How Do Late Payments Impact Mortgage Applications?

Life happens, and sometimes late payments are unavoidable. 

Late payments are different from missed payments or arrears. A late payment is simply that: a payment that you did make, just not on time. Knowing this difference will help you understand how it affects your credit file. 

The good news is, it’s still possible to get a mortgage with late payments - you’ll just need to find the right lender who can look at your file on a case-by-case basis.

In this Guide, you’ll find all you need to know about applying for a mortgage with late payments on your credit file, and practical ways to maximise your chances of being accepted.

Can I get a mortgage with late payments?

Yes, you can get a mortgage with late payments. It’ll be trickier than if you had a cleaner credit history, but you’ll just need to find the right lender who can look at your individual circumstances.

There's a difference between forgetting to pay on time and being unable to pay on time.

Let’s say you were due to make a minimum payment on your credit card on the 7th of the month, but you make it on the 14th; seven days late. This won’t be marked by your credit card company as a late payment in most instances, because the payment has been made before the next one is due. A creditor can only report a late payment if the balance is outstanding 30 days after it’s due.

A lender will want to know the reason for your late payment, how long ago it happened, and how much money was involved. They’ll also look at what you’ve been doing since to improve your financial situation.

Lending criteria differs between mortgage companies. Some of the high street banks aren’t likely to accept you if you have a history of late payments, but there’s specialist lenders who will. Specialist lenders will look at your individual circumstances and your ability to make repayments. 

Most of the time, specialist lenders are only accessible through specialist mortgage brokers. The brokers we work with have seen it all - they’re not judgemental. They’ll be there through the whole process to help and advise you with expert knowledge and experience of the specialist mortgage market. A broker can explain your options, find the lender most likely to accept you, and make your application look as good as possible.

If you need a mortgage but are worried about a history of late payments, make an enquiry to find out your options.  

What’s the difference between late payments, missed payments, arrears and defaults?

• Late payment: When you pay your bill after the due date. It’s recorded on your credit file as a ‘late payment’

• Missed payment: When you haven’t paid the bill yet. 

• Default: When you miss more than one payment on the same account.  

• Arrears: When you owe money. For example, your account will be ‘in arrears’ of the amount of money you owe.

Secured vs unsecured late payments

There's two different types of late payments: secured and unsecured. Each affects your credit report differently.

Unsecured late payments are credit agreements where your debt isn't secured against anything you own. Such as credit cards, overdrafts, loans and mobile phone contracts.

Secured late payments are credit agreements secured against an asset, such as your home for a mortgage and car repayments. A creditor can take away this asset if you don't keep up your repayments.  

Lenders typically view unsecured late payments as less severe than secured late payments.

How long do late payments stay on my credit file?

A late payment stays on your credit file for six years. It then drops off the record. A late payment can only be reported after 30 days of being overdue. If you do miss a payment by a few days then it won't show on your credit report.

If a late payment has appeared on your file in error, you can contact the company you have the account with and ask for it to be removed. If you provide a good reason for paying late and have since paid in full, they may remove it for you.

Can a mortgage be declined because of late payments?

Lenders don’t like late payments because it suggests you’ve had trouble managing your money. Some big banks may turn you down if you have late payments on your credit report. However, the older the late payment, the less weight it carries, so you may still be able to find a high street lender willing to approve your application if you don’t have other credit issues on your file.

Your credit score goes down if you have more than one late payment on your credit file. A lender will look at how long ago the late payments were and how much they were for. If your late payments are recent and for a lot of money it will be harder to get accepted. You might be asked to put down a bigger deposit or pay a higher interest rate. The older your late payments, the more options you’ll have.

If you need a mortgage and have late payments on your credit file, it’s best to speak to a specialist mortgage broker who deals with bad credit. Our Mortgage Experts will  explain your options, make your application look good, and find the lender most likely to accept you. Get started  by making an enquiry.

Does missing one payment affect your credit score?

Paying on time is one of the biggest factors that affect your credit rating, so missing a payment can affect your score. Payments over 30 days late will mark your credit file for six years, and will be visible to lenders during that time. Like all credit issues, they lose impact the older they get. Having a reasonable explanation for missing the payment can also help when it comes to applying for a loan, credit card or mortgage. Read more in our Guide: What Credit Score Do I Need to Get a Mortgage?

What happens if I miss a mortgage payment? 

A single missed payment may not be a disaster. Your credit score might be affected, but the best thing to do is talk to your lender so they know and understand your situation. Don't ignore it!

Once you've told your lender, you'll have a grace period of between one to two weeks in order to make the payment. A late fee will be added on top, and you'll need to make sure you pay it, as well as the usual mortgage payment.

