Is a Bad Credit Mortgage Possible for the Self-Employed?

Yes. Getting a mortgage while self-employed with bad credit is indeed possible. But we won’t sugarcoat it, the path may not always be straight or smooth.

Moreover, some lenders specialise in handling non-standard mortgage applications, including those from self-employed individuals with bad credit.

They usually evaluate various risk factors before deciding to approve a mortgage. These factors include:

  • How long you’ve been self-employed.
  • The cause and circumstances of your bad credit.
  • The size of your available deposit. A bigger deposit can often tip the balance in your favour.
  • The lender’s affordability criteria to see if you can comfortably afford the mortgage repayments given your income and outgoings.

Pro Tip

A bad credit mortgage is achievable even when you’re self-employed. The trick is knowing where to turn. That’s where good mortgage brokers prove their worth. They can introduce you to specialist lenders and save you time, money, and potential credit file hits.

Avoid Direct Lending: Here’s Why

When you’re seeking a mortgage as a self-employed individual with bad credit, you might be tempted to contact lenders directly. It seems like the most straightforward path, doesn’t it? 

But, this approach can carry risks and negative consequences.

When you apply to several lenders directly, each one will conduct a ‘hard’ credit check. This type of check can further lower your credit score, making it even more difficult to secure a mortgage. 

Moreover, without expert guidance, you could find yourself overwhelmed by the myriad of complex mortgage options, potentially missing out on a deal better suited to your circumstances.

Mortgage Eligibility Criteria for Self-Employed Individuals with Bad Credit

Let’s delve into the criteria lenders typically use when assessing a mortgage application from a self-employed person with bad credit. Understanding these criteria can make the application process less confusing:

Self-Employment Duration

Lenders like to see a track record. The longer you’ve been successfully self-employed, the better.

Proof of Income

Unique to self-employed individuals is the way income is assessed. Most lenders will want to see proof of your income. They will ask for:

  • At least 2 or more years of certified accounts verified by a chartered accountant, and/or
  • 2-3 years of SA302 forms or tax returns from HMRC to show your income and deductions for a specific tax year.

Some lenders might be willing to lend for 12 months of proof of income. But, this depends on the severity of your bad credit.

If you have fluctuating income, lenders might look at the average over some time, often 2-3 years. 

This can be challenging if you’ve had a lean year, but if you can show a strong track record in your industry, it can work in your favour.


Can you meet your debt obligations? Lenders will assess your ability to make regular mortgage repayments. Having a bad credit history can make this tricky, but it’s not impossible to demonstrate solvency.

Deposit – A larger deposit can help. It reduces the lender’s risk and shows you’re capable of saving and managing money.

How Your Bad Credit Is Evaluated

When looking at your credit history, lenders aren’t just interested in the ‘bad credit’ label; they look at the details behind it. 

Why did the credit issue happen? What kind of credit issue was it, and how old is it? Some lenders, particularly specialist mortgage providers, take a more flexible approach. 

For instance, they might view a missed payment three years ago less seriously than a County Court Judgement (CCJ) last month. 

So, understanding your credit file can help you gauge where you stand in the eyes of lenders. This can give you an overview of the risk involved with your bad credit and tackle it accordingly.

How to Mitigate Risk to Secure a Mortgage?

If you’re self-employed with bad credit, there are strategies to make your mortgage application more appealing to lenders. This includes:

Offer a larger deposit
This reduces the lender’s risk and can help counterbalance your bad credit history. In general, lenders will be happy to lend if you have at least a 10 – 15% deposit. 

But, due to your bad credit situation, you may need to put down extra money to get access to better rates.

Show more years of account data.
Having at least 3 years’ worth of accounts can put you in a strong position in your loan application. 

You will also have access to a wider range of deals and lenders. In short, the more proof of income you have, the better.

How Much Can You Borrow as a Self-Employed with Bad Credit? 

When it comes to understanding how much you could borrow, specialist lenders for bad-credit mortgages typically don’t treat self-employed applicants differently from those in full-time work. 

They’ll examine your accounts and limit the amount they’re willing to lend based on your average earnings.

For instance, some lenders might offer up to 4.5 times your income, while others might stretch to 5 or even 6 times.

However, it’s worth noting that achieving these higher multiples can be more challenging with a poor credit history.

Here’s an example that makes it clearer:

Let’s say over the past three years, your earnings have looked something like this:


The average income over these years is £46,666. Using this figure, lenders might offer the following:

Lender TypeIncome MultiplePotential Mortgage
Lender A4.5£210,000
Lender B5£233,330
Lender C6£280,000

But don’t lose hope yet! If you seek the help of a mortgage broker, you could unlock greater borrowing potential. 

Some brokers might be able to introduce you to lenders who will base their calculations on your most recent income year, which in our example, is £60,000.

The potential mortgage figures would then look like this:

Lender TypeIncome MultiplePotential Mortgage
Lender A4.5£270,000
Lender B5£300,000
Lender C6£360,000
This illustration is only to show how a mortgage broker could significantly boost your borrowing potential.

Can a Joint Mortgage Help in My Application?

Yes, a joint mortgage can help you get approved for a mortgage even if you have bad credit. This is because the lender will consider the combined income and credit history of both borrowers. 

If your partner has good credit, this can offset your bad credit and make you look like a more attractive borrower.

But, there are a few things to keep in mind:

  • Assess whether your partner is willing and able to make the mortgage payments if you are unable to do so.
  • Ascertain whether your partner’s income is sufficient to cover their share of the mortgage payments.

Furthermore, it is important to note that your bad credit will still be considered by the lender when they assess your overall application. You are most likely to get the best deals from a specialist lender, so it may be wise to work with a good broker.

How Can I Get a Mortgage with Bad Credit as a Self-Employed?

Achieving a mortgage when you’re self-employed with bad credit may feel tricky, but with the right steps, it’s entirely possible:

  • Understand your credit history. Know the specifics of your credit file. Understand what issues exist and how they might impact your application. Also, download your credit reports to see and correct any errors in your file.
  • Gather evidence of income. As a self-employed individual, you may need to provide more years of account data to establish your financial reliability.
  • Consider ways to lower risk. Think about offering a larger deposit or demonstrating a steady income to help counterbalance your credit history.
  • Apply through a good broker. They can guide you towards lenders who are likely to look at your application favourably, potentially saving you time and further damage to your credit score.

The road to securing a mortgage may be more winding for self-employed individuals with bad credit, but with careful planning and professional guidance, it can certainly lead to a new home.

Key Takeaways

  • Even with bad credit, self-employed individuals can still obtain a mortgage.
  • Specialist lenders offer flexibility for unique circumstances like self-employment and bad credit. 
  • An expert brokers can connect you with lenders tailored to your situation.
  • Increasing your deposit, proving income stability, and using a broker improve approval chances.
  • A joint mortgage can be your option, but you must consider the impact of your bad credit.

The Bottom Line

Self-employed individuals with bad credit may find the dream of homeownership daunting, but it is not impossible. With the help of a knowledgeable mortgage broker, you can successfully make your way through the complex process and achieve your goal.

Rather than viewing your unique circumstances as a barrier, see them as an opportunity to seek the right help. A mortgage broker can help you understand your options and find the best fit for your situation.

So why wait? Get in touch with us today and we’ll connect you with a broker who can help you make your dream home a reality.