One of the most common questions that we are asked here at Tailored Money by our clients is, “can I get a Mortgage with late payments on my credit report”. Unfortunately, many lenders are not sympathetic to “the odd” missed payment, and can decline creditworthy applicants due to recent missed payments on their credit files, or due to the low credit score that these payments have caused. Thankfully, getting a Mortgage with late payments IS possible, and there are lenders happy to consider borrowers even with multiple late payments, with minimal deposit and at competitive rates.
How late payments affect your mortgage application
When applying for a mortgage, the lender will carefully study your accounts, with emphasis on how you have managed your past credit. Using this information, alongside facts such as your income and occupation, they will make a judgement on how likely you are to keep up with your mortgage payments. Generally speaking, the better you have managed your credit commitments, the better your chances of being approved.
Since the crash and recession in 2007, lenders have tightened their approval criteria. If you have any missed payments on unsecured loans or credit cards, then you will be red flagged as higher risk to the mortgage lender. Any late payments on an old mortgage can seriously damage your remortgage chances, or any future mortgage applications period.
The types of credit account for missed payments
The type of account you have missed a payment for makes a monumental difference to whether you will be accepted for a Mortgage or not. There are two types of account:
Unsecured – Current Account Overdrafts, Phone Bills, Credit Cards, Personal Loans
Secured – Mortgages, Secured Loans
Missed payments on unsecured accounts are much less significant than missed payments on a secured account.
One or two missed payments several years ago on, for example, on a phone bill, are unlikely to prevent you obtaining a successful mortgage application. However, if you have a mortgage with late payments on your credit report, you are likely to find things extremely difficult. Depending on how many missed payments you have, or how recent they were, you may need a larger deposit to find a lender.
Your applications success will be subject to the number of missed payments
As previously mentioned, one missed unsecure payment in the last 10 years is very unlikely to cause too much damage, although more recent payments may lower your score and provide problems securing agreements with top lenders. Having multiple missed payments will have a far bigger impact on reducing credit score, and the majority of high street lenders will automatically decline your application.
How recently your late payments were registered on your credit report makes all the difference for your mortgage or remortgage application. Anyone hoping to get a mortgage with a smaller deposit may need to have a clean file for the last 2-3 years if applying on the high street.
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