Getting a mortgage with a bad credit rating?!

glitterjunkie

Hey everyone!

I just wondered if anyone had experience of getting a mortgage with a bad credit rating? Is it completely impossible, or can it be done? Basically me and OH are wanting to buy a house next year. I have a good credit rating, and he has a bad one. I am not sure exactly how bad his is - I don't think he even knows himself - but I have just applied for a current account online for him and it was actually declined, so I assume it must be pretty bad, eek! He’s missed a few payments on his car insurance and phone bill recently, and he had an overdraft a few years ago which got passed to a debt collection agency until he finally paid it. He also had a house with his ex a few years ago, and I know she took out loans and stuff in his name. I think it would be a good idea to get his permission tomorrow to obtain his credit report, and we can go through it and see exactly where he stands.

BUT in the mean time, I am just wondering how it will affect us wanting to get a mortgage either this year or next? My own credit rating is actually really good - I’m not blowing my own trumpet or anything lol (I am in debt myself so am no angel)… BUT I have always been good at managing all my payments and making sure that I at least pay the minimum each month. I‘ve looked at my own report online and it‘s all big green plus signs, no red boxes. I've had a couple of catalogue accounts, 3 storecards, a credit card, a phone contract etc etc, and paid them all off. My big worry is the impact OH's credit rating will have, both on my own rating if we get a house together, and what sort of a mortgage deal we will be able to get. Will my good rating offset his bad one, or will his bad one ‘drag mine down’ so to speak, and then nobody will give us a mortgage?! Or just a rubbish one with mahoosive monthly payments?!

If anyone has any experience of a similar situation, I'd appreciate hearing it Or any ideas of how to improve his credit rating so we are more likely to get a mortgage...I know that you need to take out credit in order to show lenders that you can handle it, but if he can't even get a bank account then how is he going to get any sort of credit?!

Many thanks in advance

beecher

I can't see you getting a mortgage at present from what you've said. You're doing the right thing in getting the credit report but it sounds like your OH's is not going to be good enough to get any sort of deal.

How much of a deposit do you have? Would it be possible to get a mortgage only using your salary? Maybe taking the next few years to sort out both your finances - ie getting yourself out of debt and improving your OH's credit report is the way to go.

glitterjunkie

Thanks Beecher - not what I wanted to hear, but I think it's probably the truth isn't it!

We are lucky to have a good deposit, £25k or so (as my dad sadly passed away a few years ago - so not lucky, but you know what I mean!), and house prices where we live are fairly low so we'd only really be wanting a mortgage of around £60k. We wouldn't be able to get a mortgage using my salary alone though - just to throw a bit of a spanner in the works, I am going back to uni part-time next year so I'll only be earning about £6k a year. We will need both our salaries to get even close to a mortgage!

I think we will just need to throw everything at improving his credit rating as much as poss for the next year, maybe even 2 or 3 - and if that means we have to put our dream of buying a house back then so be it

Off out now, but thankyou - you have given me a lot to think about. If anyone has any tips on what exactly to do next would be much appreciated! xxx

LoopyPrune

In this climate I would honestly concentrate on paying back as much as possible and building your deposit up. Also would you really want a mortgage payment around your neck while your studying? Stay on the rental ladder until your can show a clean sheet to a possible lender.

On the other hand if my above suggestions dont fit your requirements then speak to a broker. They can be expensive but when all else failed they managed to get myself and a partner a mortgage 3yrs ago with a sub prime called Preferred Mortages and we are now perfect client with a glowing credit report. 3 years ago high street lenders wouldnt even give me an appointment now they are throwing their best deals at me. But we used self restraint and determination to get there.

With a 25k deposit on a 60K house you may access good rates at 60% LTV if you can rebuild OH rating in the mean time

Conrad

Ok, you said you are planning to buy in a year, so the simple answer is make sure you both pay everything on time in full, to demonstrate a mortgage is suitable for you.

If an underwriter is faced with an applicant that habitualy pays bills late, he is putting his own neck at risk by approving such an applicant, if said applicant then goes on to miss mortgage payments - you can imagine the underwriter being grilled by a compliance officer - "why did you approve this mortgage when you could see the applicant had a history of paying late".

