The Adverse Credit Ladder
Lenders categorise adverse credit broadly from lightest to most severe. Understanding where you sit determines which lenders can help and at what rate premium:
Missed or Late Payments (1-2, over 2 years ago)
Many lenders - including some building societies - will accept limited missed payment history where the events are isolated and older than 24 months. The impact on rate is minimal at this level. Lenders typically require the relevant accounts to now be in good standing.
Defaults (satisfied or unsatisfied)
A registered default is more serious. Satisfied defaults (marked as settled) are treated significantly better than unsatisfied defaults. Most specialist adverse lenders will consider satisfied defaults regardless of age. Unsatisfied defaults are a barrier for most lenders - settling before applying is strongly advised where possible.
County Court Judgments (CCJs)
Satisfied CCJs - particularly those over three years old - are manageable for specialist lenders. Unsatisfied CCJs are a barrier for most lenders, including most adverse specialists. The time since the CCJ and the amount involved both affect the response.
Debt Management Plans (DMP)
Borrowers currently in a DMP have limited options. Those who have completed a DMP and have clean credit since completion are better placed - specialist lenders will consider completed DMPs typically from 12-24 months after the final payment.
IVAs and Bankruptcy
An Individual Voluntary Arrangement (IVA) severely restricts options while active. Post-IVA, specialist lenders will consider applications typically three to six years after completion. Discharged bankruptcy is similarly a barrier while recent - most specialist lenders want to see 3-6 years post-discharge before consideration, though some specialist products exist from 12 months post-discharge with a sufficiently large deposit.
How Deposit Size Affects Adverse Credit Mortgages
Deposit size is the single most powerful lever for adverse credit borrowers. A 15-20% deposit opens significantly more lender options than a 5-10% deposit. At 35-40% deposit, some lenders will consider severe adverse credit that would otherwise be declined. This is because the lender's risk is primarily covered by the property equity - the lower the LTV, the more comfortable they are with adverse credit history.
Key Specialist Adverse Lenders
Several lenders on the DBF panel specifically focus on adverse credit mortgages: Kensington Mortgages, Pepper Home Loans, Norton Home Loans, Bluestone Mortgages, Together Money, Vida Homeloans, and Precise Mortgages. Each has different criteria around the type, age, and severity of adverse events they will accept. Knowing which lender to approach first - without generating unnecessary credit footprints - is the core value of an adverse credit specialist broker.