Credit Report & Mortgage with a default

wially

Hi Guys, I'm new to this and was wanting some help.

My girlfriend and I recently applied for a mortgage through the halifax. She works with them and so gets the staff rate at 0.5%. We went to the meeting with the advisor not expecting much as I know my credit file isnt great due to a default with the Nationwide some years ago which I wil go into later.
To our surprise we passed their application however they want a 25% deposit! Which of course we cannot afford as we would have only been able to possibly get 10%. The advisor said that it was due to the credit score.

My default is with the Nationwide due to an overdraft that I had when I was a student. Their account was my main current account throughout my teenage years, however when at uni i was enticed to another bank that was offering all the overdraft and credit card facilities. I of course took this on being a skint student and forgot about my Nationwide account and overdraft. As the account lay dormant for sometime they contacted me and demanded I repay it. At this time I was still in Uni and not earning too much so could not afford to repay it. They closed the account and demanded I repay making montly repayments, fortunatly they froze the interest on it. I didnt do this at the start, stupidly and it went to their recoveries team called KPR Collections, who I understand are part of the Nationwide and not an external firm, as now KPR have been disbanded and when I call to make my monthly payments it is the Nationwide I call. The balance due is curently around £900.

My issue is that on my credit file each month is noted as a default, even with me making the agreed payments. Is there anyway I can have this amended or removed?

I am tempted to pay it off in full as I have come into more money recently, however the Halifax Mortgage Advisor advised that it may be best to not do this as it will put a recent mark on the credit file and so if we come back to him in a few months to check again for a mortgage it could mean that the credit search may not allow them to quote for the mortgage, whereas this week it was allowing them to. Is this right that even if I pay off the debt it could have a worse effect on the credit file?

Any advice you can give would be great!

[Deleted User]

A settled default will look better than an unsettled one. Pay it off.

wially

thats what i thought until the advisor saying it may be best to not have a recent footprint on the file. Obviously it seems the best approach is to clear all issues just seemed strange advise

[Deleted User]

In house Mortgage Advisors, to be fair, tend not to know much about mortgages or credit files.

Candyapple

Your credit files are updated automatically monthly, so your mortgage advisor going on about not putting any new ‘marks’ on it is impossible.

You cannot get the default removed as it is a factual statement of your handling of said financial account. The default would drop off your file from 6 years after the date it was applied – will this be anytime soon?

If you pay it off, the account will still be marked as a default, however it would show as ‘satisfied’ which is seen as marginally better to lenders than just a bog standard unpaid default. However, the length of time remaining on your default will probably be the biggest factor i.e. a default which is 5 years old and you paid it off will have little to no impact to your file, say compared to a one year old default which is still new.

Also, if you aren’t able to proceed with the mortgage now due to not having 25% deposit, will you be in a position in a few months to increase your current savings to 25% deposit to proceed then? If not, it doesn’t make a difference either way as you wouldn’t be applying for a mortgage then so no need to worry about rocking the boat so to speak, you could sort out your credit file in your own time.

As far as I’m aware, when you apply for a mortgage most banks will do a ‘soft search’ on you for the agreement in principle and then a ‘full’ search for the decision in principle. So even if you passed the first stage, a lot of people fall down on the second stage as their income/expenditure is looked at in-depth, also they may use a different credit reference agency for the ‘full’ search.
http://www.moneysavingexpert.com/credit-cards/credit-reference

And finally, don’t forget that just because a default is showing on one credit reference agency records, doesn’t mean it shows up on all 3. So unless you have copies of all 3 of your reports and you know for certain, it could be that the lender you chose searched one of the credit reference agencies and said agency may not have a record of your default on file.