Which Credit Issues Affect A Mortgage Decision?

September 7, 2022

People are often told it is not worth applying for a mortgage if they have a poor credit history. However, this is incorrect, especially if you use a broker who is experienced at helping clients with adverse credit issues. There are lenders who have more flexible attitudes than you might have been led to believe, if you are given the right advice.

That said, some credit issues are regarded as more serious than others. If your problems were a few years in the past, and you have taken steps to improve, then you may be in a stronger position than you think. Adverse credit events stay on your file for six years, so if they were longer ago than that, you should be in the clear.

Even if they were not in the very recent past but still on your file, some lenders may not dismiss your mortgage application outright. If you can demonstrate some past history of meeting loan repayments, or paying bills on time, this will help your case.

Defaults

The lender will consider how many defaults (when you don’t pay a bill at all) you have had. They will look to see how long ago the default event happened, how many times it has happened, and how much money was involved. If you paid the debt off at a later date, they may take this into consideration.

Late payments

The lender will also check for any record of late payments on your file. These are generally not taken as seriously as defaults, as the payment was met at some point, and it may have been unintentional. Again, they will check how many late payments have occurred, how long ago they occurred, and how much money was involved.

Bankruptcies

If you have been declared bankrupt, then this is an obstacle to getting a good mortgage deal, but it doesn’t mean it is impossible, if you are prepared to accept a non-standard deal. You will need to wait until you have been discharged from the bankruptcy, in some cases for 12 months afterwards.

Bear in mind that most lenders will also request a bigger deposit if you have a bankruptcy showing on your credit file, of between 20% to 50%.

County Court Judgements (CCJs)

CCJs are when someone takes legal action to recover a debt from you. A lender will consider the amount of money involved, if it was repaid in full, and how long ago it happened.

Debt Management Plans (DMPs)

DMPs are put in place to help an individual pay off non-priority debts at a rate they can afford. There are specialist lenders who may agree to a mortgage deal if you are keeping up with your repayments.

Individual Voluntary Agreement (IVA)

An IVA is a legal agreement between an individual and a creditor to repay debts at an affordable rate. It is regarded as a more flexible option to bankruptcy. Again, some specialist lenders will consider an application, if there is evidence that the repayments are being met.

If you would like some advice from poor credit mortgage brokers, please get in touch today.

Your home may be repossessed if you do not keep up with your mortgage repayments.

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