It's no secret that making on-time payments is critical to maintaining a good credit score. A poor credit score could lead to higher interest rates and in some cases a declined mortgage application. We discuss late payments and mortgage applications in this guide — including how to recover from late payments and improve your chances of getting approved for a mortgage.

Is There a Difference Between Late Payments, Missed Payments, Arrears and Defaults?

If you're behind on your bills, you might be wondering what the difference is between late payments, missed payments, arrears and defaults. Each one has a different meaning and can affect your credit score differently.

Here's a breakdown:

  • Late payment - this is when you don't make your payments on time and it's recorded on your credit file as a late payment
  • Missed payment - when you haven't made your payment yet
  • Default - if you miss more than one payment on the same account, it's considered a default. This is very serious and can have a strong negative impact on your credit score
  • Arrears - arrears happen when you owe money. For example, if you're 2 months behind on your mortgage payments, then you'd be said to be in arrears of 2 months

What Should I Do if I Have Missed a Payment?

If you've missed a payment or bill, rectify it immediately. If you can make up for the missed payment straight away, it will most likely not show on your credit report. Don't worry if your payment hasn't been processed right away — it can sometimes take up to 3 working days. Check your account for updates in the meantime.

If you're having trouble making your mortgage payments on time, it's important to get in touch with your lender or broker as soon as possible. The lender may be able to work out a payment plan with you or give you some extra time to make your payment. The sooner you reach out, the better off you'll be.

What Should I Do if I've Had a Late Payment?

With a little organisation, you can try to catch up on your payments and be ready to apply for a new mortgage. Although a late payment isn’t necessarily as serious as a missed payment it’s important to try and get your finances in order as soon as possible. Even one late payment on your bills can potentially limit the lenders that will consider your application. And, if making late payments is starting to become a habit and you have multiple late payments, you’ll find your options restricted even further.

How Do Late Payments Impact Mortgage Applications?

You may be putting off paying for services like Amazon Prime, your phone bill, or even your car finance when the end of the month approaches. But will late payments affect a mortgage application?

The answer is, unfortunately, yes. Any late payments — even if they're just a few days — can show up on your credit report and have the potential to negatively impact your mortgage application. Although some late payments are viewed more seriously than others – e.g. a late mortgage payment will be seen as more serious than a late phone bill payment. Adverse credit stays on your credit report for up to 6 years. So, if you're looking to take out a mortgage in the next few years and you have late payments on your record, lenders will be able to see it. It's important to be aware that late payments could have an impact on your ability to get a mortgage in the future.

Can I Have a Mortgage Declined Due to Late Payments?

If you're constantly making late payments, it gives the impression that you struggle to manage your finances, which may cause high street banks to reject your application.

Your credit score goes down even if you have only 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. At John Charcol, we work with a wide range of specialist lenders to give you the best chance of being accepted.

Does the Type of Late Payment Matter?

The type of late payment you have has a big influence on your mortgage application. There are 2 types of late payments - unsecured and secured.

Unsecured late payments are late payments for things like phone bills, personal loans, credit cards and overdrafts. Because these debts aren't secured against anything, these companies simply count on you to make your payments on time. Some lenders are more tolerant if you have late payments that fall into this category. Although it may still have an impact on your application, there are lenders that will still provide you with the same products as everyone else.

However, if you have late payments that fall into the secured category — like mortgages on your home — lenders are much less likely to consider your application. In fact, you may require an adverse credit lender that will want you to provide a higher deposit than usual to get a mortgage after being behind on your payments. This is particularly true if your late payments are recent and there are multiple.

How Do I Get Back on Track After Having Late Payments?

If you have late payments on your credit file, the first step is to catch up on your payments. Especially more serious ones like mortgage payments.

Once you're back on track, it's important to minimise your outstanding debt. This means paying off as much of your credit card balances and personal loans as possible. If you have a lot of debt, it's worth speaking to a debt adviser who can help you come up with a repayment plan - but bear in mind that a repayment plan will also likely affect your mortgage application.

Avoid making any more late payments or getting other bad marks on your credit file. This includes small things like late missed phone payments and more severe marks like CCJs and bankruptcies. To do this, set up direct debits for all of your bills and ensure there's enough money in your account to cover them. It's also a good idea to set up alerts so you know when your payments are due.

How Do Mortgage Lenders Find Out About Late Payments?

