Impaired Credit: What It Really Means for Your Mortgage

Impaired credit (you might also hear it called adverse or bad credit) simply means you’ve had some financial bumps in the road. You’re not alone. It’s very common in the UK, and it doesn’t necessarily mean you can’t get a mortgage.

When lenders look at impaired credit, they’re not just ticking boxes. They usually want to understand what happened, how serious it was, and how long ago it was. Context matters.

Here are the most common types of impaired credit and how lenders tend to see them:

Missed or late payments
This is one of the most common issues and can happen for all sorts of reasons. It includes late or missed payments on credit cards, loans, mobile phone contracts, or even utility bills. One or two missed payments from a few years ago are usually not a big deal. A pattern of recent missed payments though, can raise more questions but again does not necessarily mean you cannot get a mortgage.

Defaults
A default is added when payments have been missed for several months in a row. While it sounds scary, it’s not always a deal-breaker. Mainstream lenders usually feel more comfortable with defaults that are older and fully paid off, compared to ones that are recent or still outstanding. Specialist lenders may be able to help with defaults over3-6 months old regardless of whether they have been paid off.

County Court Judgments (CCJs)
CCJs happen when a debt goes to court and the judgment is made against you. Recent, large, or unpaid CCJs can limit your mortgage choices, but if a CCJ is older or has been settled, some lenders may still be open to helping, especially if the rest of your finances look solid. Specialist lenders may be able to help with CCJs over 3-6 months old regardless of whether they have been paid off.

Debt Management Plans (DMPs)
A DMP is an informal arrangement to repay debts at a more affordable level. Some lenders see this as higher risk, while others are happier if you’ve kept up with payments and your balances are steadily coming down. Consistency goes along way here.

Individual Voluntary Arrangements (IVAs)
An IVA is a formal, legally binding agreement to repay part of your debts over a set period. It does have a big impact on your credit file, but it doesn’t shut the door forever. Once the IVA is completed and you’ve had time to stabilise your finances, mortgage options can start to open up again. Specialist lenders may be able to help with an active IVA but would require a higher deposit e.g. 25%.

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Bankruptcy
Bankruptcy is the most serious form of credit impairment. High-street lenders usually won’t lend during or immediately after bankruptcy, but that doesn’t mean you’re stuck. Specialist lenders may consider applications once you’ve been discharged.

Low credit score or a thin credit file
Sometimes the issue isn’t bad credit, it’s barely any credit at all. If you haven’t used much credit, lenders have less to judge you on. The good news is this is often one of the easiest situations to improve, as lenders mainly want to see evidence of sensible, responsible credit use and well conducted bank statements.

Most credit issues stay on your UK credit file for six years before dropping off. Plenty of people with impaired credit can still get a mortgage. It all depends on the type of issue, how recent it was, whether it’s been settled, and your wider picture. Things like your deposit, income, and affordability.

Impaired credit doesn’t define you, and it doesn’t mean homeownership is off the table. With the right advice and the right lender, there are often more options than people expect. A specialist mortgage broker (like us) can help you understand where you stand, find lenders who are more flexible, and map out the next steps, without the judgment or the jargon.