How can i ressurrect my creditworth for a mortgage?

positiveangel

Hi everyone;

As of January 2015 my Partner and I decided it was time to grow up and turn our credit rating around for a chance to get a mortgage in the near future and here's a bit of background on our situation:

JOB
Partner in a new job now for over 5 months
I have just recently secured a permanent full time job (changing to part-time when Uni starts in Sep 15)
Prior to this we were both in the same job for over 12 years

SAVINGS
We currently have £40,000 saved up and we continue to save £1000 each month; hoping to receive some compensation payout in a few months which would really be a bonus and a boost. Due to my injury I will be receiving pension of £620 a month from August (confirmed)

CREDIT
We have no loan or HP due to the fact that our credit has always been poor because of the bad decisions we both made. But I have 3 Credit cards which I try to pay off each month in brackets are our balances which stands as of now.Lloyds limit £500 (balance £59), Capital One limit £1200 (£292.76), Vanquis limit £2500 (£0)
and partner only has the one with RBS Limit £1240 (£116.97) we currently use our credit cards to do food shopping, fuel and other essentials and we try to clear it each month although last month we had a balance of £150 carried forward in total between Capital One and RBS CC. Reason being is that I read somewhere that the best way to rebuild credit is to use credit card and pay off.

We both have Defaults on our files, Mine was from 01/12/09 (£145) and the partner has a 5 year old default (£103) 01/06/10.

We both also have missed payments latest was OCT 14 (3), Nov (1)
Also both had used PAY DAY Loans in Nov 2014

We have no one to blame but ourselves for our situation; and now we are more strict with our finances; we have lost some whom we thought were good friends but turned out were just using us. A big and massive makeover was needed when reality finally hit us. And now we will need to move out by end of the year. May I please beg for any advice on the following:

Are we doing the right thing with our credit cards?
If we keep working on our credit rating i.e. no missed payments when would we be able to at least get a glimpse of a Mortgage?

I welcome any advice please. Thank you.

(apologies for the long essay) x

[Deleted User]

Clear your cards. There's no need to carry a balance if you are able to save £1k a month.

Then continue to use them and pay in full each month.

A lot of lenders won't like pay day loans, so it would be advisable to use a broker when you come to apply for a mortgage.

Double_V

If you have 40k saved up.
Then use that to clear all cards or debts. And then start saving 1000 from there.
You will be hassle free and more relaxed.

rockm87

If you have debts you wont get a mortgage, they wont even consider it!

Clear your debts, and just go for it.

If you can save £1,000 a month, just keep doing that so you need less of a mortgage!

positiveangel

Thanks everyone for the quick reply and as soon as I read them I went straight onto online banking and paid off 2 cc Lloyds & RBS and £100 into Capital One of what I thought was £292.71 was actually £331.71 so after paying in £100.00 that should bring the balance down to £231.71 which I should be able to clear this Friday when I get paid. Thanks again.

Kittycat1981

rockm87 wrote: »

If you have debts you wont get a mortgage, they wont even consider it!

Not strictly true. We had 6k bank loan and 3k (spread over 4 credit cards @ 0%) when we applied for our mortgage and was accepted. We met the criteria for affordability. Yes if we didnt have the debt we would have been able to borrow more, but we didnt need to borrow more because of a large deposit and in the end only borrowed 35% of what was available to us.

Our credit file- 2 late payments from 2011 - same account (dispute with vodaphone) 12 clean closed accounts between us - longest credit relationship 17 years (bank account with over draft) and 9 open accounts between us (including credit cards, bank loan and mobile phone contracts)

Everyone is different and there is no "one size fits all"

If i was you positiveangel I would be seeking the advice off a mortgage broker.

positiveangel

Thank you Kittycat1981, an Independent Mortgage Advisor sent me a Mortgage Fact Find to fill and send along with copies of pay advice, passport and driving license. He says there are some lenders that can help us but it doesn't sit comfortably with him. All we want is a mortgage that won't go over £620 on monthly payment as that will be my monthly medical pension. We would love to secure a mortgage by the end of our current rent tenancy (Oct) but looks like it won't be any from the high street. However I'm gonna give it a go with this IFA.

dancingfairy

Firstly Vanquis probably has a horrendous apr. I believe it is a sub prime card? Basically I think it is likely to show up as a huge red flag for lenders so you need to get shot of this asap.
Why do you have 3 credit cards? You have access to nearly £5,000 worth of credit, I'd keep 1 card each. Lloyds or Capital one for you and RBS for your other half. I believe actually writing to the companies and getting the account formally closed would be better than merely paying them off as otherwise you still have access to this credit, and having access to too much credit (even if you are not using it) can go against you.
Where you use the card it should be paid off in full each month.
After 6 years old defaults will drop off your credit record.
Make sure you are on the electoral role as this will help your credit file a little.
Have you got a mobile on contract? If not then switching from pay as you go to a cheap contract might help a bit as that will help build a good history.
One problem you will both have is that you are very new in your jobs, I believe lenders like to see a history and feel you are secure in your job and won't be let go in your probation period.
Also going part time, again is not going to help your application so if you want a mortgage in the near future you may find it better to apply before going part time.
Unfortunately your situation isn't great, although you do have a decent deposit. Your best bet is probably to continue saving like mad for the next 12 - 18 months and then try. By then your credit file will be a lot tidier and hopefully your partner will have been in her job for a decent length of time and you will have a bigger deposit. Sometimes you just need time to fix these things.
df

[Deleted User]

dancingfairy wrote: »

Firstly Vanquis probably has a horrendous apr. I believe it is a sub prime card? Basically I think it is likely to show up as a huge red flag for lenders so you need to get shot of this asap.

Not true. Your credit file doesn't show the lender name or the rate.

positiveangel

Thanks everyone; I've had the Vanquis card now since Nov 2011 and although all debts are important to keep track of, this card however will always have my utmost attention given the high interest rate, its the card with the biggest credit limit of £2500 that i've ever had.Am I doing the right thing here? I only opened the Capital One Credit Card last Oct 2014 with a limit of £1000 and in March they increased my limit to £1200 that has to be good news right? We check our credit rating once a month and since January our report has been between excellent and Good depending on our credit card balance at the time of credit updating. Last week we finally plucked up the courage to send a "goodwill letter" to the lenders we had defaults with. Hoping something good will come one out of it; if not then no harm done (Fingers crossed)

Thrugelmir

positiveangel wrote: »

We currently have £40,000 saved up


We both also have missed payments latest was OCT 14 (3), Nov (1)
Also both had used PAY DAY Loans in Nov 2014

From a lenders perspective doesn't stack up to be using PDL's when there's available savings.