What counts as bad credit for a mortgage?
Bad credit — also known as adverse credit or impaired credit — covers a range of issues that appear on your credit file and indicate missed financial obligations. Not all adverse credit is treated equally: lenders apply a sliding scale based on the type and severity of the issue and how recently it occurred.
Common forms of adverse credit include missed payments, defaults, County Court Judgements (CCJs), debt management plans (DMPs), Individual Voluntary Arrangements (IVAs), and bankruptcy or repossession. Each carries different weight with lenders — and crucially, time is a major factor in how seriously each is viewed.
How lenders assess each type of adverse credit
Missed payments
One or two missed payments on a credit card or personal loan more than two years ago are viewed relatively leniently by many lenders, particularly if your credit conduct has been clean since. Recent missed payments — within the last 12 months — are treated far more seriously and will exclude you from many mainstream lenders entirely.
Defaults
A default is registered when a creditor gives up attempting to recover a debt after multiple missed payments. Defaults remain on your credit file for six years. Satisfied (paid) defaults are viewed more favourably than outstanding ones. The amount defaulted and how recently it occurred are key factors. Many specialist lenders will consider defaults registered two or more years ago.
CCJs (County Court Judgements)
A CCJ is a court order requiring you to repay a debt. CCJs are treated seriously by lenders. Satisfied CCJs (marked as paid) are viewed more favourably than outstanding ones. Most mainstream lenders will decline applications with any CCJ in the last three years; specialist lenders may consider satisfied CCJs after two years, depending on the amount.
IVA and debt management
An IVA (Individual Voluntary Arrangement) is a formal agreement to repay a portion of your debts over time. It remains on your credit file for six years from the date it started. During an active IVA, mortgage lending is very limited. Once satisfied, some specialist lenders will consider an application, typically requiring a larger deposit (25–30%) and a period of clean credit conduct.
Bankruptcy and repossession
Bankruptcy and repossession are the most serious forms of adverse credit. Most lenders require a minimum of three years since discharge from bankruptcy, with some requiring six years. A 25–35% deposit is typically required. Repossession is similarly serious, with lenders requiring evidence of a sustained period of clean credit since the event.
Specialist lenders: what they offer
Mainstream high-street lenders have strict credit policies and automated systems that decline applications with adverse credit automatically. Specialist mortgage lenders — sometimes called adverse credit or sub-prime lenders — have built their products specifically for borrowers with a less-than-perfect credit history.
These lenders assess applications on a case-by-case basis, taking into account the nature and age of the adverse credit, the size of the deposit, affordability, and the broader credit picture. Rates from specialist lenders are typically higher than mainstream products, reflecting the additional risk — but they can be a crucial stepping stone to rebuilding credit and eventually returning to mainstream rates.
Deposit requirements with adverse credit
The deposit required increases with the severity of the adverse credit. For minor issues such as a single missed payment a few years ago, some lenders will still consider 10–15% deposit applications. For defaults or CCJs, a 15–25% deposit is typically required. For IVAs, bankruptcy, or repossession, most specialist lenders require 25–35% or more.
A larger deposit not only improves your chances of approval but also reduces the LTV, which typically lowers the available interest rate from specialist lenders.
How improving your credit score helps
Even if you have existing adverse credit, improving your score in the months before applying can expand your lender options and potentially reduce the rate available. Key steps include: registering on the electoral roll at your current address, ensuring no accounts have an incorrect address, paying all current credit obligations on time, reducing credit card balances to below 30% of the limit, and avoiding new credit applications in the three to six months before your mortgage application.
Checking your credit reports from all three main credit reference agencies — Experian, Equifax, and TransUnion — and correcting any errors is also important. Errors on credit files are not uncommon and can unnecessarily worsen your score.
How a broker helps with bad credit mortgages
A whole-of-market broker with experience in adverse credit mortgages is essential for navigating this market. Applying directly to multiple lenders leaves a trail of hard credit searches, which can further damage your score. A broker makes a single, targeted application to the most appropriate lender for your specific credit profile.
At Mortgage International, we work with specialist lenders who are not available on comparison sites and who we know will consider your circumstances. We present your case in the most favourable light, helping you access the right rate and start rebuilding your credit history through a responsible mortgage.
Roger Iyamu
CeMAP Qualified Mortgage Adviser | FCA Regulated
Roger has over 15 years of experience as an independent mortgage adviser. CeMAP qualified and FCA regulated, he specialises in complex mortgage cases including self-employed applicants, portfolio landlords, expat mortgages and high-value purchases across Greater London and the Home Counties.
All advice provided by Mortgage International is given by CeMAP qualified advisers regulated by the Financial Conduct Authority.