There has been some interesting data around household finances in the UK recently.
The Bank of England’s latest Credit Conditions Survey found that lenders reported an increase in default rates on unsecured lending during the second quarter of 2026, including credit cards and other unsecured loans. Lenders also expected defaults on unsecured lending to increase again in the following quarter.
The latest individual insolvency figures also show some movement. In August 2026, individual insolvencies in England and Wales were 3% higher than in August 2025.
However, it would be too simplistic to say that adverse credit is simply ‘increasing’.
Other measures tell a different story. Recent household data showed the proportion of households reporting missed payments was broadly unchanged between July and August, and below the level recorded earlier in the summer.
What the figures do show is that financial circumstances remain an important issue for many households.
And for anyone who has experienced financial difficulty, one of the biggest problems can be understanding the terminology.
You may have heard phrases such as adverse credit, default, CCJ, arrears, DMP or IVA without being entirely sure what they mean — or, more importantly, what they could mean when you apply for a mortgage.
What does ‘adverse credit’ actually mean?
‘Adverse credit’ isn’t a specific entry that appears on a credit report.
It’s a broad term used within the mortgage and lending industry to describe a history of financial difficulties that may make obtaining credit more complicated.
This can include:
- Missed payments
- Arrears
- Defaults
- County Court Judgments (CCJs)
- Arrangements to Pay
- Debt Management Plans (DMPs)
- Individual Voluntary Arrangements (IVAs)
- Bankruptcy
These are very different things, however.
That’s why simply describing someone as having ‘bad credit’ doesn’t tell you very much.
The detail behind the credit history matters.
Missed payments and arrears
A missed payment is a payment that hasn’t been made when it was due.
If payments continue to be missed, an account can move into arrears.
The two terms are sometimes used interchangeably, but they aren’t necessarily describing exactly the same thing.
A single missed payment isn’t automatically the same as having a default recorded on your credit file. The circumstances, the account involved and the lender’s reporting all matter.
What is a default?
A default is a more serious credit-file marker.
It can be recorded when a lender considers that the terms of a credit agreement have been broken and the account is no longer being maintained as agreed.
The timing can vary, but defaults are generally associated with a period of sustained missed payments rather than one isolated late payment.
Defaults can appear in relation to different types of credit, including loans and credit cards.
If you see a default on your credit report, the date of the default and what has happened since can be important when considering a future mortgage application.
What is a CCJ?
CCJ stands for County Court Judgment.
A CCJ is a court judgment relating to money owed.
If a creditor takes court action over an unpaid debt and obtains a judgment, this can be recorded as a CCJ.
For mortgage purposes, the detail surrounding a CCJ matters.
For example:
- When was it registered?
- How much was involved?
- Has it been paid?
- Is it satisfied or still outstanding?
A CCJ therefore isn’t simply a case of ‘yes, you have one’ or ‘no, you don’t’.
What does ‘satisfied’ mean?
You may see the word satisfied alongside a CCJ.
This means the judgment has been paid in full.
It doesn’t necessarily mean that the historic entry immediately disappears from the credit record.
The timing and circumstances can therefore be important when assessing a mortgage application.
What is an Arrangement to Pay?
An Arrangement to Pay, sometimes abbreviated to AP, is where a borrower and lender agree a different repayment arrangement.
This may happen where the borrower is unable to maintain the original contractual payments.
An arrangement to pay can therefore be an indication of previous financial difficulty, but it is different from a default or a CCJ.
Again, the circumstances and dates matter.
What is a Debt Management Plan?
A Debt Management Plan, or DMP, is an arrangement designed to help someone repay certain debts at an affordable rate.
Typically, the borrower makes one regular payment to a DMP provider, which then distributes payments to creditors.
A DMP is different from a formal insolvency procedure. It is generally a non-statutory arrangement between the borrower and creditors.
If someone has previously been in a DMP, this can form part of the information considered when looking at their mortgage circumstances.
What is an IVA?
IVA stands for Individual Voluntary Arrangement.
An IVA is a legally binding agreement with creditors, arranged through an insolvency practitioner.
The person makes agreed payments towards their debts, normally over a number of years, with the arrangement dealing with the debts included in it.
An IVA is therefore considerably different from a missed payment or a single default.
Recent insolvency statistics show that IVAs remain a significant part of individual insolvencies in England and Wales, with the number registered in August 2026 higher than the same month a year earlier.
What about bankruptcy?
Bankruptcy is another form of formal insolvency.
It is a legal process for dealing with debts when someone is unable to repay them.
Like an IVA, bankruptcy represents a significant event in someone’s financial history.
It shouldn’t, however, simply be grouped together with every other form of adverse credit. The circumstances, dates and current financial position are all relevant.
So, what does adverse credit mean for a mortgage?
This is where the terminology becomes particularly important.
There isn’t one universal rule that says:
‘You have adverse credit, therefore you can’t get a mortgage.’
Mortgage lenders have different criteria, and they can consider different types of credit history in different ways.
The questions that may need to be considered include:
What happened?
Was it a missed payment, a default, a CCJ, an arrangement to pay or something more serious?
When did it happen?
Recent financial difficulties can be very different from problems that happened several years ago.
Has the situation been resolved?
For example, has a CCJ been satisfied or has a defaulted account subsequently been settled?
What has happened since?
A credit history is a record of what has happened in the past. The circumstances today are also important.
What does the rest of the financial picture look like?
Income, expenditure, existing borrowing, deposit, employment and affordability can all form part of a mortgage assessment.
Why specialist mortgage advice can help
The term ‘adverse credit’ covers a wide range of circumstances.
That’s why it can be unhelpful to make assumptions based on a single entry on a credit report.
A default isn’t the same as a missed payment.
A CCJ isn’t the same as a DMP.
An IVA isn’t the same as an arrangement to pay.
And the date and circumstances behind each of these can matter.
For someone who has experienced financial difficulty, the most useful starting point is often to understand exactly what is showing on their credit history before making assumptions about what is or isn’t possible.
At Custom Mortgages & Finance, we help clients whose financial circumstances don’t always fit a straightforward mortgage application.
If you’re unsure about something on your credit report, understanding what the terminology means is a good place to start.
Your financial history is part of the picture. It isn’t necessarily the whole picture.
