Having adverse credit does not automatically mean you cannot get a mortgage and is one of the most common mortgage myths.

Many people experience financial difficulties at some point in their lives, and lenders understand that circumstances can change.

A credit report can include information about:

• Payment history
• Missed payments
• Defaults
• County Court Judgments (CCJs)
• Mortgage or loan arrears
• Arrangements to pay
• Debt management plans (DMP)
• Individual Voluntary Arrangements (IVAs)
• Bankruptcy
• Credit balances and borrowing levels
• Financial associations
• Previous credit searches

This guide explains how adverse credit can affect your mortgage application, what lenders consider, and what steps you can take to improve your chances of getting approved.

Averse credit means there are negative markers on your credit history that may make some lenders view you as a higher risk and not want to lend to you.

Common types of adverse credit include:

• Arrears
• County Court Judgments (CCJs)
• Defaults
• Bankruptcy
• Debt Management Plans (DMP)
• Individual Voluntary Arrangement (IVA)

Arrears occur when you fall behind with payments on a credit agreement. They can appear on your credit report and may affect how lenders assess your mortgage application.

Arrears can be:

• Secured arrears – Missed payments on borrowing secured against an asset, such as a mortgage.
• Unsecured arrears – Missed payments on borrowing not secured against an asset, such as credit cards, personal loans, or finance agreements.

Lenders will usually consider the amount owed, how recent the arrears are, whether they have been cleared, and your current financial position.

A CCJ is a formal court order issued in England, Wales, and Northern Ireland against someone who owes money to a creditor. It is recorded on your credit file and can affect your ability to obtain credit. The court will have formally decided that you owe the money.

When assessing a mortgage application, lenders may consider:

• The amount of the CCJ
• When it was first registered
• Whether it has been paid and when
• How long ago it occurred
• Your financial position today

A satisfied CCJ (one that has been repaid) is usually viewed more positively than an outstanding CCJ.

A default occurs when a lender records that you have failed to keep up with payments on a credit agreement and decides to close your account because you’ve missed payments.

Examples can include:

• Credit cards
• Personal loans
• Mobile phone contracts
• Finance agreements

Mortgage lenders will usually look at:

• The date of the default
• The amount owed
• Whether it has been settled and when
• Your payment history since the default

Older defaults tend to have less impact than recent ones.

Bankruptcy is a formal insolvency process used when someone is unable to repay their debts.

Getting a mortgage after bankruptcy may be possible, but lenders will usually consider:

• How long ago the bankruptcy occurred
• Whether you have been discharged
• Your current income and affordability
• Your deposit size
• Your credit behaviour since bankruptcy

A history of bankruptcy does not necessarily prevent future home ownership.

A Debt Management Plan (DMP) is an arrangement to repay unsecured debts through an agreed repayment plan, usually after experiencing financial difficulty.

A DMP may appear on your credit report and lenders may consider:

• When the DMP started and whether it has been completed
• The debts included in the plan
• Your payment history since entering the arrangement
• Your current affordability and financial position

Having a DMP does not automatically prevent you from getting a mortgage, but it may affect which lenders are available to you.

An Individual Voluntary Arrangement (IVA) is a formal agreement with creditors to repay debts over an agreed period, usually when someone is unable to maintain their original repayments.

An IVA may appear on your credit report and lenders may consider:

• When the IVA started and whether it has been completed
• The debts included in the arrangement
• Your payment history since the IVA
• Your current income, affordability, and financial position

An IVA does not automatically prevent you from getting a mortgage, but it may limit the number of lenders available and the terms offered.

Yes, it may be possible.

High street lenders often have strict lending criteria, but specialist lenders consider applications on a wider range of circumstances.

Every application is assessed individually.

The Age of Your Credit Issues

The more recent a credit issue is, the more likely it is to affect your application.

A CCJ or default from several years ago may be viewed differently from one registered recently.

Your Deposit

A larger deposit can improve your mortgage options because it reduces the lender’s risk.

Some borrowers with adverse credit may need a larger deposit than someone with a clean credit history.

Your Current Financial Situation

Lenders want to see evidence that your finances are now stable.

They may review:

• Income
• Regular Expenditure
• Existing Debts
• Bank Statements
• Recent Credit Conduct

The Reason Behind Your Credit Problems

Many lenders understand that financial difficulties can happen because of circumstances such as:

• Redundancy
• Illness
• Relationship breakdown
• Unexpected expenses
• Temporary loss of income

Check Your Credit Reports

Review your credit files to make sure the information is accurate.

Look for:

• Incorrect defaults
• Outdated information
• Unrecognised accounts
• Incorrect balances

Maintain Good Payment History

Recent positive credit behaviour can help demonstrate that your financial situation has improved.

Try to:

• Pay bills on time
• Avoid missed payments
• Keep credit balances manageable
• Avoid applying for unnecessary credit

Save as Much Deposit as Possible

A larger deposit may provide access to more lenders and potentially better mortgage options.

Prepare Supporting Information

You may need to provide:

• Proof of income
• Bank statements
• Details of credit issues
• Explanations for past financial difficulties
• Evidence of improvements

Being prepared can make the application process smoother.

Borrowers with adverse credit may pay a higher interest rate compared with applicants who have a perfect credit history.

This is because lenders consider adverse credit applications to carry additional risk.

However, improving your credit profile over time may create opportunities to remortgage onto a more competitive deal in the future.

If you have experienced financial difficulties, finding the right mortgage can feel challenging, but adverse credit does not always mean your home ownership goals are out of reach.

As a mortgage broker who often deals with these types of cases and applicants, I have access to a wide range of lenders, including specialist lenders who consider applications from customers with CCJs, defaults, arrears, DMPs, IVAs, and other credit issues.

I take the time to understand your individual circumstances and help you explore the mortgage options that may be available to you.