Mortgages after late payments

No, late payments aren't the same as missed payments or arrears. Here’s a breakdown of what each one means:

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

• Missed payment: When you haven’t paid the bill yet. Missed payments can become ‘defaults’ or defaulted payments if you miss more than one payment. 

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

There are two different types of late payments. Each affects your credit score differently. 

There’s secured and unsecured late payments. 

An unsecured late payment covers credit agreements including mobile phone contracts, credit cards, overdrafts, personal loans, and other things where the debt isn’t secured against anything. 

A secured late payment relates to a mortgage or a secured loan that has been secured against assets, such as your home or car. If you fail to make payments, a creditor can seize the assets that the debt has been secured against. 

A lender will usually view an unsecured late payment as less serious than a secured late payment.

It's possible to get a late payment removed from your credit report. If you think a late payment has been recorded by accident, or if there’s a good reason you weren’t able to pay on time, here’s what you should do:

1. Check your credit report 
   The first thing you should do is check your credit report to see if the late payment has definitely been recorded. You can do this by going to checkmyfile* to see the thorough breakdown of everything all the major credit checkers have about your credit history. It’s really easy to use, and you can access it for free with a 30 day trial (usually £14.99 a month).

2. Contact the company you have a late payment with
   They may be able to remove it for you. You can either call them or write to them to ask them to remove the late payment from your report. If you’ve since paid, and have a reason for the missed payment, they could be lenient and take it off for you. 

If they can’t, and you think it might be an issue with your banking, for example, the late payment came from an account where you have a direct debit set up, contact your bank for help.

It’s definitely possible, but you’ll have fewer options available to you. The more late payments you have on your credit file, the lower your credit score will be. But if your late payments were a while ago, and you don’t have any other issues on your credit file, you should be able to find a lender willing to give you a mortgage. 

A lender will look at how long ago the late payments were and how much they were for. If your payments were recent and for a sizeable amount of money, some lenders might not consider you for a mortgage. Or they might offer you a mortgage but at a higher rate. If your late payments were years ago, for example, 5-6 years ago, you’ll have more options. 

The size of your deposit will also be a big factor in your mortgage chances. The bigger your deposit, the more options you’ll have.

Putting down a larger deposit reduces the risk for the lender. That might help them outweigh what they see as the ‘risk’ of lending to you if you have missed payments. Some lenders will ask for a higher deposit for that reason, but all lenders have their own lending criteria. Working with a specialist mortgage broker (like us!) will help you work out the level of deposit and loan to value (LTV) that you’ll need in order to get approved.

Read more in our Guide: What Deposit Do I Need For a Bad Credit Mortgage?

All late payments can negatively impact your credit score. But a single late payment doesn’t necessarily mean that you have bad credit or won't be able to get a mortgage.

Lenders will consider how many late payments you’ve had and how recently they happened. The more late payments you have and the more recent they are, the lower your credit score will be.

Something that affects your credit score, like a late payment, stays visible on your credit file for six years. After that, they drop off automatically. However, a creditor is only able to report a payment as being late once this has been overdue for 30 days or more. Missing a payment date by a few days won’t show on your credit report and isn’t likely to affect your mortgage application.

Usually, the higher your credit score, the easier it is to get approved for a mortgage. So it’s always a good idea to do what you can to improve your score before applying if you can. If you’re really pushed for time, and have a low credit score but need to get a mortgage soon; make an enquiry and one of of Mortgage Experts will look at your options.

Here are some top tips for improving your credit score with late payments on your file:

• Pay off any outstanding debt in full (including credit cards, loans, and similar). If that’s not possible, just pay as much as you can.

• Make sure you’re listed on the electoral roll. 

• Consider reviewing the number of credit cards and accounts you’ve got open. Even if they don’t have outstanding balances. 

• Use your available credit in a sensible way. For example, make small purchases on your credit card and pay off the balance in full each month. That can help build your score because it shows that you’re making repayments on time.

Read more tips on boosting your credit rating before applying for a mortgage.