So in other words present yourselves in the best light.

Now, just in case your other half is like many many people I see, I will add this note;
ALL people with late payment / adverse history ALWAYS say it was'nt really thier fault.

The reason I mention this is an underwriter in a lender will njot be interested in ANY exuses, and this is the reason - the underwriter herself does not pay things late, even if her nan dies, the dog is ill, they are away on holiday etc etc etc.

Therefore the underwriter thinks to herself - hmm, how is it am able to be organised and plan ahead, yet this applicant is not. We all know our car will break down, the vets bill will be £1000 and someone close to us might be ill, BUT WE STILL PAY ON TIME IN FULL.

The worst excuse an underwriter gets is "it was the Banks fault", but again this is NEVER the case.

Again the underwriter has her own Bank and knows Banks mess things up, so she always ensures there is plenty of money in the Bank to cover everything, no matter what.

This is not a lecture! Just useful to others to get them to see why underwriters do not exept exuses.

I myself often have to treble check a credit is made - its about being organised AND NEVER RELYING ON VERBAL ASSURANCES - i always get documentray proof something is paid if I have a doubt.

Best of luck

SouthCoast

He’s missed a few payments on his car insurance

What happens if he has an accident with unpaid premiums?

glitterjunkie

Thanks all

Loopyprune - thankyou, that's very sensible advice. I think the main reason neither of us want to rent any more is that it's so expensive...we both hate the idea of paying £XXX a month to pay someone else's mortgage, when we could be paying the same amount to pay our own! Both our parents own their own houses and have fully paid off the mortgages, and they've always instilled into us that there's no better feeling than knowing your house is your own, and nobody can take it from you. But actually, I do think you're right. I don't think we've got any choice - we have to rent for a year or two, in order to attempt to sort his credit history out, because nobody will give us a mortgage anway! A mortgage broker sounds like a good idea - it might be worth getting an appointment to see what they think, and if there's any chance at all for us? Glad to hear everything worked out for you

Conrad - thankyou also, that's a really interesting way of looking at it and has helped me understand a bit better! I was hoping that my good history might outweigh his bad one - that a lender might look at us and think 'okay, OH is not organised and doesn't pay things on time - but Glitterjunkie always pays things when they need to be paid, so we will lend to them as long as she takes control of the finances' :rotfl:But I can see now that it probably won't work like that, both of us need to show we are trustworthy. Hopefully we can start to repair some of the damage and start to show that over the next year or two, fingers crossed.

Does anyone think it *is* repairable then? If we rent for now and really concentrate hard on building up his credit rating, might we be in a better position to get a mortgage in a year or two? It's hard at the moment because I still don't know exactly how bad his report is - it might not be as bad as I am fearing, or it might be a whole lot worse! He said I could access it today on his behalf and print it out, ready for us both to have a proper look when he gets home - but it wants to know the postcode of his previous address and I don't know it, damn! He's at work until 10pm tonight so I'll have to do it tomorrow now.

I am angry, because when he was with his ex, he must have had a good enough credit rating to get a mortgage with her...but the pair of them were stupid from what I can gather, and had all sorts of credit cards and loans. I know she took out credit in his name (she had a child and didn't work, so everything was in his name). I feel like I am clearing up the mess that she left and it is not bloody fair... I am only 22 and I am more mature than the lot of them! But it's his own fault for letting her do it, and not making sure payments were made etc. Classic burying his head in the sand, for years and years. BUT I have chosen to be with him, so I am just going to have to get over it and make the best of a bad situation aren't I. He does seem to have stopped burying his head in the sand at last, and is willing to get it all sorted out properly, so I really hope we can look back on it in a few years when it's all sorted and know we have learned something from it!

SouthCoast wrote: »

What happens if he has an accident with unpaid premiums?

Sorry, I didn't make that clear...he has never actually driven without insurance, I would kill him myself if he did! But he has had a few occasions lately where his monthly direct debit to the insurance company has not been paid, basically through his own disorganisation :rolleyes: so the car insurance company then writes him a letter telling him it's not been paid and they are giving him so many days to pay otherwise the policy will cancelled. He always pays it over the phone when he gets one of these letters, so the insurance has never actually been cancelled - but I thought the late payments might affect his credit rating? As I know late payments to mobile contracts do?