If you don't make your payments after 90 days, your account will be marked as defaulted. It's at this point that talks of repossession might happen. Repossession is always a last resort, so there'll be chances to discuss options and get financial advice before it comes to that. Your mortgage lender would prefer you to make your payments rather than take your home away, so they will likely offer advice and solutions. Make sure you let your lender know as soon as possible if you think you'll struggle to make repayments.

Getting a mortgage after arrears

Missing payments on important accounts such as a mortgage is usually a last resort due to the risk of losing your home. Because of this, missed mortgage payments can look bad to potential lenders because it flags a serious issue with your ability to keep up repayments.

One or two late payments on your mortgage is unlikely to stop you getting accepted again, but lenders will want to hear a good reason and see an otherwise healthy credit file. Timing is everything - the older the issue the less impact it will have.

If you need a mortgage after previous mortgage arrears, it’s a good idea to speak to a specialist mortgage broker who deals with bad credit. Our Mortgage Experts have seen it all and aren’t judgemental. Make an enquiry to find out your options.

Can I make a mortgage payment on a credit card?

Most mortgage lenders don't accept credit card payments. If you have a Mastercard you may be able to pay your mortgage through a payment processing service or money transfer card, but you'll have to pay a fee. 

Life happens! And sometimes a bad couple of months can hit your finances. Using credit cards to pay your mortgage isn't a sustainable way of borrowing, so you should get financial advice if you're struggling to keep up with repayments.

What are the most important factors when applying for a mortgage?

Mortgage lenders have different lending criteria that they use to assess mortgage applicants. Generally, they’ll look at the following factors

•   Income – your regular cash flow

•   Credit report – they’ll prefer a positive credit history

•   Assets – anything else which could give you financial stability

•   Deposit – how much you can put down up front

Read more in our Guide: What Do Lenders Look For in Mortgage Applicants?

How can I improve my chances of getting a mortgage with late payments?

Applying for a mortgage can be challenging and stressful. There’s always the worry that you might not get accepted, especially if you have late payments on your credit file. Finding out where you stand and making some simple changes is a good place to start.

1. Check your credit report
   You can easily get a copy of your credit report from companies known as credit reference agencies. The three main ones are Equifax, Experian and TransUnion. 
   
   However, they differ in what they show you. So for a detailed and thorough overview of everything in your credit record, go to checkmyfile*. Checkmyfile shows you the information from all three credit checkers on the same report. And you can download your report for free with a 30 day trial. 
   
   Look at your report in detail to see if everything looks correct. Sometimes mistakes are made, so get in touch with your creditors if something doesn't look right. Also make sure things like your name, address, date of birth, and other personal information are up to date. It'll affect your score if they aren't. 

2. Get on the electoral roll
   Registering to vote at your current address makes it easier for lenders to prove your identity. Double check you’re registered with the correct information and this will work in your favour. Check if you're on the electoral roll here

3. Reduce the credit you’re using
   Using credit responsibly does wonders for your credit score. But you should make sure you're not using too much of the credit that's available to you. Maxing out your cards isn't ideal. Lenders will take into account how much of your outgoings goes towards paying credit card bills and loans each month as part of your affordability assessment.

4. Watch out for fraudsters
   Unfortunately, some cyber criminals take out loans or open up bank accounts in the names of other people. They don’t care about the hard work you've put into your credit rating and will run up huge bills in your name. When checking your credit report, make sure you recognise everything on there. 

5. Make sure your name is on the bills
   If you’re paying any household bills but your name isn’t on the account, it won’t be counting towards your credit score. Don't let your good work go unnoticed!

6. Space out credit applications
   Don't apply for lots of credit applications in a short space of time. Each time you apply to borrow money, lenders will carry out what is known as a ‘hard search’ on your credit history which is then noted in your report. A hard search is when a lender looks in detail at your credit score and file and stays on your credit file for 12 months. Lenders view lots of hard searches in a short space of time as a sign you're struggling with your finances and need to borrow money. So if you do need credit, leave some time between applications. 

7. Remove yourself from joint accounts you don’t need
   Your credit report will show your financial links you have to other people. If you’re linked to someone who has poor credit, this can negatively impact your score. If you’ve ever shared a joint account or credit card with someone else and you don't need to any more, it’s best to remove yourself if you can.

8. Check your credit score regularly
   Checking your credit report on a regular basis is the best way to stay on top of any issues or errors that may come up. It’s also motivating when you can watch your score improve. Always check your credit report before you make any applications for credit. That way, you’ll see what a lender will see and you'll know how likely you are to be accepted. This can help you avoid getting rejected for credit applications because that can damage your credit score.

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