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Author: Carl Shave-Director
Updated on January 30th, 2024

Can I get a Right to Buy Mortgage with Bad Credit?

In 1980 the government introduced a statutory Right to Buy scheme. Still running today, it allows council tenants to buy the home they rent at a discounted rate. This enabled more people to get onto the housing ladder and invest in property.

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In 2015, the government introduced changes to the Right to Buy regulations. This made it even easier to buy your council home, even if you have a bad credit history.

People can make use of the scheme if they have lived in their home for three years, instead of five. The maximum discount available is £96,010 or £127,940 if you live in London. This increases every April in line with the consumer price index.

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Am I eligible for a Right to Buy mortgage with Bad Credit?

Yes, you are. It is totally possible to get a Right to Buy mortgage with bad credit.

Typically, lenders use their own scoring system to assess whether you pose a high risk of non-payment. They will also look at your credit reports from the three main credit reference agencies. A lender’s scoring system is based on a variety of criteria including:

  • the type and severity of any previous adverse credit events,
  • how long ago they happened,
  • the amount of money involved.

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BankruptciesCounty Court Judgements and default notices all remain on your credit history for six years but carry less weight the older they are.

Fortunately, with mainstream banks being more risk-averse, many lenders have filled the gap in the market for servicing applicants with a blemished credit history. These specialist lenders offer Right to Buy mortgage products to suit people with bad credit. However, your ability to secure an affordable rate may be affected by any bad credit issues you’ve had.

At The Mortgage Centres, our brokers are experts in bad credit mortgages. We have access to a network of lenders and exclusive deals you won’t find on the high street. Our experienced advisers can help you find exactly the right mortgage to suit your circumstances.

Read Our Right To Buy Guide

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Fill out our quick and easy Bad Credit calculator below. We only require a few details to see how much you may be able to borrow.

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How can I tell if I have Bad Credit?

Mortgage lenders and other credit companies routinely use credit reference agencies to check information about an applicant’s credit. This helps them determine how likely you are to pay back a loan and how affordable the loan will be for you.

Applying to the following credit agencies can give you idea of your credit situation:

  • Experian 
  • Equifax 
  • TransUnion 

Remember, these agencies report information in slightly different ways. Therefore, it’s worth going to them all to see what they are holding.

When applying for a mortgage, you’re most likely to have problems if you have suffered serious adverse credit such as a CCJ,  repossession or bankruptcy. But lesser bad credit issues like missed card payments can also be detrimental to your credit report.

Bear in mind that the term ‘credit’ can cover all kinds of arrangements that you might not consider in the same bracket as cards and loans. This could be gym memberships, mobile phone contracts, utility bills or broadband contracts.

There are various factors that combine to determine your credit score:

  • Your level of current debt
  • Your payment history
  • Previous types of credit you have used
  • The length of your credit history
  • The amount of credit searches companies have made against your name.

What should I do if my credit records show Bad Credit?

  • The first thing you should do is verify the facts and make sure any adverse entries are correct. Any instances of default, missed payments or other signs of bad credit management should be checked against your own statements. And if you find anything that is not as it should be, you must contact the appropriate company right away to get it amended. Credit companies do make mistakes and will correct inaccurate entries within a few weeks of notification.
  • You can also include mitigating factors behind a bad credit event in your report that were beyond your control. For example, if you were a victim of fraud or you lost your income after your employer went bust. Tell the credit agencies about it and they might be prepared to add a note explaining circumstances. This in turn could help to swing a mortgage decision in your favour.
  • You can also take several proactive steps to try to repair or rebuild your credit rating. These include making sure you are on the electoral roll, closing unused credit facilities and avoiding any unnecessary credit. For a complete run-down of what you can do, take a look at our tips on how to repair your credit rating.
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What types of Bad Credit will affect my Right to Buy mortgage application?

In truth, any kind of bad credit will have some sort of bearing on your application. With each lender taking a different approach to your situation. Mainstream or high street lenders tend to take a very negative approach to even a slight black mark.

On the other hand, specialist mortgage lenders apply far more flexible criteria. They will often consider people who have experienced severe credit events.

There are several factors that influence a lender’s decision. This includes the severity of the credit issue, the amount of money involved, how long ago it happened, and how your patterns of borrowing have improved since.

The types of bad credit events will affect your application in slightly different ways. Let’s go through them one by one, starting with the least serious.

