Mortgage and my credit history

Bluntman_1983

Hi,

I am looking to enter the property market for the first time but need some advise on some aspects of my credit history.

I fell into some financial difficulty last year and took out a number of payday loans, which spiralled (familiar story to these pages I should think). It was a stupid situation to get into and I was very lucky in that a family member loaned me some money to pay these off. The repayment to that person is over a very long period of time and does not adversely affect my monthly funds too much. I now have zero debts other than this and keep 1 credit card ticking over but pay off in full each month. I have saved some money of my own and have a deposit available from an inheritance. I would like to look at buying a property early next year.

My question is about my credit record. There are no late or missed payments recorded and the equifax score puts me at 790 (experian over 800) at the moment. I am on the electoral role at my current rented address. However, because of the situation I was in there are a large number of repaid payday loans showing on my credit files with callcredit and experian. They all show as green, settled accounts but will a mortgage lender look at these and judge me to be a poor risk? If there are any mortgage brokers or people who know the industry well who could advise I would be very grateful.

By the way, I do know how stupid and ridiculous it was to get involved with these payday loan companies in the first place and I will pay for my mistakes for a number of years. I recognise how incredibly lucky I have been to have loving relatives who could help. I have a new attitude to money and have been managing responsibly for a few months now. Payday loan companies need to be better regulated or banned in my opinion. They are nothing but trouble.

BitterAndTwisted

Yes, they will be looking at those pay-day loans extremely closely indeed, regardless of whether they have been settled or not. The very fact that you've taken them out so very recently will be a MASSIVE red flag to any lender: they are a clear and obvious sign of someone who hasn't run their financial affairs sensibly.

Look at it this way: you had to have a family member bail you out of the mire and the only funds you have is from a windfall, not money you've been saving yourself. Would you lend yourself tens of thousands of pounds? I wouldn't risk lending you a fiver that I couldn't afford to kiss "goodbye" to.

You have been "managing responsibly" for only a few months now? Try doing that for a couple of years.

Experian_company_representative

Closed accounts that show you repaid what you borrowed on time should only help your credit rating. Your Experian report score (which is out of 1000 unlike the other one you mention) should come with advice on how you might be able to improve it. An independent mortgage broker should be able to help you find the best deal for your circumstances.

James Jones

Bluntman_1983

Thanks for the your opinion. I guess the real question is, in practical terms does the impact of these things decrease over time? i.e. in 2 years or a year and a half will they have the same negative impact on a mortgage lender's perception of my credit risk as I imagine they would now, assuming I continue to manage my finances in a proper way.

I'm just trying to get an understanding of whether it is realistic to plan for a mortgage in the next year or 2 or whether I should forget about it for 6 odd years until the records drop off my credit file.

I understand that you were being quite forthright with your views on my situation and am not going to defend myself against any criticism. Just trying to understand my options.

Experian_company_representative

BitterAndTwisted wrote: »

Yes, they will be looking at those pay-day loans extremely closely indeed, regardless of whether they have been settled or not. The very fact that you've taken them out so very recently will be a MASSIVE red flag to any lender: they are a clear and obvious sign of someone who hasn't run their financial affairs sensibly.

We've seen no evidence of this actually. Currently, most lenders who use Experian do not see payday credit as a separate entity - just another loan. Most scorecards will reward timely repayment of any loan.

James Jones

sirmosh

You'll find settled debts with no defaults should only help whereas any current commitments will reduce your affordability massively. If you have a large deposit then you should be seen as fairly low risk to a lender which will mean it'll be much easier to borrow.

Bluntman_1983

James, yes sorry the scores I gave are adjusted to both be out of 1,000, from checkmyfile which shows results from the 3 main agencies.

Bluntman_1983

Sorry to 'bump' this topic - perhaps it belongs in the mortgages section... I appreciate the responses so far but I was hoping a mortgage broker might be able to offer some insight as well? Any advice would be appreciated. I'm going to wait till mid next year before I look to buy and just want an idea of whether these settled payday loan accounts will harm my chances.