Can You Get a Mortgage With Open Low Balance Defaults?

It’s more common than many borrowers think: small-value defaults appearing on a credit file years after a missed bill or disputed charge. These low-balance defaults — often under £200 — can still cause concern, especially when they remain open rather than settled. If you’re preparing to apply for a mortgage, you may be wondering how lenders view these entries and whether they will block approval.

The positive news is that a mortgage with open low balance defaults is still possible, and for some lenders, the size and nature of the default matter just as much as the presence of the default itself. This guide explains how lenders assess open defaults, why low-balance entries are treated differently, and how to prepare for a smoother mortgage application. This is general information only and not regulated mortgage advice.

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What Counts as a Low Balance Default?

Low balance defaults typically involve small outstanding amounts arising from:

• Mobile phone contracts
• Utility bills
• Broadband or TV subscriptions
• Old service charges
• Parking or local authority-related fees
• Disputed final bills

While the amounts may be small, lenders still treat defaults as negative markers.

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Why Does the “Open” Status Matter?

A default that remains open means:

• The debt has not been settled
• The lender considers the balance outstanding
• Repayment has not been completed

Many high street lenders prefer defaults to be settled, even if the balance is small. The open status signals unresolved financial commitments, which increases perceived risk.

The good news: specialist lenders may still consider applications with open defaults, depending on the size, age, and circumstances.

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Do Low Balance Defaults Always Affect Mortgage Approval?

Not necessarily. Lenders assess defaults based on:

• Age of the default (older defaults carry less weight)
• Balance owed (lower balances often viewed more leniently)
• Number of defaults
• Whether defaults are open or settled
• Affordability and income stability
• Overall credit profile
• Bank statement conduct

A single open default for £50 is vastly different from multiple open defaults across several accounts.

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How High Street Lenders View Open Low Balance Defaults

High street lenders tend to be cautious. Their typical approach:

• Open defaults: Usually unacceptable, even at low balances
• Low-balance settled defaults: Often acceptable if they are older (e.g., 3+ years)
• Recent defaults: More scrutiny regardless of balance
• Multiple defaults: May require specialist consideration

High street lenders prefer clean, settled credit files with predictable recent conduct.

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How Specialist Lenders View Open Low Balance Defaults

Specialist lenders may take a more flexible approach:

• Open defaults under £300–£500 may be accepted
• Older defaults may be disregarded entirely
• Context matters — e.g., disputes, administrative errors, or overlooked final bills
• Stable income and good bank conduct can offset concerns

Manual underwriting means specialists examine the full picture rather than relying solely on automated scoring.

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Key Factors Lenders Consider

1. The Age of the Default

Defaults more than three years old often carry significantly less weight.

2. The Balance

Low balances suggest minor administrative issues rather than structural financial problems.

3. Your Overall Credit Behaviour

Lenders look for:

• No recent missed payments
• Controlled borrowing
• Clean bank statements
• No reliance on overdrafts or high-cost credit

4. Number of Defaults

One small default may be acceptable; multiple defaults signal a pattern.

5. Reason for the Default

Underwriters may be more understanding if the default resulted from:

• A disputed charge
• A forgotten final bill after moving
• A provider error
• Administrative issues

6. Repayment Plan or Intention to Settle

Some lenders want the default settled before completion, even if they accept the application.

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Should You Settle a Low Balance Default Before Applying?

Some applicants choose to settle their defaults before applying, but it depends on timing and lender requirements.

General information (not advice):

• Settling an older default does not reset the default date.
• Many lenders view settled defaults more favourably.
• Settling a very recent default may still require a few months of clean conduct.
• If a lender requires defaults to be settled, paying them off early in the process helps avoid delays.

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How Open Low Balance Defaults Impact Affordability

Defaults do not directly affect affordability calculations.
However, they can:

• Reduce lender choice
• Push applicants toward specialist products
• Lead to more cautious income multiples
• Increase documentation requirements

Affordability is still based on income, outgoings, and commitments — not the default amount.

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What Underwriters Really Look For

Underwriters will assess:

1. Evidence that the issue is resolved or being addressed

This could include proof of settlement or dispute resolution.

2. Your recent bank statements

They check for:

• Returned direct debits
• Persistent overdraft use
• BNPL reliance
• Irregular spending
• Stable income patterns

3. Credit use since the default

Consistent, positive credit behaviour can outweigh an old, low-balance default.

4. Affordability strength

Strong surplus income helps mitigate perceived risk.

5. Deposit size

Larger deposits reduce lender exposure.

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Common Scenarios

Scenario 1: A £50 open mobile phone default from three years ago

Many lenders — including some high street lenders — may accept once settled.

Scenario 2: Multiple open low balance defaults from utilities

Likely needs specialist underwriting.

Scenario 3: A recent open default for £80

High street lenders may decline; specialist lenders may consider.

Scenario 4: Default disputed and under investigation

Lenders may request documentation or delay the decision until resolved.

Scenario 5: Older default that has been recently settled

May still be acceptable depending on timing and recent financial conduct.

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How to Strengthen Your Application

(General Information Only)

Many applicants choose to:

1. Check their full credit report

Including Experian, TransUnion and Equifax.

2. Settle low balance defaults early

If appropriate for their situation and lender expectations.

3. Ensure consistent address history

Helps improve credit matching and reduce identity checks.

4. Minimise overdraft reliance

Strong account conduct reassures lenders.

5. Avoid new borrowing before applying

Prevents additional searches and rising utilisation.

6. Maintain clean credit conduct for 3–6 months

Recency of behaviour is highly influential.

These are general considerations only and not regulated advice.

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Summary

A mortgage with open low balance defaults is still possible, but lender decisions depend on:

• Whether the default is open or settled
• The age and value of the default
• Overall credit and bank statement conduct
• Affordability strength
• Number of defaults
• High street versus specialist lending criteria

Open defaults usually require more explanation and may lead to specialist lender options, but small-value entries — particularly historic ones — do not necessarily block mortgage approval.

This article provides general information only. For personalised recommendations, regulated mortgage advice is required.