  • A low credit rating– a low credit rating could be caused by not having much of a borrowing history to speak of or not having one at all. Ironically, you may be seen as a credit risk by lenders, as they have no information to make a judgement. However, this is easily overcome by providing a thorough overview of your income, outgoings, savings, and current commitments.
  • Late or missed payments – even small events like these can cause a problem with many lenders. They will view this as a possible bad habit, or a sign of a less-than-serious approach to borrowing and money management. Therefore, flagging you as a high lending risk. This said, a lot will depend on the exact details and the amounts of money involved.
  • Defaults & CCJs – these are both quite serious credit events. But again, depending on the size and nature of the issue, there are lenders who are willing to accept people. Generally, you’ll face an uphill struggle if the event occurred within the last 12 months. But there are some lenders who have been known to accept defaults in less than 12 months. This is only if other surrounding factors are in your favour, such as having a good-sized deposit. As a rule for getting a mortgage after a CCJ, most will be happy if it’s been three or more years since the event occurred.
  • Debt Management Plans & Individual Voluntary Arrangements – these plans show lenders you were willing to accept responsibility and enter an arrangement to settle your debts. Therefore, if you settled your DMP or IVA three or more years ago, most lenders will likely consider you. However, if you’re currently subject to a DMP or IVA then only a few specialist lenders will consider your application.
  • Repossessions – if you have ever had a property repossessed, then unfortunately most lenders won’t consider your application. It will even be tough if you try to use a specialist lender, especially if the repossession occurred within the last year. If it’s been three years or more since it happened, then your options will improve, and even more so after five or six years. Once it has slipped off your records, most will be happy to accept your application.
  • Bankruptcy – if you have a bankruptcy on your record then a mainstream lender is likely to decline you straight away. Specialist lenders will take a more flexible view, with some willing to lend to you the day after a bankruptcy has been discharged. While a few more will be fine to look at your application after twelve months. If three to six years have elapsed since your discharge, then most specialist lenders will be happy to lend to you.

It’s important to remember the impact that bad credit events will have on your application will lessen as time goes by especially if you have maintained a healthy record of credit, borrowing and repayments since. It could also be the case that attitudes amongst lenders might shift in future. Meaning, you may find that criteria for borrowers with bad credit also change with time.

It’s worth talking to a member of our expert team to find out how the land lies currently in relation to your issue. Our team has a wealth of experience in dealing with Right to Buy mortgages. Get in touch to find out your options.

Right to Buy with Bad Credit FAQs

  • Can I use my Right to Buy discount as a deposit?
  • My Right to Buy flat is in a high-rise building – can I get a mortgage?
  • What is the maximum age lenders will accept on a bad credit Right to Buy mortgage application?
  • When I buy my Right to Buy property, can I borrow more for home improvements?
  • Can I rent out my Right to Buy property once I have obtained a mortgage?

It is possible to use your Right to Buy bad credit mortgage discount as a deposit but it will depend on the lender. Most will be fine to treat your Right to Buy discount as a deposit, but this is not the same for all lenders. Some are likely to still ask for a cash deposit to secure the property purchase.

The Right to Buy scheme applies to all kinds of properties, both flats and houses of all descriptions. However, much is down to the lender, as they have their own policies for lending against certain properties. It’s best to make sure lenders you speak to are aware of the property type and ask them if they avoid high-rise flats.

There is no age limit on the Right to Buy scheme, but most lenders have an upper limit for who they are willing to lend to. This allows them to ensure that the borrower will be able to pay back the amount owed, especially in retirement.

It might be possible to borrow extra money against the property to carry out home improvements. However, this will depend on the property value, the level of discount and the maximum loan-to-value ratio.

Bear in mind that for leasehold properties, you may need permission from the freeholder before you make any changes.

If you buy your property through Right to Buy, this does not stop you from renting it out afterwards. Although it might affect the type of mortgage and the terms you will be able to get from the lender, as they still have a say. If you fully intend to rent your property after you buy it, then you will need to get a Buy to Let mortgage. But many lenders will not permit these on a Right to Buy purchase.

Like any mortgage product letting consent policies vary considerably from lender to lender. Some can be quite flexible while others will only give consent to let in very specific circumstances.

Lenders may charge extra fees for either applying for consent to let or changing from a residential to a Buy to Let mortgage. If you don’t yet know if you want to let out the property immediately or on a long-term basis, but may wish to in the future, then you should apply for a standard residential mortgage with a view to requesting the lender’s approval to rent the property when the time comes. This is usually referred to as “content to let” or “consent to lease”.

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