Working a way of of Defaults

RichCH

This is something completely new to me, not going to go into too much detail but basically my wife has got herself into a bit of a mess with credit cards, which was totally avoidable.

So, what has happened is I was trying to get a Mortgage with my wife and we were denied and I looked into her credit history. We have 17 late payments in a row with one credit card, and two defaults from December 2010 which have been settled in January 2012.

So, I suppose I have two questions. Defaults, I understand there is 6 years and they are removed, but is that 6 years from the account being settled or 6 years from the account being defaulted? I would imagine it was when it was settled.

Other question is, how long is this going to take to repair in general and am I ever going to get a mortgage in the next 6 years?

I'm pretty much as clean as a whistle, my credit score is excellent, the only problems I have is that I use a lot of the credit limits on my cards every month for work, but that is going to stop soon and I'm only going to use my cards for very little. I am now taking over the finances of my wife, keeping one credit card open and using it for small purchases and paying off the balance in full every month, and all of her debt has gone.

Is there anything else I can do to help repair her rating (which is poor at the moment)? I imagine I've got to make her as squeaky clean as possible for a few years and hopefully watch it rise. But mortgage companies are going to take a pretty dim view of those defaults, even if they become 3 or 4 years old aren't they?

I suppose I could talk to a financial advisor in a year's time and see if there are maybe some mortgage lenders which are a little kinder to people with adverse credit. In a year also I would hope that the rating has at least gone up to fair.

ahmadali

So, I suppose I have two questions. Defaults, I understand there is 6 years and they are removed, but is that 6 years from the account being settled or 6 years from the account being defaulted? I would imagine it was when it was settled.

Its 6 years from the date of default rather than the settlement date

I'm pretty much as clean as a whistle, my credit score is excellent, the only problems I have is that I use a lot of the credit limits on my cards every month for work, but that is going to stop soon and I'm only going to use my cards for very little. I am now taking over the finances of my wife, keeping one credit card open and using it for small purchases and paying off the balance in full every month, and all of her debt has gone.

So long as you are repaying the full balance of the card in full every month then this is reflected on your credit report (called APACS Data). I would also advise that you close down any credit cards you don't use (I only ever keep two open at any one time)

Is there anything else I can do to help repair her rating (which is poor at the moment)? I imagine I've got to make her as squeaky clean as possible for a few years and hopefully watch it rise. But mortgage companies are going to take a pretty dim view of those defaults, even if they become 3 or 4 years old aren't they?

Get her to keep using the card for nominal purchases each month, and repaying the full balance as you've already said.

Do you already have a mortgage? Is your OH on the mortgage already? If so her credit rating should improve quite quickly.

You should also consider taking the mortgage on by yourself in the short term and then adding your OH later (if your earning are sufficient to cover the repayments).

RichCH

Yeah unfortunately I can't get a mortgage on my own for the amount I need.

We don't have a mortgage currently.

I only have two credit cards, the balances are always paid in full... never had a late payment in my life on my account.

What do you mean by OH on the mortgage? Not sure what OH means.

fermi

OH = other half

RichCH

Ah right, no. As mentioned neither of us have had a mortgage before, and we were trying to get a joint mortgage.

But defaults are going to look bad for a few years I imagine.

fermi

Some people do manage to get mortgages even with old bankruptcies still on their credit reports. Or at least that used to be the case.

So old defaults are not an insurmountable hurdle. I wouldn't discount it entirely.

You are likely to have to go through a "whole of the market" broker (whatever that phrase means).

Perhaps ask on the mortgage board here?

RichCH

Funnily enough, after doing a bit of research I found London and Country Mortgages through Money Supermarket. I looked on a few bits of the forum here and some people heartily recommend them.

Had a very honest conversation explaining that one of us has an Excellent credit rating but the other person's is poor, and they are looking into some deals for us... they're obviously just going to be more expensive a month.

So not the end of the world by any means... going to be more expensive for me though and also it means that we've had to pull out of buying the place that we really wanted.

krein559

If so her credit rating should improve quite quickly.

RichCH

I've looked into it. The guy from the mortgage company said that because she banks with the Halifax and they are a little more forgiving, they would most likely give her a mortgage. But with only a 10% deposit, we're looking at a rate of 6.89% for three years fixed. If I wait and get a 15% deposit behind us, with the Halifax I can get 5.09% for three years, even with adverse credit. This is a no-brainer. Wait, get more money behind us.

Even though I could cry that I lost that flat, because it was stunning.

Hopefully my wife has learned her lesson now. I'm taking over the running of all of her finances and giving her an allowance every month.

HappyMJ

RichCH wrote: »

Hopefully my wife has learned her lesson now. I'm taking over the running of all of her finances and giving her an allowance every month.

My OH would leave me if I did that....good luck. Or...would take out store cards and not mention it.

I personally would take out the mortgage on your own income and not have her added onto the mortgage. She will then not be credit checked. She could be bankrupt and it doesn't matter. You can consider adding her at a later date. You can then get interest rates much less than 5%.

What amount do you and she earn and is it essential that she is added to the mortgage?

You could borrow a larger multiple of your own income. My bank (RBS) lends 3.75x one income and 2.75x two incomes.

RichCH

Taking it out in my own name isn't an option. I was looking to borrow £189,000. My basic salary is low at £23,000, and hers is £26,000. Combined they would have been fine to get this mortgage but on my own they'll only lend me around £100,000. It's annoying because I consistently earn £40k plus but it's all on a job by job basis so doesn't count.

If I wanted to borrow the money on my own, I'd need to earn £42k a year basic.

Unfortunately I've got to be patient, wait a year, help build her credit score back up, we now know we've probably got to go to the Halifax or speak to an experienced broker who knows the people most likely to give us a mortgage.

If I wait 18 months, in theory I could have a 20% deposit on the same price of place I was going to buy. And who knows what's going to happen to property prices in London? They seem to have bucked the trend and not taken a hit over the past four years, unlike the rest of the country. Surely the bubble's going to burst at some point.