He is not very organised with money at all, and we both know it is something which needs sorting out. We've had some fab advice from the people on the Debt free wannabee forum, and it is something we're addressing - hence the reason he was trying to open a 2nd bank account so he could separate his bill money and his spending money ( which is when it got declined and this whole thing came to light). Argh, it's all such a mess! However I am glad it's all out in the open now, and at least we can start trying to repair some of the damage.

Thankyou all again! xxx

Jonbvn

glitterjunkie wrote: »

I think the main reason neither of us want to rent any more is that it's so expensive...we both hate the idea of paying £XXX a month to pay someone else's mortgage, when we could be paying the same amount to pay our own!

Please don't believe these rent money is dead money tails.

You have to remember that the mortgage interest you pay is equally as "dead" as rent money. With house prices falling, the house you eventually buy is likely to be considerably cheaper than at present. The mortgage interest you will save (on a smaller mortgage) will outweigh a few years rent money.

glitterjunkie

Jonbvn wrote: »

Please don't believe these rent money is dead money tails.

You have to remember that the mortgage interest you pay is equally as "dead" as rent money. With house prices falling, the house you eventually buy is likely to be considerably cheaper than at present. The mortgage interest you will save (on a smaller mortgage) will outweigh a few years rent money.

Do you know what, I never thought of it like that! Never even considered the mortgage interest, or the fact that house prices may be even cheaper in a year or so. I've seen loads of sold signs going up round our area in the last few weeks, so thought (perhaps wrongly) that prices were picking up again - but I suppose it won't be overnight will it? Will tell OH that way of looking at things when he gets home, thankyou

Am feeling quite positive now actually - looking forward to renting for a while and not having the pressure of a mortgage. I just want somewhere we can call our own, and lock the door at night and shut the world out :rotfl:Living with relatives at the moment which is a bit of a nightmare...hence the desperation to buy somewhere. But at least renting for a bit will give us our own space!

danielanthony

Remember that you wont get a mortgage with a default on your credit file, check Equifax and Experian to see what is recorded. Defaults and missed payments stay on for 6 years, so if you're good for a period of 6 years after your last missed payment or default then you should get mortgage finance. My last defaults come off next month and then I'll have my 6 years unblemished credit history, after having an IVA and nearly 20 defaults it is something I'm proud of!

glitterjunkie

danielanthony wrote: »

Remember that you wont get a mortgage with a default on your credit file, check Equifax and Experian to see what is recorded. Defaults and missed payments stay on for 6 years, so if you're good for a period of 6 years after your last missed payment or default then you should get mortgage finance. My last defaults come off next month and then I'll have my 6 years unblemished credit history, after having an IVA and nearly 20 defaults it is something I'm proud of!

Thanks Daniel Wow, well done on making it 6 years with no missed payments or anything... that's a great achievement, you should be really proud of your unblemished record when you get it What exactly does a default mean - do you get one if you make a late payment, or just if you don't make a payment at all? OH has been with me 4 years and as far as I know he hasn't had any loans or anything in that time - so fingers crossed, alot of the unpaid loans and stuff he had with his ex should hopefully be pretty close to the 6 year mark. But am I right in thinking if he's got more recent ones then it will set us back the *entire* 6 years? Do you only get a mortgage if you have a completely perfect credit record... or do they accept one or two old defaults if you can show you've improved your payments since then?

I've been trying to get access to OH's report all day to see exactly what is on it, but having a bit of a nightmare as it keeps asking me for stuff I don't know (his old addresses etc), and he's at work all day and evening. I got him to text me all his old addresses, but now it wants details of a card registered to his billing address, so I still can't do it - I thought I could just do register for the payments with my own card, which was a bit silly of me because obviously the card is part of what they use to identify you, durr! Will get him to go through it all tomorrow, and then we will have to brace ourselves and see exactly how bad it is! Wish me luck, I think we might need it!