Can I get a mortgage with late payments showing on my credit report?
This is probably the most common question and issue we come across, as pretty much everyone has missed the odd payment at least once in their lives.
Unfortunately, many lenders are not necessarily very sympathetic about this and can decline obviously otherwise creditworthy applicants because of a record of recently missed payments on their credit files or because of the low credit score that results. Appealing these refusals can be a laborious and stressful process so it is generally advisable to simply move on and find an alternative lender who is actually likely to consider the application from the outset.
Thankfully, getting a mortgage with a missed payment is possible and there are lenders happy to consider such applicants, even borrowers with multiple late payments, with a minimal deposit and at competitive rates.
- One or two late payments
- Multiple late payments
- Unsecured late payments
- Mortgage late payments / Mortgage Arrears
- Secured loan late payments
What is the difference between late payments and arrears?
Late payments are isolated payments missed on any type of account that remains as status one on your credit file but is now up to date. Most creditors will allow borrowers until the end of the calendar month before they register this as a formal missed payment on their credit file. So, if your payment date is the 1st of the month and make payment on the 21st, many creditors will consider this to be paid ‘on time’ and not report the incident to credit reference agencies.
Arrears are missed payments that fall further behind, going unpaid for more than 1 month. A person is classed as ‘in arrears’ when they currently owe more than their current month’s payment.
Type of credit account for the missed payment:
The type of account you have missed a payment for makes probably the biggest difference as to whether you will be accepted for a mortgage or not. Missed payments on unsecured accounts are less of an issue than missed payments on secured credit.
Unsecured: Current account overdrafts, phone bills, credit cards, personal loans.
Secured: Mortgages, secured loans.
One or two missed payments occurring a few years ago on something unsecured is not likely to prevent you from being approved by at least a few lenders but, if you have a mortgage with late payments on your credit report (including missed payments on secured loans), you are likely to find things much harder and depending, on how many and how recent they were, you may need a larger deposit in order to find a lender.
Number of missed payments
Having one missed payment on your credit file within the last 6 years is not likely to cause too much damage, although it may lower your score if this is more recent and may mean some of the top lenders will still decline your mortgage application or perhaps offer you a higher rate. Having multiple missed payments can have a far bigger impact on reducing your credit score and you will find that the majority of high street lenders will decline your application or offer terms based upon you having a larger deposit available.
This is an important point to remember – if you apply to your lender for say 85% LTV, and they offer you an agreement but only at 70% LTV, this indicates that your credit score with them is not strong enough to qualify for the higher LTV. It does not mean that you won’t be able to find another lender who will consider an 85% LTV despite what the first lender might say in order to convince you to use them. At times it may well be the case that the maximum any lender will consider is 85% LTV, but better to exhaust all avenues for the mortgage you want before having to compromise.
If you want to borrow a 95% mortgage with missed payments then it is certainly possible, so long as you are not more than 3 months behind on any one account.