Finding a default on your credit file can be unsettling; and for many people, it brings a fear that a mortgage with unsecured defaults simply isn’t possible. It’s a common belief, and an understandable one. Defaults tend to look severe on paper, and they stay visible on your credit report for six years. But despite how they appear, a default does not automatically mean a mortgage decline.
Before we dive in, it’s important to clarify what we are talking about. This guide focuses specifically on unsecured defaults – things like credit cards, personal loans, utility bills, mobile phone contracts, and mail-order accounts. We’re not covering CCJs, IVAs, DMPs, bankruptcy or repossession here, as those fall under much stricter lending categories.
The good news? UK lenders don’t treat all defaults the same. Instead, they assess risk using three key pillars: Regency, Status and Value. A single historic or low-value default – especially one that’s now settled – is often far less of a barrier than people expect. Lenders apply their own rules with defaults being an evaluated risk, not an automatic rejection.
This guide breaks down exactly how lenders interpret defaults, and if you prefer tailored advice for your own circumstances, our contact page is always available.
The Three Key Pillars of Default Assessment
When lenders review an application that includes unsecured defaults, they break the risk down into three key areas. Understanding these pillars will help you see how lenders reach decisions, and see why two people with defaults can have very different outcomes.
- Recency – When did it happen?
Defaults are time-sensitive. A default registered six months ago carries significantly more weight than one that happened several years ago. Older defaults often fall into more flexible lending tiers, and some lenders may even ignore them entirely once enough time has passed. - Status – Is it satisfied or still outstanding?
A satisfied default shows you recognised and resolved the issues, which reduces perceived risk. An unsatisfied default suggests an ongoing problem. Some lenders insist all defaults must be settled, while others – particularly specialist lenders – are more flexible. - Value and Type – How much was it for, and what kind of debt was it?
Not all defaults are viewed equally. Small amounts are often disregarded or treated as minor. Utilities and communication defaults, such as a missed mobile phone bill, are also seen as less serious than defaults on loans or credit cards.
These pillars allow lenders to judge whether a default was a brief blip, a misunderstanding, or a sign of deeper financial difficulty.
Pillar 1: Recency – The Passage of Time is Your Ally
Time is one of the biggest factors in determining whether you can secure a mortgage with unsecured defaults. Lenders are ultimately assessing current risk, not whether you have ever made a mistake, but whether the issue is likely to repeat. The further away the default sits in your history, the less relevant it become.
Recent Defaults (0-12 Months)
Defaults registered within the last year are the hardest to place. Most high street lenders, and even many specialist ones, will automatically decline applications with defaults from the last 12 months.
Examples include:
- Pepper Money requires zero defaults registered in the last 6 months.
- Atom Bank (Near Prime) requires zero defaults registered in the last 12 months.
If your default is very recent, waiting even a few months can significantly improve your options.
Intermediate Defaults (12-36 Months)
Once you pass the 12 month mark, the market opens up considerably. You’ll often still fall into a specialist or “near prime” tier, but many lender become much more flexible.
Examples include:
- Dudley Building Society separates its criteria into two age brackets – defaults within 3 years and those older than 3 years, with more tolerance as the default ages.
- Tandem uses a tier-based approach – Tier 1 accepts 1 default in 24 months, Tier 2 accepts 2 defaults in 24 months, Both require 0 defaults in the last 3 months.
This is often the point where applicants realise they may not need to wait the full six years for the default to drop off their file.
Historic Defaults (>36 Months)
Once you reach the three-year point the landscape changes again. Defaults older than 36 months are viewed much more leniently, and in many cases, lenders will disregard them entirely – especially if they were low valued or are now satisfied.
Examples include:
- Vide Homeloans (Vida 36 tier) accepts both satisfied and unsatisfied defaults older than 36 months.
- The Co-operative Bank (Access) accepts defaults once they are over 36 months old.
- Aldermore may consider defaults older that 36 months, even if they remain unsettled.
At this stage your profile may look almost identical to a standard applicant; especially if the default was low value or linked to utilities or communications.
Pillar 2: Status and Value – Small Blips vs. Major Red Flags
Not all defaults have the same impact, and in many cases the type, value, and status of the default matter more than the default itself. Lenders look closely at what caused the issue, whether it has been resolved, and whether the amount involved suggests a one-off oversight or a deeper financial strain.
