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Right To Buy With Bad Credit

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Oct 29, 2022

Right To Buy With Bad Credit

The statutory Right To Buy scheme introduced by Margaret Thatcher’s government in 1980 allows council tenants in England to buy their rented homes at discounted rates.

What this means is that more UK residents are now able to invest in property. Since the introduction of Right To Buy, ex-tenants have collectively bought approximately two million council residences.

The government made further changes to the Right To Buy regulations in 2015. Since then, it’s simpler to buy your council home even with a poor credit history.

You must have rented a property for at least three years, as opposed to the previous five-year minimum, and used it as your primary dwelling. You can then apply for Right To Buy assistance.

The maximum discount available is now £84,600, with London maximums being £112,800. Per the CPI (consumer price index), these discounts increase in April yearly.

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Right To Buy Mortgage As It Currently Stands

More changes took place to the scheme in 2016. The government made amendments to Right To Buy, including tenants guaranteed through housing associations. Five such associations initially chose to test the modifications, with more housing associations joining them over the next two years.

Over 3,000 guaranteed tenants chose to buy their previously-rented homes over this period.

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Right To Buy Mortgage With Bad Credit

Many specialist mortgage lenders now provide Right To Buy mortgage finance for council and housing association tenants. Bad credit is one major pitfall affecting a council tenant’s ability to procure a mortgage.

If you are considering applying for a mortgage through the Right To Buy scheme and believe you might have a bad credit history, you might want to consider some specific points.

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How A Credit Score Works

Numerous combined factors determine a credit score. Levels of active debt, types of credit, payment histories, lending institutions, and credit histories can impact credit ratings.

Specialist lenders use credit reference agencies for credit checks, which helps them assess somebody’s repayment ability and the level of affordability in that specific case. TransUnionExperian, and Equifax are all major independent reference agencies in the UK and will all have details of your credit report.

The documents are unlikely to be identical, so obtain credit reports from all three. These agencies are more than willing to assist individuals looking to determine their financial position and chances of securing Right To Buy mortgages.

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Identify Your Credit Score

You can predict bad credit scores by identifying whether you’ve been through past incidents likely to have affected it. Bankruptcies, repossessions, and County Court judgements indicate an adverse credit score.

Moreover, missed utility payments, wifi and phone bill payments, and other unpaid monthly subscriptions would reduce your credit rating.

If you’ve been through any of the above, likely, your credit report won’t be perfect. Should this be the case, we encourage you to investigate the status of your credit file more closely.


Applying With A Bad Credit Score

Before you do anything else, get access to your credit record. Create an online account with a credit reference agency or phone one for assistance. You can check your recorded history with reference agencies as often as necessary without altering it.

Adverse credit events

Occasionally, circumstances might have led to adverse credit events appearing in your history that you had no control over. For example, experiencing a retrenchment due to an employer’s closure can lead to a difficult period for you, credit-wise.

Being open and honest with the credit company assigned to recover your debt might encourage it to add an addendum explaining your situation. Notes like this can substantially assist in achieving a favourable position for a quick mortgage approval.

Double-check your records

Make sure that all entries on your credit record are valid. Check for any missed payments or defaults showing against what you have in your documents. Contact the relevant companies or institutions to rectify the problem if you find any discrepancies.

Sometimes a credit company does make a mistake, but it’s up to the alleged defaulter to remedy any issues. If you can prove the error lies with them, the credit company should correct the error within a week or two, and your Right To Buy application will be more likely to succeed.

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How To Repair A Poor Credit Score

There are several ways to go about repairing poor credit histories. You will need to take charge to ensure improvements personally, which can take time. Try to fix your credit score before you apply for a Right To Buy mortgage, as these actions will improve your chances of success.

Close some unused credit facilities

Evaluate your open credit facilities. Establish what they cost, how you use them, and their effect on your credit score. Although you might save money and reduce fraud risk by closing an account, terminating the wrong ones might detriment your credit score.

Do an online check of your account status before you close accounts to help your credit score. Too many similar accounts can negatively affect a score, but carefully assess which accounts these may be, as closing long-standing accounts with high limits and low outstanding balances is more likely to impact your credit rating negatively.

