Are Your Late Payments on Your Credit Reports Harming Your Chances of Getting a Mortgage?
Introduction
Getting a mortgage can feel challenging if you have late payments on your credit history. Lenders usually look at your financial record before approving a loan, and missed payments can make the process tougher. But the good news is that late payments do not always mean rejection. With the right approach and guidance, it is still possible to secure a mortgage.
In this article, I’m going to explain how it’s possible to get a mortgage even with late payments shown on your credit file. My name is Gindy, I’m one of the senior advisers at Crate Finance, so let’s get into the video.
Read more: Mortgages for the LGBTQ+ Community
Assessing Late Payments
Late payments don’t always mean your mortgage application will be declined. Lenders want to see the full picture. They usually focus on three things:
- Whether the payments are now up to date
- When the late payments happened
- How many late payments there were
When the Late Payments Occurred
The timing of late payments plays a big role.
- If your late payments happened in the last 12 months, lenders may see you as high-risk. This can limit the type of mortgage deals you qualify for.
- If the late payments are more than 12 months old, most lenders will overlook them, especially if you’ve shown good payment behavior since then.
| Timing of Late Payments | Impact on Lenders |
|---|---|
| Within last 12 months | Some lenders may limit borrowing options |
| Older than 12 months | Most lenders ignore these late payments |
Tip: The older the late payment, the less impact it usually has.
Number of Late Payments
How many times you’ve missed matters just as much as when.
- If it was just one late payment, most lenders will ignore it.
- If there were multiple late payments (for example 3–5 months in a row), lenders will be more concerned.
This doesn’t mean you won’t get a mortgage, but:
- You may face limited mortgage options.
- You might be offered a slightly higher interest rate.
Importance of Being Up to Date
Lenders want to see that you’ve fixed the problem.
- Make sure your accounts are fully up to date before applying.
- An updated record looks favorable to lenders.
- It shows you’ve learned from past mistakes and are now managing your finances responsibly.
Staying current on payments can significantly increase your chances of approval.
Deposit Considerations
Minimum Deposit in the UK
In the UK you can usually buy a property with a 5% deposit. This is the lowest entry point for most first-time buyers. However, getting approved for such a mortgage depends heavily on your credit profile and income stability.
Impact of Late Payments on Credit Score
Missing payments or having late payments can have a direct impact on your credit score. With a 5% deposit, you are applying for a 95% mortgage, which is considered higher risk. If your credit score has dropped due to late payments, you may not qualify with a High Street lender. In such cases, you may need to raise a slightly higher deposit, usually around 10% to 15%, depending on the severity of your credit history.
Higher Deposit for Multiple Missed Payments
If you have had multiple missed payments, like three or more, lenders usually ask for an even higher deposit. The idea is that by putting down more money up front, you lower the risk for the lender. This can sometimes mean needing a 20% deposit or higher depending on your credit history.
Why Lenders Care About Deposits
Deposits show lenders your financial responsibility. A bigger deposit not only increases your chance of approval but may also give you access to lower interest rates. That means long-term savings on your mortgage.
Deposit Requirements Overview
| Situation | Likely Deposit Requirement | Example on £200,000 Property |
|---|---|---|
| Good Credit | 5% | £10,000 |
| Some Late Payments | 10% – 15% | £20,000 – £30,000 |
| Multiple Missed Payments | 15% – 25% | £30,000 – £50,000 |
Credit Scoring vs Credit Searching
Credit Scoring Model
Most lenders in the UK will use a credit scoring model. This means they check your score on platforms like Experian or Equifax. If you have a high score, then usually you can apply with a High Street lender. A good score makes the approval process easier and faster.
Credit Searching Lenders
Some lenders do not rely on scores. Instead, they use a credit search. This means they look at your credit history rather than the overall score. Even if you have some adverse credit, if it matches the lender’s profile, you can still get approved.
Other Adverse Credit Factors
Late Payments in Isolation
When it comes to your credit profile, not all issues carry the same weight. If your report only shows a few late payments in isolation, this usually won’t have a major impact on your chances of getting a mortgage. Many lenders view late payments alone as a minor concern, especially if they are not recent or frequent.
Late Payments Combined with Other Adverse Credit
However, if the late payments are combined with other adverse credit, such as a CCJ or a default, the lender may class you as high risk. There may be some limitations on whether you can achieve a mortgage. You may need to put down a bigger deposit, or it may be that you’re paying a slightly higher rate of interest initially. But you can always review your options two or three years down the line.
- You might be asked to provide a larger deposit.
- You may have to accept a higher interest rate at the start.
- Some lenders will limit the loan-to-value ratio (LTV) they’re willing to offer.
The good part is that such restrictions are not permanent. Within two to three years of being current in payments and embarking on an upward credit path, you can usually remortgage to a better deal with more competitive rates.
Professional Recommendation
As a professional guide dealing with credit healing solutions, I would highly suggest you start by acquiring a copy of your credit report. Full access to your credit history will enable you to understand what the lenders will see when they consider a loan application. This is necessary as it will point out any missed payments or defaults or CCJs that might affect your application.
My advice is to usually check your credit report at: Checkmyfile.com. A multi-agency report like the one provided by Checkmyfile shows you results on multiple credit reference agencies, unlike many other providers. This helps to detect problems early, benchmark the data between agencies, and take actions to clean up your profile before mortgage approval.
Conclusion
Well, you now go ahead and get a mortgage with late payments reported on your credit history. It is not the end of the world as lenders are interested in the bigger picture, not on one or two failures. A little planning, with the appropriate guidance can still set you on the path to owning your home.
And by the way, in case you want to learn more about mortgages or credit, just read some other articles, we will help you to understand what should be done next.
Frequently Asked Questions
Will a late payment stop me from getting a mortgage?
Not always. A single late payment usually doesn’t block your chances. Lenders focus more on your overall history. If most of your payments are on time, one mistake won’t ruin your application.
Do lenders look at late payments?
Yes, they do. Lenders check how often you’ve missed payments and how recent they are. A late payment from years ago won’t matter much, but recent ones can affect your approval.
How many late payments can you have on a mortgage?
One or two late payments may not cause a big issue, especially if your credit score is strong. But repeated late payments show risk to lenders and can lower your chances of approval.
How long does it take to rebuild credit after late payments?
It depends on how consistent you are. Usually, 6–12 months of paying on time improves your score. Staying disciplined with payments is the fastest way to rebuild trust with lenders.
How to get a late payment removed?
You can request your lender for a goodwill adjustment, especially if you have a good record otherwise. If the late payment was reported by mistake, you can file a dispute with the credit bureau to correct it.
