Adverse credit mortgages

How lenders read adverse credit

Specialist lenders look at three things, in order: how recent the credit event is, how severe it is, and whether the pattern has stopped. A single default from four years ago that was settled and has not repeated is a different case to three defaults in the last twelve months. The lender pool, the LTV (Loan to Value) cap and the rate move based on those three signals.

The lender tiers

Roughly speaking there are four tiers. Mainstream lenders accept light, settled adverse with a clean recent run. Near-prime specialists handle moderate adverse from one or two years ago. Specialist adverse lenders handle recent and heavier events. Heavy adverse lenders price the cases nobody else will touch. The rate steps up at each tier; deposit requirements usually step up too. We tell you which tier your case sits in before we apply, so you do not waste a credit footprint.

Worked example, two satisfied defaults from three years ago

Borrower with two satisfied defaults from 36 months ago (a phone account and a utility bill, total £1,200, both paid). No adverse since. Income £48,000, deposit 15% on a £240,000 purchase. Mainstream lenders typically decline at this profile because of the count of events. Near-prime specialists (lenders such as Kensington, Pepper, Foundation) often accept the case at standard residential rates with a small uplift, perhaps 0.4 to 0.8 percentage points above mainstream. The case lands. Three years from now, with a clean run continuing, the same borrower would qualify for a mainstream rate. Time fixes most of this.

Recency matters more than severity

A satisfied CCJ (County Court Judgment) from five years ago will often be ignored by mainstream lenders. The same CCJ from six months ago changes the pool entirely. Time is the cheapest fix. If you are six months from clearing a key event, we will sometimes recommend waiting and saving rather than applying now at a worse rate.

What to do before you apply

Pull your credit file from all three agencies (Experian, Equifax, TransUnion). They do not always agree, and lenders pull from different ones. Settle anything outstanding where you can. Stop applying for credit, every search leaves a footprint. Bring the files to us and we will read them properly.

Specific event types and how lenders read them

Late payments: most lenders accept up to 2 to 3 in the last 12 months on a strong case. Defaults: settled and over 24 months old often acceptable to near-prime lenders. CCJs: count, value, age and whether satisfied all matter. IVAs (Individual Voluntary Arrangements): typically need to be discharged for 3 years for specialist lenders, 6 years for mainstream. Bankruptcy: discharged 3 years for specialist, 6 years plus for mainstream. Debt management plans: similar treatment to a chain of late payments. Each tier has its own rule book; we hold them.

If we cannot place the case today

We tell you. We tell you what would change the answer (time, settled amounts, deposit increase) and we put a date in the diary to revisit. We do not run cases through lenders we know will decline.

Common pitfalls we see

Applying to multiple lenders in quick succession in the hope one will accept (this leaves a search trail that hurts the next application). Settling small adverse with a personal loan and increasing total exposure on the file. Treating "soft search" comparison sites as harmless, when some leave records visible to specialist underwriters. Picking the cheapest rate without checking lender appetite for the specific event types. We work the file properly before any application.