Your best course of action will be to close inactive accounts that charge high fees. That way, you won’t risk reducing your credit score and will also save money.

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Register on the electoral roll

The electoral roll, or electoral register, is the list of people registered to vote in all UK and Northern Ireland public elections and means they’re eligible for referendum voting. The roll includes your name, address, and electoral number and ensures that only eligible people can vote. The electoral roll can also get used to select people for jury duty, to aid criminal investigations, and for credit applications.

There’s a simple reason why inclusion on the electoral roll assists in growing your credit score. It allows mortgage brokers to confirm your identity and verify the accuracy of any details you have provided, improving security to guard against identity theft or fraud.

Making sure that your name appears on the electoral roll is one of the most effective and easy ways to improve a bad credit rating.

Accurate details on the register will assist specialist lenders in ascertaining whether your credit score accurately reflects your financial history and whether any adverse credit will affect your ability to cover monthly mortgage payments.

Open a savings account

Opening a savings account won’t directly improve your credit score, but savings accounts with healthy, growing balances assist you in creating the foundation for building your credit rating.

A decent amount in a savings account will improve your ability to afford expenses like loan payments and enhance your financial situation, helping you grow a low credit score. Plus, having more savings shows mortgage lenders you’re not borrowing more than you can afford.

Work out your budget

List your income and expenses to improve your understanding of your financial habits, showing how you handle your money. Itemise your spending and determine where you can cut back on wasteful costs.

Re-examine your budget monthly and make adjustments where you can. The more you can save with monthly planning, the better your capacity for any future credit and Right To Buy mortgage approval will be.

If you struggle to manage your budget and credit, seek a bad credit specialist who can offer services to improve matters.

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Are Mortgage Brokers Strict With Right To Buy Bad Credit Applications?

Most mortgage brokers will score Right To Buy with their own processes and by checking credit reference agencies’ scores. If deemed too high risk, you can be sure there is a valid reason. Reference points like bankruptcies, default notices and County Court judgements remain on a person’s credit history for six years.

These reference points are significant warning signs for many mortgage brokers and lenders. Still, the success of Right To Buy applications often depends on the age of severe credit events. An application that includes a five-year-old event and a clear credit report since then is likely to have more chance of success than one very recently acquired.

Make preparations before an application

Whether the final decision is deemed strict depends entirely on the individual applicant’s viewpoint and the decision-making process of the mortgage broker involved. The best way to circumvent any ill feelings as a Right To Buy applicant is to prepare for your application in the methods we’ve already mentioned.

Established banks are reluctant to take risks in modern times, so other mortgage providers make it simpler for Right To Buy scheme applicants to submit successful applications.

Prospective Right To Buy scheme applicants should seek mortgage advice and make debt management plans to minimise the risk of bad credit being a problem. It is possible to secure a Right To Buy mortgage with bad credit, but council tenants should be proactive in the preparation phase for any application.

Accept that terms might be more difficult

Specialist lenders are now servicing applicants with bad credit histories. A specialist lender of this type will offer Right To Buy mortgage products that suit people with bad credit who high street providers may have already rejected.

A Right To Buy discount offered will potentially not be as high depending on individual situations. Still, a mortgage application has a much better chance of being approved by most lenders, even if it includes a bad credit rating.

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Why Make Your Right To Buy Application Through Loan Corp?

Loan Corp guarantees super easy and hassle-free finance for our customers. We offer a wide range of mortgages and other financial products in the consumer and commercial lending arenas with tech and customer support portals that look slick and work amazingly fast and accurately.

We offer Right To Buy mortgages with competitive discount structures designed to meet an individual customer’s specific needs and pocket. Loan Corp also offers right to buy Guarantor mortgage options with short and long-term repayment options.

Guarantor mortgages are designed for customers without sufficient income to be eligible for a mortgage. As a borrower, if you default on your payment, the guarantor guarantees that they will repay the loan amount.

Start your application below, and one of our knowledgeable and efficient financial experts will contact you within 10 minutes of clicking “Get a quote”.

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