Satisfied vs. Unsatisfied Defaults
A satisfied default is always viewed more positively because it shows you’ve taken steps to remedy the situation. Some high street lenders insist that all defaults must be satisfied before they’ll consider an application.
For example:
- Furness Building Society requires all defaults to be satisfied.
- Buckinghamshire Building Society requires defaults (outside of DMPs) to be settled on or before completion.
However, specialist lenders tend to be more flexible:
- Tandem states that defaults don’t usually need to be satisfied unless the balance is very high (typically above £2,000).
- Vida, Pepper, Aldermore and others frequently accept unsatisfied defaults depending on age and value.
This is where using the right lender becomes critical. Some see an unsatisfied default as a deal-breaker, while other will overlook it entirely.
Why Low-Value Defaults Are Often Ignored
Small defaults are commonly treated as minor administrative issues rather than signs of financial instability. Many lenders set clear thresholds below which a default may be disregarded or handled under more flexible criteria.
Threshold Examples:
Defaults under £100
- Teachers Building Society ignores a single communication default under £100.
- Saffron Building Society allows unsettled defaults up to £100.
Defaults in the £200-£350 Range
- Barclays declines cases where satisfied defaults exceed £200 within three years.
- Pepper Money may ignore 1-2 utility, comms, or mail-order defaults up to £200 each depending on the product tier.
- United Trust Bank disregards CCJs and defaults under £300.
- Tandem ignores utility and communication defaults under £350 when determining the product tier.
Defaults Up to £500
- Principality classes defaults above £500 in the past six years as adverse credit.
- The Co-operative Bank declines mainstream applications where defaults above the last six years exceed £500.
- Dudley Building Society allows greater default value below 80% LTV but restricts it to a £500 maximum above 80% LTV.
Why the Type of Default Matters
Some lenders make a distinction between serious credit failures and day-to-day utility issues. Defaults of utilities, mobile phones, or mail-order accounts are often viewed as less significant than missed payments on loans or credit-cards.
Pillar 3: Product Tiers and LTV Limits
Even when lenders accept a mortgage with unsecured defaults, they often use tiered products and Loan-to-Value (LTV) limits to manage risk. Put simply: the more severe or recent the defaults, the lower the maximum LTV available.
Understanding Tiered Lending
Lenders manage the risk of defaults by operating on a tier system. Each tier represents a different risk level, and your credit history determines which tier you fall into. Lower tiers have stricter criteria, and typically require a larger deposit.
Examples of Tiered Lending Structures
Dudley Building Society
- Up to 80% LTV: More flexible – allows up to £1,000 of defaults (satisfied or unsatisfied) within 3 years, or £5,000 if older.
- Above 80% LTV: Much stricter – defaults must be satisfied and total less than £500
Aldermore
- Level 1: Up to 95% LTV
- Level 2: Up to 90% LTV
- Level 3: Up to 80% LTV (most flexible – allows older adverse as long as there are no defaults/CCJs in the last 6 months)
Bath Building Society
- Shows maximum flexibility up to around 70% LTV, accepting unsatisfied defaults up to £5,000 if registered over 2 years ago.
These structures meant that applicants may secure a mortgage with unsecured defaults, but they may need a slightly larger deposit or a product designed for higher risk profiles.
Debt Consolidation Consideration
For remortgage applicants wanting to clear unsecured debt, lenders will often impose additional restrictions.
Examples include:
- Consolidation may be capped at 85% or 80% LTV, depending on credit score.
- Some lenders set a maximum total consideration amount, such as £50,000 unsecured debt or a cap on the number of debts (e.g., 10 debts).
- United Trust Bank is a notable exception – it explicitly states that it has no debt consolidation LTV restrictions.
Taking the Next Steps
Having unsecured defaults on your credit file doesn’t mean your mortgage hopes are over. Lender assess defaults through the lens of three key pillars: Recency, Status and Value. A historic, low-value, or satisfied default is often considered a minor issue, and many specialist and near-prime lenders take a common-sense approach.
Because criteria vary so widely working with a broker can make the difference between an approval and a decline. At AALTO Mortgages, we can help you understand which lenders are likely to accept your specific credit profile and guide you toward the most suitable options. With the right lender, the right timing, and the right strategy, a mortgage with unsecured defaults is very often possible.
