Credit Rating 7 year rule

marflar

Hi folks, new to the forums here (and new to actually trying to manage my finances!)

I'm 28 and since university have steadily built up quite a bit of debt (currently maxed out at end of month overdraft of 2000, credit card with min payments at 1200 and paying off grad loan with 1500 left)

To top it off I've also made use of payday lenders in the past, to a point where in the end I had to make use of a repayment plan

At this point I'm gonna ask you not to judge! I'm aware that my financial management is poor and take complete responsibility for my situation

This situation hasn't developed from low income, but low sensibility!

My credit rating is poor (as you can imagine!) 1/5 on noddle

My newest salary (and mentality!) has me in a place where i can sort this all out, with the target of getting debt free with a deposit for a house in the next 36 months.

I know that banks use credit ratings to judge whether to lend or not, and I've also heard that stuff stays on your file for 7 years - what i really want to know is by sorting this debt out ASAP, will banks still looks at me based on my current situation (even 6 years down the line)

Again, I know this is my fault, and i'm not looking for quick fixes. I'm taking full responsibility and trying to get things sorted - i would just like to know how my future is affected.

Thanks in advance for any advice

The_Boss

You don't have a credit rating as credit ratings do not exist. See the top sticky thread on this board and my signature for info.

Yes, the banks look at the past 6 years of account data - settled or defaulted accounts drop off 6 years from the date of the default. Until then, they will use this data when assessing applications you make.

Pay day loans on your credit file will make you even less appealing to lenders unfortunately.

All in all, I doubt you will be able to get a mortgage in 3 years as lenders will not be impressed at what they see. You're best waiting for it all to drop off.

The_Boss

^ but hey, good for you for getting it all sorted in the meantime.

marflar

cheers man much appreciated - just a tiny bit heartbroken, but get it

matttye

Whilst I'm inclined to agree with The Boss, I think it is dependant on how much of a deposit you save.

If you have a 50% deposit (unlikely but using it as an example) then you'd have a heck of a lot more of a chance than if you had only a 10% deposit.

The less you need to borrow, the less risk to the lender, and saving a higher deposit would, in itself, show financial discipline and be a good sign to them.

The_Boss

^ this is true as well; must admit I assumed it would be a 10% deposit by the time everything else was repaid.

IDoDoodles

Try not to be too down-hearted. The response may not be an instant no when it comes to applying in 3 years.

I myself have 2 defaults, from 2010 and 2011. 3 months ago my partner and I bought a (rather pricey by national averages) house (London).

This was possible due to a large deposit (40%), his much better credit rating and a decent broker.
We have a thoroughly fantastic fixed rate.

I honestly didn't think it would be possible, and had prepared myself to not be able to own a house until I was about 50!


ANYWAY, what The Boss said has a lot of truth to it. However, just speaking from my own position, I'd say try to clear your current debts, keep saving like mad for as large a deposit as you can, make sure you're using available credit sensibly and paying off each month, and stay away from payday loans! (I've had to resort to them in the long ago past just the same, it happens). Never say never. After 3 years, lenders are much more likely to start opening the doors again.

marflar

Thanks guys - I appreciate the support and the guidance The Boss

Most likely the deposit would be around the 10% mark - I've cut as much as possible in terms of (needless) outgoings

If a miracle occurs, and I do get my own place in the next 3 years, you're all invited for a beer

Angry_Bear

Have you looked at the snowball calculator to see what the best way to pay off your debt is?

http://www.whatsthecost.co.uk/snowball.aspx

marflar

Thanks - but I'm pretty sure I know how I'm going to fix it.

It's not based on what might be most sensible, but what is most secure for me.

You can still add yourself to the beers at mine list though tAngry Bear