Self-Employed Bad Credit
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Self-Employed Bad Credit
Luke Platt talks about how the mortgage process works if you are self-employed with bad credit.
What are the main challenges for self-employed individuals with bad credit in securing a mortgage?
It’s almost the same principle as if you were employed. To overcome that challenge of having bad credit and obtaining a mortgage, it’s best to speak with an advisor.
Some of the main challenges can be if your income has decreased compared to the previous year, or if your costs have increased and are now reflecting on your net profit. It could also be that you have only been self-employed for 1 year, which does limit the lenders available.
You can talk to us here at Smiths Financial and we will look into your credit report and advise you accordingly and recommend the right lender to match your needs and circumstances.
How can self-employed individuals with bad credit improve their chances of getting a mortgage?
If you can, the best thing is to pay off any bad credit, such as defaults. Getting them satisfied can help with some lenders. If you are unable to do this, make sure that you continue with the monthly payments on time and in full.
Some lenders will ask for proof of rental payments for the last 12 months, so it’s always best to make sure that your rent is paid on time, along with other bills. Of course, things can happen and you may be late paying a utility bill, but we work with lenders that will consider this. As long as the lender can see that you are making improvements to repair your credit, then it should be fine.
With bad credit, it’s all about researching the different lenders and their criteria. We can take a look at your credit report and advise you, to recommend the right lender for your needs and circumstances.
What documentation do self-employed individuals with bad credit need when applying for a mortgage?
It would be the usual income proofs – This is usually your Tax Calculations and Tax Year Overviews for the last two years, generally. In some cases you just need one year’s accounts. It could also be your CIS payslips – it all depends on how you are self-employed.
The SA302 is a previous name for tax calculations, and some self-employed clients use this term.
With bad credit involved, we would request a copy of your credit report, which we can provide a link to a free credit report trial. This will assist us in placing your case with the right lender.
Call us to discuss your needs – we can advise and support you through your mortgage application.
Can self-employed individuals with bad credit get a mortgage without a large deposit?
Yes. This comes down to affordability, and it depends on what you’re looking to purchase. The minimum deposit generally is 5%, but it can vary from lender to lender and sometimes is dependent on the level of bad credit as some lenders may wish for more deposit to be put down.
You can also potentially get a shared ownership mortgage with £0 deposit, there are lots of options available for different circumstances.
Everyone’s circumstances are different, so we would look at this for you, when we review your credit report and advise you on how much deposit you may need to proceed.
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What interest rates can self-employed individuals with bad credit expect to pay on a mortgage?
It’s difficult to put a figure on an interest rate without knowing more from the client – such as the deposit available, what’s on their credit report and their affordability.
Lenders’ rates change regularly and can be influenced by the level of bad credit. The best thing to do would be to reach out to us here at Smiths Financial. We can take a look at it for you and come back with an idea of what the interest rates may be.
If you do have bad credit, it may be that you would likely need a specialist lender, and the rates for these do tend to be higher than a high street lender, that said we would look at all options and depending on the level of bad credit, you could end up with a similar rate to that of a high street lender. Obviously if you have a recent CCJ then this is likely to affect things, but get in touch with us and we will help you.
What role does a credit score play in getting a mortgage as a self-employed borrower with bad credit?
A credit score is an indicator as to how well you are managing your credit, but it isn’t the be-all and end-all. Lenders have their own internal scoring to decide whether to accept an individual.
The key parts of a credit report are the details within it, such as any bad or adverse credit, when it occurred, and the present situation. For example, a default registered on 1 Jan 2025 is less than six months old, therefore It would depend on the lender’s criteria and whether they can accept a default within that time frame. It may also be dependent upon the value and the number of defaults within a credit report.
Having said that, some lenders completely ignore some defaults. The best way forward, if this is the case for yourself, is to reach out to us here at Smiths Financial, and we will advise you accordingly.
Do any mortgage lenders specialise in lending to self-employed individuals with bad credit?
Yes, there are lenders that specialise in lending to self-employed individuals with bad credit. The right one for you will depend on the lender’s criteria. That could include how long you have been self-employed for, if your profit is growing each year, and of course when the bad credit occurred.
Each lender has their own criteria regarding self-employed and adverse credit, so we would review your credit report and ensure we have the right lender for you.
What steps can self-employed individuals with bad credit take if they have been declined for a mortgage?
Generally in most cases, the lender does provide a reason as to why you have been declined.
They might need more history of income, or the bad credit needs to be older. They may want a previous Default satisfying before they can consider you. There are lots of possible reasons. .
Here at Smiths Financial, we would explore what’s happened and look for another lender for you straight away. If none are available to you right now, we would advise you on how best to move forward, and get you in the best possible position to apply again in the future.
How long does it take for self-employed individuals with bad credit to get a mortgage offer?
Every lender has their own service levels – that’s the number of days it takes them to assess an application. The time it can take to get a Mortgage Offer can depend upon the circumstances and the case.
Here at Smiths Financial, we provide regular updates and do our best to get the offer issued as quickly as possible. Of course, the lender may have further requirements, and the property valuation needs to be arranged, but we do get offers turned around quite quickly.
What else do we need to know about mortgages for the self-employed with bad credit?
We’ve covered a lot here. If you’ve got any other questions that we haven’t answered in this podcast, then just reach out to us and we’ll answer them.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.