Mortgage with past bad credit

Hudson1984

Hi all,

next year i'll be looking to buy my first house (looking at around 10% deposit)

however I have had issues in the past with bad credit, definitely got sucked into borrowing beyond my means and it caught up with me. I'm now pretty much out of debt, and certainly upto date with it i.e no missed payments - well actually 1 missed in 12 months for virgin media when I changed adress but all accounts are up to date.

I am still in debt at the moment but I borrowed loads of my parents and paid everything off at once (stupid decision should've staggered the payments but hindsight and all that) but I have three more payments to my parents then i'll be paying off the remaining debts.

What my query is; can I significantly improve my credit rating enough to obtain a mortgage at a resonable rate?

I will have 2 defaults on the report at the time of applying (they are due for removal 2014).

I want to be doing everything I can in the next 12 months to really bump myself up the scores and be in the best possible position come april/may 2013. what should I be doing?

my current plan is;

once M&D are paid off, pay £500 off credit cards and £750 off overdraft each month. Once all paid off in full, use capital one card as my spending card so max it out each month then pay it off at the end of each month so I incur no interest charges.

I haven't got any big spends planned and no credit applications will be made but as stated I'd really like to do all I can and at least look as little a risk as possible given my bad track record over the last 6 years

if I've missed anything out that is needed to advise further just let me know....I tend to waffle on

Thrugelmir

Hudson1984 wrote: »

I am still in debt at the moment but I borrowed loads of my parents and paid everything off at once (stupid decision should've staggered the payments but hindsight and all that)

The right decision, as mortgage lenders will score you on your last 6 years credit usage and history.

Continue along your current path. Clearing the debts, and closing no longer required accounts.

Learn to manage your finances without using your overdraft facility.

Hudson1984

Thrugelmir wrote: »

The right decision, as mortgage lenders will score you on your last 6 years credit usage and history.

Learn to manage your finances without using your overdraft facility.

Really? I thought I would've been better to stagger payments to clear the debt than pay it off in one go? oh well done now whatever the case.

Yup that's the plan, once I've paid the parents off the main priority is to clear the overdraft.

The current spending plan would see me free of debt completely by November, so leaving six months after this to show i'm a good boy now would be May '14, just wondering if 6 months would be long enough being as i'll have those two defaults there regardless of what I do

bargainbetty

Hudson1984 wrote: »

once M&D are paid off, pay £500 off credit cards and £750 off overdraft each month. Once all paid off in full, use capital one card as my spending card so max it out each month then pay it off at the end of each month so I incur no interest charges.

Under no circumstances 'max out' your card each month with the intention of paying it off. What happens if you do get an unexpected expense? You're stuffed. Clear the cards, and then use if for a few small purchases each month, paying it off in full to avoid interest. You achieve the result of showing good money management without the risk.

Make sure you are on the electoral register and don't miss anything else. Until those defaults drop off, there isn't a huge amount else to do.

vics199

How much do you owe on credit cards and overdraft? You would be better off clearing your credit cards before your overdraft as credit card balances will impact more on a mortgage offer than an overdraft will. When I got my mortgage I had to clear my credit cards first but the bank didn't care about my £2,000 overdraft.

Tixy

Given that the defaults are due to drop off next year anyway and that it will take you until apr/may next year to pay off your debts and save a deposti then ideally wait until the defaults have dropped off your file, you will be more likely to be accepted and more likely to get a better rate if they are no longer showing.

When next year are they due to drop off? If its only a few months later then when you expect to have paid off your debts and saved up the 10% then I would advise holding off for a few more months and carrying on saving (if you can get a 15% deposit you will find better mortgage deals available to you).

Hudson1984

vics199 wrote: »

How much do you owe on credit cards and overdraft? You would be better off clearing your credit cards before your overdraft as credit card balances will impact more on a mortgage offer than an overdraft will. When I got my mortgage I had to clear my credit cards first but the bank didn't care about my £2,000 overdraft.

cool that's what I was wondering really. Credit cards are at around £2650 (£200 on one £1650 on another - updated sig shows detail)
and will be paid off come september.

sorry not great with multiquote so onto the other points;

maxxing out: OK scratch that plan was wondering if it would help basically i'd just be spending what I normally spend per month but paying it off in full but I see your point i'd be better off using it as a fuel card esentially and paying that off rather than ALL my monthly outgoings. and yep i'm on the electoral register - fell in that trap before . To clarify maxxing out would be on the capital one card which has a £200 limit, my average monthly spend is £350 so I was planning to pay off the £200 in full then use that as my normal spend and have the remaining £150 as cash for the month. get to the end of the month and do the same, but I assume from your post it's the % that's important rather than the actual value

defaults: 2 come off in January 2014 and the other two come off January 2014, so yes maybe I would be better off giving it another year and attacking the housing market with a much bigger deposit and no defaults.

mayluio145

Rates of interest on bad credit mortgages are higher than standard mortgages and you will probably need a larger deposit, but you may still find options available.

They don’t work with conjunction with any government scheme such as Help to Buy or Shared Ownership and usually don’t accept applications from people made bankrupt previously six years - unless your credit file is now clear without any defaults showing.

Applicants will still need a stable income and also this should be above £15,000 per year, with the deposit creating no less than 15% or more from the property value.

paulolondon

Hi,

Help! May I ask a few newbie questions please?

1. Is 15% the minimum deposit that lenders would accept with a default on a credit file? Are there companies that go lower?

2. My default (one default but it was a mortgage, no other problems) will be two years old next April (2015) should I wait until then before making an application for a mortgage to increase my chances of success?

3. My fiance has a good credit record, me not so much (640/ Poor: Experian). How will this affect a joint application for a mortgage in respect of it succeeding?

4. Joint income is about £100k. What sort out of multiplier can we expect to get?

Thanks in advance.

Tixy

paulolondon wrote: »

Hi,

Help! May I ask a few newbie questions please?

1. Is 15% the minimum deposit that lenders would accept with a default on a credit file? Are there companies that go lower?

2. My default (one default but it was a mortgage, no other problems) will be two years old next April (2015) should I wait until then before making an application for a mortgage to increase my chances of success?

3. My fiance has a good credit record, me not so much (640/ Poor: Experian). How will this affect a joint application for a mortgage in respect of it succeeding?

4. Joint income is about £100k. What sort out of multiplier can we expect to get?

Thanks in advance.

Hi and welcome to the forum

You may be better asking these questions on the mortgages section of the forum as there are a number of mortgage brokers who will probably be best placed to answer these.

This is a link to the mortgages board - Mortgages & Endowments and if you then select the icon then more people will probably see your question than if you add it on to an old thread.