Your credit history is considered by lenders when they review your application. They use information credit reference agencies hold on you to paint an overall picture of your credit profile – this picture includes things like mortgage and bill payments and gives the lender an idea of how you manage your finances. There are a variety of different credit reference agencies that collect data on you, but the most common ones include Equifax, Experian, and ClearScore. Some are updated more frequently than others, so it's possible that a rectified late payment won't show up on your credit file immediately. It's a good idea to check your score before applying for a mortgage or any type of credit. If something appears amiss or outdated, contact the original creditor and request that they remove it.

It might not always be easy and it can take some time, but it's worth trying to improve your credit score. Assuming you meet the rest of the lender’s criteria, a better credit score typically gives you access to cheaper deals and better rates for your situation.

What Is Considered a Late Mortgage Payment?

Late mortgage payments are considered to be any payment that is more than 30 days overdue. However, some lenders may have different standards, so it's important to check with your lender to find out what their policy is.

If you make a late mortgage payment, you may be charged a late mortgage payment fee and your credit score could be affected if you get a late mortgage payment credit report mark.

In order to avoid these penalties, stay on top of your payments and make them on time each month. If you're ever in doubt, you can always call your lender and ask them for clarification on their policy.

Stamp duty

Do All Lenders Reject Applications with Late Mortgage Payments?

Most high street lenders won’t consider your mortgage application if they can see you have any late mortgage payments. There are some adverse credit lenders that will consider your mortgage application if you have one late payment that occurred a few years ago. If you have multiple late payments or a recent late payment you may struggle to find a lender willing to consider your application.

Although it may seem difficult, it is possible to get a mortgage or remortgage with late mortgage payments on your record. It’s best to use a mortgage broker like John Charcol in this situation as we’ll be able to match you with a lender that considers applications like yours on a case-by-case basis. In fact, many adverse credit lenders will only operate through intermediaries and won’t accept applications directly from clients.

What Other Factors Can Affect My Mortgage Application?

Aside from late payments, there are other factors that can affect your mortgage application:

  • Your credit score – if it's low as a result of late payments or something else, this will give lenders the impression that you're a higher risk borrower which means you may require an adverse credit lender
  • The size of your deposit – typically, the bigger your deposit and the lower your LTV, the better the rates and deals available to you
  • Your age – if you’re approaching retirement it may be harder for you to obtain a mortgage for the amount you want based on your earned income

How Can I Improve My Chances of Getting a Mortgage with Late Payments?

If you have late payments on your record, here are a few ways to improve your chances of getting a mortgage:

  • Repair your credit score – settle defaults and any outstanding debts and make all of your payments on time
  • Save up for a larger deposit – the bigger your deposit, the lower the risk to lenders. If you can, take some time to save up as much money as possible before applying for a mortgage
  • Use a mortgage broker like John Charcol – we’re familiar with different lenders and their policies and we have access to bad credit lenders who only work with intermediaries. This means we’ll be able to match you with the best deal for your situation

From mending your credit score to finding the right lender, there are many ways to improve your chances of getting a mortgage with late payments on your record.

One of the best steps you can take is to use a mortgage broker like John Charcol. As an independent, specialist and whole of market mortgage broker, we have access to a wide range of lenders which means we can find the right mortgage for your individual circumstances.

If you're looking to get a mortgage with late payments, get in touch with John Charcol today on 0330 433 2927.

First-Time Buyer Mortgages

If you’re thinking of buying your first home, discover the latest advice and the best first-time buyer mortgage rates available on the market with John Charcol today.

Applying for a Mortgage

Applying for a mortgage couldn’t be simpler with our easy and simple guide from application to accepting your offer.

How Much Can I Borrow?

This mortgage calculator examines your income and works out how much money a mortgage lender might provide you with

House Buying Mortgage Guide

Are you looking to buy your first home? Or perhaps want to move to a new area? Our step-by-step guide will tell you everything you need to know about buying a house.

Help to Buy Guide

Support from the government-backed Help to Buy initiative is available for first-time buyers and existing homeowners who are finding it difficult to move up the housing ladder.

House Mortgage Deposit

Saving a mortgage deposit for a house is definitely one of the biggest hurdles you face as a buyer. In our guide we explain how deposits work and ways you can save.

Mortgage Deposit Amounts

Learn all about the different mortgage deposit amount options, how they affect your mortgage, how they vary depending on what type of borrower you are & more.

Funding Home Improvements

There are a few ways to finance work on a house: get a home improvement loan, remortgage for home improvements, ask your lender for a further advance & more

Mortgage Glossary

On this page you’ll find our detailed mortgage terminology glossary. There’s a lot of jargon out there but we’re here to make it easy.