Mortgages for People With Old Defaults That Are Now Settled: Clear, Practical Guidance
Having defaults on your credit file can feel like a barrier to getting a mortgage, but that’s not always the case — especially when those defaults are older and marked as settled. Many lenders recognise that financial circumstances change over time, and they assess applicants on recent behaviour as much as their past credit history.
This guide explains how lenders view mortgages for people with old defaults that are now settled, which options exist, and how to prepare a strong application. This article provides general information only and does not offer regulated mortgage advice.
Why Settled Old Defaults Matter Less Over Time
A default stays on your credit file for six years from the date it was registered. Once settled, the record updates to show you’ve repaid the debt.
To lenders, this demonstrates:
- Responsibility in dealing with outstanding debt
- Financial recovery
- A reduced ongoing risk
As defaults age, their impact decreases — particularly if your recent financial conduct is stable.
How Lenders Assess Old Settled Defaults
Lenders don’t treat all defaults the same. Their decision depends on:
1. The Age of the Default
The older the default, the less importance it carries.
General lending attitudes:
- 0–12 months old: Most restrictive period
- 1–3 years old: Specialist lenders typically required
- 3–6 years old: Many flexible lenders may consider
- 6+ years old: Defaults drop off your file entirely
Settled defaults older than two or three years are often viewed as low risk by lenders who accept some level of historic adverse credit.
2. Whether the Default Is Settled or Unsettled
Settled defaults are significantly more favourable because they show:
- You addressed the debt
- The issue is no longer ongoing
- You have taken control of your finances
Some lenders specifically require defaults to be settled before they will assess an application.
3. The Value of the Default
Lower-value defaults (e.g., telecom or utility defaults under £500) are viewed more leniently. Higher-value defaults require more time to pass and a stronger overall profile.
4. The Number of Defaults
One or two old settled defaults is manageable for many lenders. Multiple defaults are still workable, but lender choice depends heavily on:
- Age of each default
- Total number
- Timing and clustering
- Deposit size and affordability
Defaults registered at the same time are often treated as a single event.
5. Your Recent Credit Behaviour
Lenders pay close attention to:
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- 12 months of clean payments
- Low credit utilisation
- No new adverse credit
- Stable bank statement conduct
- Responsible use of existing credit
Recent behaviour matters more than older issues.
6. Whether You Have Rebuilt Your Profile Since the Default
Lenders want to see evidence of financial recovery, such as:
- A small number of well-managed accounts
- Clear repayment patterns
- Stable income
- Predictable spending behaviour
Mortgage Options for People With Old Settled Defaults
1. High-Street Lenders
Some high-street lenders accept older settled defaults, particularly when:
- Defaults are more than 3–4 years old
- Amounts are small or moderate
- You have a good deposit
- Credit conduct since the defaults is strong
Not all mainstream banks accept defaults, but several do under the right circumstances.
2. Manual-Underwriting Lenders
These lenders review applications individually and consider:
- Why the default occurred
- How your finances have improved
- Whether your recent conduct is consistent
Manual underwriters frequently accept older settled defaults, even if multiple.
3. Specialist Adverse Credit Lenders
These lenders consider:
- Multiple defaults
- Larger defaults
- Defaults under three years old
- Complex situations
Rates may reflect the risk, but affordability assessments are often more flexible.
4. Joint Applications
When applying jointly:
- Lenders assess both applicants
- A partner with stronger credit improves options
- But your defaults must still fit the lender’s criteria
Joint applications work well when the settled defaults are older and the second applicant’s profile is clean.
How Deposit Size Affects Your Options
Deposit size is one of the strongest factors in mortgage approval.
General expectations:
- 5–10% deposit: Limited if defaults are under 3 years old
- 10–15% deposit: Wider specialist options
- 15–25% deposit: More flexible high-street options
- 25%+ deposit: Many lenders more relaxed about older defaults
A larger deposit reduces lender risk and increases the likelihood of approval.
Common Scenarios and Lender Responses
Scenario 1: One default from four years ago, settled quickly
Many lenders may accept.
Scenario 2: Several telecom defaults from five years ago, now settled
Often treated as low-risk; some high-street lenders open to this.
Scenario 3: One large default from two years ago, settled recently
Specialist lenders likely required until more time has passed.
Scenario 4: Old settled defaults but recent missed payments
Recent behaviour matters more than old defaults; lenders may hesitate.
Scenario 5: Default removed after six years, but other conduct weak
Default no longer visible, but lenders assess overall stability and bank conduct.
How to Strengthen Your Application When You Have Old Settled Defaults
(General Information Only)
1. Maintain 12 Months of Perfect Payment Conduct
Recent reliability reassures lenders.
2. Keep Credit Utilisation Low
Under 30–50% is preferred.
3. Avoid New Credit Applications Before Applying
Multiple credit checks can reduce approval chances.
4. Ensure Your Credit Files Are Accurate
Check Experian, Equifax and TransUnion for:
- Correct default dates
- Correct settlement status
- No duplicate entries
5. Improve Bank Statement Conduct
Lenders look for:
- No unarranged overdrafts
- No returned payments
- Predictable spending
6. Save a Larger Deposit
A bigger deposit widens your lender options significantly.
7. Prepare Clear Explanations If Asked
If your defaults resulted from:
- Illness
- Redundancy
- Relationship breakdown
- Business challenges
…underwriters often take this into account.
Can You Get Good Rates With Old Settled Defaults?
Yes, depending on:
- Age of defaults
- Deposit size
- Recent financial behaviour
- Lender criteria
Old, small, settled defaults often have little influence on pricing if the rest of your profile is strong.
Summary
Many applicants successfully secure mortgages for people with old defaults that are now settled, especially when:
- Defaults are several years old
- They are marked as satisfied
- Recent financial conduct is clean
- Deposits are strong
- Income and affordability are stable
Lenders care more about your current stability than historic problems. With the right preparation, even applicants with multiple old settled defaults can access a wide range of mortgage options.
This article provides general information only. For personalised support, regulated mortgage advice is required.
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Important information: Mortgage Bridge provides information only and acts as a mortgage introducer. We do not provide mortgage advice or make lender recommendations. We can introduce you to an FCA-regulated mortgage adviser who can provide personalised mortgage advice.