A default on your credit file does not have to end your plans to buy. Here is how lenders view defaults and how a specialist broker can find a way forward.
Missing payments or overlooking a debt can result in a default being registered on your credit report, and it is a far more common obstacle to homeownership than many people realise. If a default is standing between you and a mortgage, it helps to understand exactly how lenders treat it, and why a rejection from one lender is rarely the end of the road.
Traditional high-street lenders often prioritise applicants with a pristine credit history, which can leave borrowers with defaults facing rejection. The encouraging reality is that the mortgage market is far wider than the high street alone. Specialist lenders and the advisers who work with them deal with adverse credit every day, and alternative routes to a mortgage genuinely exist.
The key thing to understand is that each lender operates to its own rules. Some compete purely on low rates for customers with clean credit. Others specialise in lending to the self-employed, to people with complex incomes, or to borrowers with adverse credit histories such as defaults.
Plenty of lenders are willing to approve applicants with one or more defaulted accounts. Working with a mortgage broker streamlines the search, sparing you the effort of comparing countless products yourself. Because we know which lenders offer favourable terms for circumstances like yours, we can point you towards the options most likely to accept you, and potentially towards savings across the life of the mortgage.
Be open with your adviser from the very start. Telling us the full picture of your finances lets us recommend the right lenders first time. These conversations are completely confidential, and holding details back only risks delays, declines, or missed opportunities later in the process.
While every default counts, lenders do not treat them all equally. A default on a secured loan or a mortgage payment is generally viewed as serious, and it can weigh heavily on a lender's decision.
There is more flexibility around defaults on unsecured accounts such as mail order or mobile phone contracts, which many lenders view less harshly. The type, size, and age of a default all influence how an application is assessed.
A default stays on your credit file for six years from the date it was registered, and it can affect your access to credit during that time. Even so, competitive adverse credit mortgages are available to borrowers with defaults on record, so a default certainly does not rule out homeownership.
How long ago a default was registered has a real bearing on your eligibility. Lenders often favour applicants whose defaults are older, because they are seen as lower risk.
One point surprises many borrowers: repaying a default before you apply does not always improve your chances of approval. Some lenders focus on the date a default was registered rather than the date it was settled. Before you rush to clear debts, it is worth speaking to an adviser so your money goes where it has the most impact.
Adverse credit lenders often apply stricter affordability calculations. Where a borrower with a clean history might borrow up to around five times their income, someone with defaults may face tighter limits, particularly on the maximum loan size. The variability of your income and your other financial commitments will also shape how much you can borrow.
Before applying for a mortgage, it is prudent to check your own credit history. Even with a default on file, keeping the rest of your credit profile healthy improves your prospects. Bear in mind that different lenders consult different credit reference agencies, so it pays to review your report across the main agencies rather than relying on a single source.
Securing a commercial mortgage with a recent default can be more challenging. Consulting a broker who understands both your financial situation and individual lenders' preferences can bring clarity and improve your chances. If your needs are more involved, our guide to specialist and complex lending explains how we approach cases that fall outside standard criteria.
The FCA does not regulate commercial mortgages. For commercial mortgages, we act as introducers only.
A rejection from one lender does not mean every lender will say no. Our guide on what to do after being declined for a mortgage walks you through the practical next steps to get your application back on track.
Speak to an adviser who works with adverse credit every day. We will look at your full picture and find the lenders most likely to say yes to your circumstances.