Help Mortgage Advice

ST1983

My partner and I are currently saving to buy a home, unfortunately he has had bad credit in the past, however recently got accepted for car finance, all his debts were paid up last year.

I was on a debt management programme in 2007, however had a default which will be removed from my file next year.

I spoke to Credit Expert whose advice to increase my scoring was to get a credit card, I now have one of these in which I was told to put a small amount of credit on and pay it off normally, I set a direct debit up to cover the minimum payment, was this the right thing to do?

I know that we will probably have a 20% deposit when we go to buy, as know that applying for a lower mortgage might be better for us in the long run. We both earn good money now, but know that we will probably struggle to find a lender, anyone offer any advice on how to boost my scoring as believe that we will have to do this on my income alone, as his scoring will probably put us on an outright decline?
Thanks

BitterAndTwisted

ST1983 wrote: »

I spoke to Credit Expert whose advice to increase my scoring was to get a credit card, I now have one of these in which I was told to put a small amount of credit on and pay it off normally, I set a direct debit up to cover the minimum payment, was this the right thing to do?

No, it wasn't. you need to use the credit-card and pay the whole balance off every month.

Setting aside the poor credit-records you both have for the moment, any indebtedness you do have when applying for a mortgage will be deducted from what a lender will be prepared to lend to you. Which will include that car-finance if it's not fully paid off when you apply.

With one person with a poor credit-record and another only just out of a DMP I fear you will be hard-pressed to find a mortgage company willing to take a risk lending to you for some time, regardless of your current earnings.

ACG

It will probably be possible. You will have a good deposit and will have shown you can handle credit for atleast a year or so. The debts are from 2007 and alhough recently paid up its not like you have run up any more in the mean time.

Get a mortgage advisor on this when your looking to buy and i think you will be in a fairly good position to get a mortgage (probably not the best rates but i dont think it will be anything too bad).

ST1983

I entered the DMP back in 2007, however all debts were cleared back in 2010. I have been debt free for over a two years, however know defaults stay on your credit file for 6 years so this will disappear in 2013.

My partner understands that he is not in the greatest position as his debts are recent, hence why we are saving for another year as my scoring should increase as soon as my default disappears. This will mean that I will only have one active line of credit as my own car finance finishes next year, which will be the credit card I took out on the advice of Credit Expert. I can easily clear the balance in Jan which I believe may be better.

My main concern is getting my scoring up so we can do this on my earnings alone. We're not worried at rates too much at present. I need to go from Poor to Good, which is what most lenders are advising me, how to do that is what I seem to be having problems with, no-one can tell me what the best way to move forward is.

Cornucopia

Borrowing and paying back without problems is what drives your credit score up.

One of the easiest ways to do this, is to use a credit card instead of a debit card, and set up a DD for the FULL amount each month. Many providers do not even tell you that this is possible, but a lot of them do support it. Doing this should cost you nothing, but could see you "borrowing" and repaying £100s per year.

Another free option is to get a card that is 0% for purchases, and use that, paying the minimum by DD. Pay whatever else you see fit each month manually, keeping control of the overall debt. Pay it all off before the end of the 0% period.

ValHaller

It seems that people who get into bother with debt often get into lala land when it comes to cleaning up their credit records for a mortgage.

Don't pay for a so called credit score - taking money off you for that is like stealing ice cream from toddlers. The number is meaningless - as each lender scores in their own way.

While having a loan for a car and keeping it paid is much better than getting behind with payments, not having credit for a car is even better. If your partner was accepted for a car loan, the actual lender and the sector of the market they work in may tell the tale about his credit history from way before the 6 years when things are wiped from your credit record.

Don't take credit for credit's sake and if you have a credit card use it to gain the protection on purchases and as safer to carry than cash. But keep it paid off in full. Not having loans and debt - even paid on time - but having a good traceable address history on the electoral role will make you much more attractive as mortgage borrowers.

Cornucopia

From a credit scoring/mortgage acceptance POV, having credit, and having had credit are two different things.

ACG

Forget your rating on credit reference agencies. Its an indication but lenders se their own scoring methods - ive seen people with good scores be declined and vice versa so dont worry about it.

It doesnt matter so much as whats active, you have shown you can pay your car finance for however many years, so this will be helping.

You will always go through a credit check most lenders will credit score, some wont - some take into account your position and history as a whole. Just dont miss or pay late on any payments between now and your application and your credit score/credit file will repair itself over time.

http://help.creditexpert.co.uk/help/CreditExpert_OOS/Credit_Score/score_why_refused

ST1983

Taking things into account, I have another year or so to show that I can handle an active level of debt by purchasing on my credit card and paying it back in full every month.

My other half will still have all his debts on his credit file when we apply for a mortgage, his had late payments, probably default notices, however is now clear of debt, his car finance will still be active on his file, however he no longer wants any other lines of credit as has learnt his lesson from the mistakes he made. He feels that as his file is "bad" that no-one will look at him or even offer him a mortgage, so his concerned that my income alone will not enable us to get a mortgage if lenders look at past history and even though mine would have been clear for four years, turn us down. I'm trying to be optimistic.

ValHaller

ST1983 wrote: »

.... My other half will still have all his debts on his credit file when we apply for a mortgage, his had late payments, probably default notices, however is now clear of debt, his car finance will still be active on his file, however he no longer wants any other lines of credit as has learnt his lesson from the mistakes he made. He feels that as his file is "bad" that no-one will look at him or even offer him a mortgage, so his concerned that my income alone will not enable us to get a mortgage if lenders look at past history and even though mine would have been clear for four years, turn us down. I'm trying to be optimistic.

Time is the healer. Best move would be to get the car finance paid off before attempting to save - which should increase the savings because there should not be so much interest paid. With no credit issues for 3 years - everything paid on time and cleared early and no further credit and a 20% deposit - I would think that jointly you would manage to borrow more that you could on your own, although you probably would not get the max - and it would be wise to be seen not to be asking to mortgage to the last penny of your joint incomes.

ST1983

The car finance was taken out this year, it is over a 5 year term and we both want to move out of our parents respective houses into our own place.

We hope to have approx £30k and be looking at houses with the £135-140k bracket which would leave a mortgage at approx 4x my sole earnings. Obviously if this was joint it would be easier, but we feel this is impossible given my partners history.

I know they say time is a healer, however when we look to buy that would have been six years since my default, four years since I came out of the DMP, with my partner being debt free for three years when we go to apply. However not sure whether just having his car finance in the background will help repair the damage his done.