bad credit - advice for mortgage

binerds81

Hello, I'd welcome any advice from people with more knowledge than me. A few years ago I got into a state with my finances, a very stupid thing to do but with a major break up and a parent dying amongst other things it happened and I can't change it now. I had a lot of defaults (about 8) on my credit file (some of which are beginning to come off finally) but no CCJs and have repaid almost all of them, I will have NO debt on my file by the end of next month.

I now have a stable job in the civil service and want to buy on the help to buy scheme, I have more than the 5% deposit and almost no commitments other than a gym membership and mobile bill so a broker has confirmed my salary will cover the 75% LTV that I need. The house is a new build which I can reserve around August and put in a mortgage application in September.

My question is: if I can show that I have paid off all outstanding debt, have a back account in credit (I don't have an overdraft) and bank statements that show low expenditure for 3 months, might this go in my favour for a mortgage application, or are they likely to say I have to wait until all defaults are off my record which will be several years from now?

Any advice / tips on how to get a Yes despite an idiotic past would be welcome, or any other sucess stories despite bad credit history? Thanks

Thrugelmir

The age of your adverse/negative credit history is important. Particularly the past 3 years. Defaults are one factor of an account, the other is when was settlement made. Was settlement full or partial. All these factors combine to tell lenders something about you and your attitude towards money. Finally lenders will want to see that you have learnt the error of your ways on a permanent basis. Hence the expression time heals.

binerds81

Thanks Thruglmir!

All my settlements are full not partial and most were made over 3 years ago, however there are 2 that have been settled recently. I also found a couple of the defaults were on closed accounts so I'm trying to contact these companies to pay the debt anyway so they also show as satisfied. 4 of the 8 will be off my report within the next 2 months with the others reported until between 2015-2017

I was trying to gauge how long after everything is cleared would be worth applying - and since they ask for 3 months payslips/bank statements I'm not sure if that would show 'a change' in me or would it have to be years and not months. I know its my own fault so will just have to suck it up whatever they decide I guess :-)

Butti

I don't know whether anyone will be able to tell you. You will have to just test it. I would be tempted to leave it to six months after all defaults are in effect settled.

Make sure all details on your credit report are up to date, Martin has a good article on everything that needs to be right.
Put a file together.


The property
Your wage/salary slips
Direct debits
Savings /deposit
Any life assurance & critical illness cover
Statements of all loans and credit cards

Take all the above together with answers on what your circumstances were at the time and how your behaviour has changed, take these to your potential mortgage provider and pray. Whether you go to a whole of market broker or a specific lender is up to you. There is some pressure on prices particularly in London (slight understatement!) and interest rates are very likely to go up next year, but not by much!

I had three late payment on one Career Development Loan in 2011/12.
No other default on my files.
I decided to go to my bank because they could see what I'd been through and how much I had paid off in the last year. I took my credit report with the defaults marked and they took a copy of this.
The decision went to the underwriters and came back four days later with an approval provided I closed my credit card account with the bank, as they felt their exposure was too high.

The most telling statement was the meeting to sign the papers this week. Th mortgage guy who I'd seen said "I didn't expect to see you again". He did say the fact I'd been totally honest was the reason I had got approval.

kingstreet

binerds81 wrote: »

a broker has confirmed my salary will cover the 75% LTV that I need

Did it occur to him to advise you on the impact your credit history will have on the likelihood of you being granted a mortgage?

If not, the conversation appears somewhat pointless. I'd expect you to come away from a broker discussion with a lot more than that, making your question on here unnecessary.

Get all three copies of your credit file to an independent broker who will be able to roadmap/timescale what you can do and when.

BTW lenders are usually interested in the default dates, not dates of satisfaction, so concentrate on them when asked.

binerds81

hi kingstreet,

Sorry I wasn't being clear on the LTV point - I just meant that my salary was in line with being able to afford the amount I need - but you are right, I told the broker straight away that I had credit issues and he said I need to get him a copy of my credit report so he can look into all the dates etc and see which lenders may be likely to look at my application. He also said that this would be likely to restrict the amount they would lend so this would affect the deposit I would need.

thank you for the point about default dates - that's kind of what is going to impact thing as they are somewhat historic it's the satisfaction of them that is more recent - but point taken - i think I just need to fully clear things first and get a good few months of clean history before I risk applying. that way I can at least show I have no outstanding credit whatsoever, not even a credit card, just my mobile account which may let them see I am concentrating fully on a mortgage!

kingstreet

All three credit files, not just one.

The data on each is different and knowing what is visible on each can help to suggest a potential lender.