The most common and most likely answer to this crossword clue is the 7 letter word COCK-UP
I've seen this crossword clue in Independent
C
O
C
K
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Buddy explains!
The straight part
We know that "Terrible mistake" is the straight/definition part of the clue. The straight part is often a synonym or definition, in this case terrible mistake = cock-up.The cryptic/wordplay part
In cryptic crossword there's often an wordplay/cryptic part as well.This part involves a more complex hint, such as an anagram, homophone, hidden word, etc.
Sadly, We don't have an explanation for this specific crossword clue yet.
What does COCK-UP mean?
COCK-UP noun- (mildly) A mistake.
- A superior letter. A lower-case letter placed above the baseline and made smaller than ordinary script; traditionally used in abbreviations.
- A roll or twist of hair worn at the nape of the neck; a bun.