Can I Get Equity Release With Bad Credit?

Why credit history matters less for equity release

A conventional mortgage requires the borrower to make monthly repayments from income. For that to work, the lender needs confidence that the borrower can sustain those payments — which is why income assessment, affordability checks, and credit history are all closely scrutinised.

A lifetime mortgage works differently. There are no required monthly repayments. The loan, plus all accrued compound interest, is repaid from the sale of the property when you die or move into long-term care. The lender's primary security is the property itself — not your income or your ability to make payments. This is why credit history and income are not the main factors in the lending decision.

What equity release lenders do check

Although income affordability is not central to the decision, equity release lenders do carry out checks. They are primarily looking for:

• Undischarged bankruptcy — an active bankruptcy order is typically a barrier to most lenders
• Active CCJs — County Court Judgments that have not been satisfied may cause some lenders to decline
• Active IVAs — Individual Voluntary Arrangements may be a barrier while active

Historical adverse credit — missed payments, defaults that have been satisfied, CCJs that have been settled and are several years old — is generally less of a concern and many lenders will accept applications where historical issues exist.

The difference between historical and current credit issues

Equity release lenders draw a clear distinction between credit issues that are current and those that are historical. The key factor is whether an issue is active and unresolved, or whether it has been discharged or satisfied.

Undischarged bankruptcy — if you are currently subject to a bankruptcy order that has not been discharged, most equity release lenders will decline your application. Bankruptcy is typically discharged after 12 months, after which many lenders will consider applications, though some may want to see a period of clean credit history following discharge.

Active County Court Judgments (CCJs) — a CCJ that is current and unsatisfied may cause some lenders to decline. Once a CCJ has been satisfied (paid in full) and sufficient time has passed, it becomes a historical issue and most lenders will consider the application on its merits.

Active IVAs (Individual Voluntary Arrangements) — while an IVA is active, most equity release lenders will decline. Once an IVA has been completed and discharged, the position improves considerably.

Historical adverse credit — missed payments, defaults, and CCJs that have been settled and are several years old are generally acceptable to most lenders. The older the issue and the cleaner the credit record since, the less of a barrier it becomes. A poor credit score in isolation — with no active serious issues — is rarely sufficient grounds for refusal.

What happens if one lender declines

Not all equity release lenders have identical credit criteria. A decline from one lender does not mean equity release is unavailable — it means that lender's specific criteria were not met. Lender criteria vary on:

• The type of adverse credit they will accept
• How long ago the issue occurred
• Whether the issue has been satisfied or is still active
• The size and nature of the issue (a single missed payment is different from an undischarged bankruptcy)

A whole-of-market equity release adviser can identify which lenders are most likely to accept your application given your specific credit history, before any formal application is submitted. This avoids unnecessary declined applications, which can themselves show on a credit file.

It is worth knowing your own credit history before approaching any adviser. You can check your credit report for free through Experian, Equifax, or TransUnion. Knowing what is on your file means you can give the adviser accurate information and they can identify the right lenders without guesswork.

If you have an existing mortgage

If there is an existing mortgage on the property, equity release can still be possible. Many lenders will allow the equity release proceeds to be used to repay the outstanding mortgage, with the remainder available to you. The remaining equity after repayment of any existing debt must be sufficient for the equity release loan — minimum property values typically start at £70,000–£75,000 and minimum loan sizes are usually around £10,000. See Can I get equity release with an existing mortgage?

Other eligibility factors

Even with no credit issues, equity release eligibility depends on age (typically 55 minimum), property value and type, and that the property is your main residence. Enhanced terms may be available if you have certain health conditions — see What is an enhanced lifetime mortgage?