. Lenders have to compensate for the perceived increased risk of default on the mortgage by charging more and asking for more security. The terms vary significantly between lenders, highlighting the importance of expert advice in securing the most favourable terms.

How Much Deposit Will I Need for a Bad Credit Contractor Mortgage?

A higher deposit is often required for adverse credit mortgages, reducing the overall borrowing amount. This mitigates the lender's risk and will often mean the difference of getting a mortgage or not. Deposits for impaired credit mortgages typically start at 15%, though some lenders may accept as little as 10% under certain conditions. The lower the deposit, the higher the rate, and rates are not great to start with if you have bad credit history. It is therefore worthwhile that you carefully evaluate how much you borrow so the payments remain affordable, which your Cleerly Mortgage Consultant can help you with.


What Can I Do to Improve My Credit Rating Before I Apply for a Mortgage as a Contractor?

Improving your credit rating is a crucial aspect of financial health that requires consistent effort and attention to detail. By taking certain steps, you can enhance your credit score over time and secure better financial opportunities. Here are some effective strategies to improve your credit rating:

  • Make Timely Payments: Ensure that all your bills and credit obligations are paid on time. Late payments can significantly impact your credit score.
  • Utilise a Lower Proportion of Available Credit: Aim to use a smaller percentage of your credit limit. High credit utilisation can signal financial stress to lenders.
  • Resolve Outstanding CCJs, IVAs, or Defaults: Address any County Court Judgments (CCJs), Individual Voluntary Arrangements (IVAs), or defaults. Clearing these can improve your creditworthiness.
  • Avoid Numerous Hard Credit Checks: Limit the number of hard inquiries on your credit report within a short period. Multiple credit checks can lower your score.
  • Maintain a Diverse Credit Mix: Having a mix of credit types, such as credit cards, instalment loans, and mortgages, can positively influence your credit rating.
  • Monitor Your Credit Report Regularly: Keep track of your credit report for any discrepancies or errors and dispute them if necessary.

By following these steps diligently, you can work towards a stronger credit profile and better financial stability, and obviously looking more appealing to potential mortgage lenders.

Summary and next steps

Securing a mortgage as a contractor with bad credit requires careful planning and strategic action. By engaging with a specialist mortgage broker like Cleerly, improving your credit standing, and considering your deposit options carefully, you can enhance your chances of securing a favourable mortgage. Understanding how you are currently viewed by lenders will allow you to appraise what is available today, and you can then also understand at what point you will be considered for a 'normal' mortgage available to those with a good credit history. Your Cleerly adviser can help you to understand your options.

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