How lenders read adverse credit when you apply for a mortgage

From your application to a lender's decision

With adverse credit in your history, an application goes through several checks, and each one shapes the next.

1. 1

   The lender checks your credit file

   When you apply, the lender searches your credit file. The search shows every CCJ, default, missed payment, debt management plan, IVA or bankruptcy on record, with the dates and amounts.

   Soft search

   A first look that lenders use before a full application. It does not affect your credit score.

   Hard search

   Made when you apply in full. Other lenders can see it on your file.

2. 2

   The lender weighs each entry

   The lender looks at what kind of entry each one is, when it happened, how large it was, and whether it has been satisfied, meaning paid off and marked as settled on your file.

   Satisfied

   Marked as paid. Most specialist lenders treat this more favourably, though the entry still shows on your file.

   Unsatisfied

   Still owed. Fewer lenders are likely to consider the application, though some still may.

3. 3

   The lender places the application in a risk tier

   Lenders group applications by risk, looking at the type, age, size and status of each entry together.

   An old, small default you have paid puts an application in a very different place from several recent defaults still owed, though both count as defaults.

4. 4

   A high-street lender's system may decline it before anyone reads it

   Many mainstream lenders use automated credit scoring, which can decline an application with adverse credit before an underwriter sees it. A decline at this stage comes from that lender's automated criteria.

   Automated decline

   The application stops there, at that lender.

   Passes the filter

   An underwriter reviews the file.

5. 5

   An underwriter at a specialist lender reads the whole file

   Specialist lenders generally have an underwriter read adverse-credit applications. The underwriter weighs the age and size of the adverse credit against your income now, how you have kept up payments recently, and the deposit or equity you bring. The date of a past CCJ stays fixed; how you manage credit from now on is up to you.

6. 6

   The lender decides

   The lender makes an offer, declines, or asks for more information first. Which lender offers, and on what terms, depends on that lender's own criteria at the time.

   Offer made

   The lender sets terms on its own reading of the risk.

   Declined

   Each lender has its own reasons, and one lender's decline does not predict another's.

   More information requested

   The underwriter asks for more detail before deciding.

The lender assessing your file makes the decision. Our eligibility tool shows how a combination of factors is usually weighed; only a lender can say what it will decide.