Last reviewed on 11th October 2023 by Martin Alexander (Mortgage Advisor)

If you have defaults on your credit file, it shouldn’t stop you from applying for a mortgage. Although it can be challenging to get a mortgage with a default, there are lenders that do accept credit issues, which we’ll explore in this guide.

Can I get a mortgage with a default?

Yes, it’s possible to get a mortgage with a default. However, this doesn’t mean that every applicant will be approved. Lenders will assess your entire application, such as your income, deposit amount and any other credit issues that you may have.

If you’re applying for a mortgage with defaults on your credit report, lenders will assess:

• The amount of the default
• The date the default was registered on your credit file
• The number of defaults on your credit file
• Whether your defaults have been satisfied
• If you have any other registered credit issues

What is a default?

A ‘notice of default’ is issued if you miss or fail to make an agreed payment. If this happens, a default is registered on your credit file, along with details such as:

• The name of your creditor
• Which agreement terms you’ve failed to keep
• The amount you owe
• The time you have to respond to the notice

A default can affect your credit rating, but once paid, it becomes satisfied, and your credit score may even recover. If you don’t settle your default, your creditors could take further action against you, impacting your credit file further.

Does the type of default I have matter?

The type of default you have can make a difference in your mortgage application. In fact, some lenders are more suited to a particular default type than others.

A default on a phone bill compared to a default on a mortgage is entirely different in terms of severity. Some lenders will recognise the difference and may accept defaults on a phone bill but not on a mortgage. In comparison, other lenders may see all defaults as the same and refuse to lend altogether.

Some lenders will approve mortgages, whether the default was for a phone bill or a mortgage. The key here is going to the right lender best suited to your circumstances. That’s why getting the right advice before approaching a lender is crucial instead of leaving it to chance.

How long will a default stay on my credit file?

Defaults will stay on credit files for six years from their registration date. That doesn’t mean you’ll need to wait six years before applying for a mortgage. You can still get a mortgage within six years of having a default registered.

How soon after a default can I get a mortgage?

Some lenders accept defaults registered within the last six months, but the longer you wait, the more lenders you can approach. For this reason, recent defaults affect your application more when compared to defaults that happened a while ago. For instance, any defaults over six years old won’t show on your credit file and aren’t likely to affect your mortgage in any way.

Can I get a mortgage with a satisfied default?

Satisfying a default won’t significantly affect your mortgage application, but it can help. Many borrowers assume they must settle past debts to be approved, but this isn’t true.

Satisfying past debts can improve your credit score as it shows that you’ve taken some financial control. Doing so can increase the number of lenders that will lend to you, but it isn’t always necessary.

In my opinion, it makes sense to pay a default before applying for a mortgage. You’ll undoubtedly have more lenders to approach and will likely find a better deal after satisfying your default.

What if I’ve not satisfied my defaults?

Some lenders would still consider giving you a mortgage whether or not your defaults are satisfied. This is useful to know, especially if you need a mortgage immediately and still need to satisfy your default. It’s surprising that the number of people we speak to who would have applied a lot sooner had they known this.

Satisfying a default can provide value to some lenders. Still, most lenders are interested in when the default happened. Recent defaults will pose more issues than past defaults and historic credit problems.

How much can I borrow if I have defaults?

Suppose you have a completely clean credit file and no defaults. In that case, lenders may lend between three and five times your income as an industry average. Once you add defaults to your application, maximum borrowing becomes much harder. This is because borrowers with defaults are seen as a higher risk when compared to borrowers with a clean credit file.

If lenders approve maximum mortgage amounts, they’ll usually try to minimise their risk. One way of minimising risk is by charging premium rates and fees. If your default happened three years ago, you may still get a maximum mortgage amount with some pretty good rates.

Which mortgage lenders accept defaults?

Some of the lenders that accept defaults include:

• Clydesdale Bank – Will only consider applicants with less than two defaults with a maximum value of £5000
• Norton – Accepts applicants with defaults within the last 12 months if the value is below £300
• Vida – Only accepts applicants that haven’t defaulted within the last six months
• Darlington – Defaults must be older than three years and satisfied to be considered
• Furness – Will consider applicants with defaults less than £500 in the last three years only up to a value of 80% LTV
• Reliance – Will decline applicants if they have a default registered in the last 12 months larger than £100, whether it’s been satisfied or not

Approaching a lender without an advisor is a huge risk, as a credit check is only one part of a mortgage assessment. Although you might be eligible based on your defaults, you could be declined on a different part of your application. You can speak to an advisor to check whether you’re eligible.

Should I check my credit file?

Knowing what your credit file contains is extremely important, especially when applying for a mortgage with a default. Your credit file will show you the exact details lenders will look for. An advisor can also check your credit file to see which lenders you qualify for.

Your credit file will show the dates and amounts of your defaults, which can affect your mortgage chances. As demonstrated, each lender has its own criteria when assessing a mortgage.

I have a default with further credit issues

The more issues you have on your credit file will increase the difficulty of getting a mortgage. Light credit issues, in addition to defaults, such as a CCJ, shouldn’t make getting a mortgage impossible.

Mortgages are possible even with severe credit issues such as bankruptcy, IVAs and repossession. That said, lenders may increase rates and fees due to how severe your credit issues are.

Our advisors specialise in all types of adverse credit and have done so for many years. If you have multiple credit problems, you’ll likely need a specialist lender, which we can help you with.

How can I get help?

If you need a mortgage with a default, our advisors can help. It’s crucial to get your application right the first time. Being declined can further minimise your mortgage chances and delay any offers you’ve made on a property.

As this is a specialist area, seek specialist advice. Going straight to a high street lender would likely result in you being declined. Always be honest about your credit issues with your advisor, as lenders will pick up on any irregularities.