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Can you get a mortgage with late or missed payments?
What happens to your mortgage chances if you're late or have missed a payment on a credit card or loan? For lenders, being late with a payment or missing it completely can be a major warning sign that you are not a reliable borrower. If you were late with a relatively small credit payment, lenders would be concerned that you won't be able to meet mortgage repayments and that the risk of default is higher.
The knock-on effects of this are that you'll be unattractive to certain lenders, you might be ineligible for the best deals or asked to contribute a larger deposit to mitigate the risk.
The good news is that it is still possible to get a mortgage with a late or missed credit payment on your credit record.
What can I do if I've missed a payment?
The best thing you can do is alert your lender straight away that you've missed your payment date.
If you can talk to them quickly enough, they may be able to stop your credit file from being marked and taking a hit on your credit score. Informing the creditor of the expected payment date may persuade them not to act.
You can learn more about how to improve your credit record by reading our guide to bad credit mortgages.
What's the difference between a late and missed payment?
Late payments are recorded on your credit history as a bill being paid after the date it was due but paid within the same month, whereas a missed payment is when you failed to pay at all.
If you miss several payments - typically between three to six - then you'll likely receive a written notice informing you of the default. If you fail to respond within 14 days, the creditor can choose to close your credit account and demand that you repay the balance in full. In this case, the default will be on your credit account for six years.
When performing a credit check, lenders will see how many payments were missed and how many months the payment was late. They are more concerned with payment defaults, and having a missed payment on your record is likely to have more of an impact on your mortgage chances than a late payment.
How does a late or missed payment look to lenders?
How concerned a lender will be by a late or missed payment depends on whether the loan was secured or unsecured, how long ago it happened, the amount and time taken to rectify.
Secured loan payment issues such as a mortgage are seen as more severe than unsecured credit such as a phone bill. If you have the odd blip in your credit history, this is unlikely to make a significant difference, but if you have a repeated history of missing or being late with payments, this is more troubling to lenders.
For first-time buyers who are typically applying with a smaller deposit, their credit history is more likely to sway a lender than a remortgage or someone applying with a lower loan to value ratio. A high loan to value ratio means that the buyer is more susceptible to downward movements in house prices, potentially leaving them in negative equity and creating more risk for the lender as they may not be able to recoup the loan value if the buyer defaults on payments.
Which late payments are most concerning to lenders?
Every lender will have its own criteria, but at the top of the scale is mortgage repayments.
Being late or defaulting on your mortgage repayment raises the most red flags for lenders. After this, missing payment on other forms of secured loans will raise serious concerns. At the other end of the scale, missed payments on mobile phone bills, utility bills or credit cards are seen as less critical.
How long do late payments stay on your credit record?
Late or missed payments will be visible on your credit record for 6 years.
If you're keen to have them removed sooner, you may be able to persuade your creditor to amend their records which will then adjust your credit record. This is known as a 'Goodwill Adjustment' and is typically granted only to those who have previously clean record records and a long-standing relationship with the creditor.
If the incorrect amount was requested by your creditor or the payment wasn't actually late, you can ask for this to be rectified.
Apply now with Teito
We've helped thousands of people with less than perfect credit records to find the right mortgage for them. As a whole-of-market broker, we work with hundreds of lenders and know which are the most understanding when it comes to credit issues.
Our process is designed to be as stress-free as possible, you can start comparing deals online within minutes!
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