Mortgage with poor(ish) Credit Rating

StiltonFish

Hey,
I recently made an application to Northern Rock for my first mortgage and naively did not envisage my credit rating being an issue as I have never had any serious debts/ defaults/ CCJs etc. My application was subsequently refused on the basis of a poor credit rating.



I signed up to Experian and after scrutinising my credit rating I can see why my application would have been turned down.



I’ll provide a brief outline of what is on my credit file;


1. RBS bank account- 2K overdraft the balance of which is normally -£1500 (student over draft which is still interest free so not really had an incentive to pay it off.

2. Vodaphone phone contract, started last June- all payments made on time.

3. Wonga account settled on 20/11/2011- Yes I know Wonga! My partners wages, that we were relying on, were over two weeks late and we had a cash flow problem. My partners wages were also late in early January (after assurances it wouldn’t happen again), so again, we were forced to resort to wonga- although this isn’t showing on credit file, yet.

4. In relation to the above point, before getting a payday loan on 20/11/2011 from Wonga, I applied to 2 other payday loan type companies, but didn’t accept the loans as they needed proof of id and I didn’t have a scanner, anyway these show up as searches on my credit file.

There are also thing that are not on my Experian credit- (I have written to the creditors to get the information updated);

1. Natwest current account, overdraft limit £1500, normal balance is £0 to -£1000

2. Natwest credit card- Limit £500, balance has been £0 for over 12 months (registered to old address)

3. Santander credit card- Limit £500, balance £0, not late/ missed payments (registered to old address) although only opened in September

4. Orange phone contract, one late payment in June 2011 (not sure why this isn’t showing up on my credit file)

5. Virgin television account- not late payments (not sure why this isn’t on Experian Credit file)

6. I’m not on the electoral role, although I have written to the council.

Based on my credit file currently, will any lender give me a mortgage?


Based on my credit file when all they address are updated etc, will any lender give me a mortgage?



Based on my circumstances, which lender is most likely to give me a mortgage?



BTW my salary is £20k and I have a deposit of £35k (provided by my dad for equity in the property so can’t use the deposit to pay of overdrafts). Looking to get a house between £90 - £110k, so affordability isn’t the problem, only the credit rating.



Many thanks for your help in advance.

Thrugelmir

StiltonFish wrote: »

I have a deposit of £35k (provided by my dad for equity in the property so can’t use the deposit to pay of overdrafts). Looking to get a house between £90 - £110k, so affordability isn’t the problem, only the credit rating.

Affordability is the issue as you have no capacity to deal with difficult financial circumstances. Or the ability to repay debt.

You need to analyse your expenditure and find ways of cutting back. Then save money for a rainy day.

StiltonFish

Thrugelmir wrote: »

Affordability is the issue as you have no capacity to deal with difficult financial circumstances. Or the ability to repay debt.

You need to analyse your expenditure and find ways of cutting back. Then save money for a rainy day.

I think you have misunderstood me. By affordability I was referring to the fact that based on salary multiples/ outgoing etc, the mortgage company would lend me enough to buy the type of house I want, provided my credit rating is sufficient. The mortgage company used the wording “you have passed on affordability”.
I disagree with your comments.
I have just under £12k in investments I can release at any time. However, I would only use this money in an emergency as initially £23.5k was invested in 2002- so waiting until the market picks up before cashing out otherwise I would be losing out big time. The mortgage company was aware of my investments so they know I am able to deal with a rainy day.
Furthermore, my partner and I are currently paying £650pcm rent and we can live comfortably- apart from when her wages were late (she doesn’t work there anymore). I could afford to pay off my overdrafts but it would take months and I want to get a house ASAP while the market is good. I also have no appetite for paying off an interest free and low interest overdraft and reducing my standard of living for the sole purpose of getting a mortgage unless it is unavoidable.

StiltonFish

Can I bump this for mortgage advice please?

Cheers

leveller2911

As Thrugelmir..............

You may not like what Thrug posted but he was correct.

Put yourself in the Banks shoes and ask yourself "does this person show they can control their finances and are we going to get our money back?"..... Thats the way they work.

bigadaj

You also need to look at those 'investments' if they have halved in the last ten years then something is seriously wrong.

Also as above, if you can't afford to save on a regular basis then you aren't seen as a good risk.

StiltonFish

I do fully appreciate the validity of your comments I actually agree. As stated in the op, looking at my own credit file, I can see why I am unattractive to lenders.

Although that being said, I don't think my credit file is a complete train wreck, and I'm just trying to establish if;

a) there are any lenders that will consider me for a mortgage with my current credit file

and

b) what improvements to my credit file are required before I can get a mortgage with which lenders


Thanks

StiltonFish

leveller2911 wrote: »

As Thrugelmir..............

You may not like what Thrug posted but he was correct.

Put yourself in the Banks shoes and ask yourself "does this person show they can control their finances and are we going to get our money back?"..... Thats the way they work.

Thinking about it a bit more, I can see why I am not an ideal candidate for a mortgage, but I really can't see the logic behind the banks infering I will struggle to repay my mortgage when I have consistently, over the last three years, kept up to date with all my credit agreements (bar less than a hand full of exceptions) whilst paying rent that costs considerably more than the mortgage im applying for.

Is it really that hard to get a mortgage nowadays and are banks completly closed to explanations regarding credit files and negotiations?

property.advert

With direct debits meaning that you should never fail to meet a repayment on anything, a lender must ask themselves whether they really want to lend their savers' money out to people who cannot even set up a minimum payment direct debit !

One missed payment could be regarded as careless, two careless in the extreme but a "handfull" ? Is there an adjective for that ?

ljaneyr

Have you had a look at the info on credit ratings on the main site? Search for "credit rating" and it should be the first item on the list. It explains how credit records work and how to improve or work with them. Not all of it is relevent to mortgages but we found it very helpful.

Also have a look at the mortgage guide for first time buyers.

Although you might not want to it may be necessary to pay off some of your overdrafts as it will suggest to the lenders that you are serious about repaying debts and that you don't always live in 'the red'.

I think in answer to your original question - banks are a lot more cautious about who they lend to now and it is not possible to predict who will give you a mortgage and who won't. Applying and being turned down also damages your chances. You may have to jump through a few hoops and I don't think there are any quick fixes but if you're serious about getting a mortgage then you should follow the credit rating and mortgage advice on this site to the letter.

Good luck

paulmapp8306

i have a slightly different take on this.

My Credit file isnt as good as yours yet I can secure a mortgage.

Mobile phone bills with good payment history, as well as CCs with good payment history are all plus's (as long as the available credit isnt BIG).

Me and the wife both have 2 CCs (each with only £500 limit) an overdraft facility (of £3k, which has been used a lot but is not at present), a store card each (which are never at limit, and always get more than the min paid off per month), and a mobile contract each.


Ill also add, that the bigger the deposit you have the more likely you are to be granted a mortgage. We tried with 10% (as first time buyers) and couldnt get one, but once we had 15% we could. We now have 20% and have many more options - despite our credit file remaining pretty unchanged.
We both have one adverse account. I have a year (late 2009 to early 2011) that shows late payments and APs. this is (in my eyes) not accurtate but its not worth fighting. My wife has a single account with an agreement to pay. These two are the biggest issues we have, but the longer we go maintaining the payments the better things get.

IMO THE biggest thing going against you is your not on the electoral Roll. Stst say that those not on the ER are FAR more likely to default than those that are. I susspect as long as you income/outgoings support your ability to pay a mortgage you could secure one PROVIDED you get yourself on the roll. its very simple - just download the application from from the Net and send it with proof of identity to your local office.