How long does it take to recover from a Very Poor credit score?

Ginger.ice

Due to years of compulsive gambling I built up debt nearing £20k, much of it at very high interest rates. About 18 months ago I registered with Step Change and entered a debt management plan with all of my creditors.


The DMP resulted in 5 defaults (although I'm disputing one of these) and several late & under payments. I was in this DMP for 12 months and came out of it at the beginning of this year as I felt I had things under control and would prefer to deal with my creditors directly. Unfortunately I relapsed on my gambling and built my debt back up to nearly where it was before the DMP. This is when I finally admitted I had a problem and asked for help from friends and family.


After borrowing nearly £10k from my friends and family and using a bonus from work I was left with about £7k owing to creditors. Since this big life changing admission I have had 3 months without missing any payments and the total balance owed to financial institutions is about £4k. Thanks to a good job, I expect I will have paid back the remaining £4k by the end of this year, repaid my friends and family by the end of next year, and built up a small amount of savings befitting a house deposit 12-18 months after that. That means in 3 years time I maybe in a position to buy a house, but will my credit rating have recovered enough to realistically apply for mortgages?


I know it is going to be a long process, but I am monitoring my credit score via Noddle Credit and wondered how long it will take for me to become a more attractive person for banks to lend to?


At 32 years old I am already miles behind my friends when it comes to getting a house and mortgage, but since admitting my problem I feel in control of my life and my finances.


I would like to hear from anyone who has been in a similar position, or knows more than I do about the mortgage application process, as it maybe beneficial to be able to manage my own expectations.

[Deleted User]

Ignore the score. No one sees it apart from you and it has little to no bearing on how lenders will see you.

Three years of clean behaviour will certainly improve your chances, but I would suggest using a broker to place a mortgage when the time comes. A large deposit will also help.

funkysi

If you've gone into default on any one of those accounts, which by the sounds of it, you may have done as it's gone to a payment plan? Then you'll have that on your record for 6 years; bear that in mind when applying for credit/mortgage. Even if you've satisfied those accounts there will be a history.

Ginger.ice

Yeah, there are at least 5 defaults, all have been satisfied, but only this year. Its incredibly frustrating that I've been so irresponsible, but what has happened has happened, and I am on the recovery. The level of debt has fallen dramatically and I can't think of any reason why I would miss a payment ever again (unless I begin gambling again).


Sounds like I might struggle to get a mortgage for 6 years, which won't please my incredibly supportive girl friend. At least I know the situation, and can now manage both of our expectations.


Thanks for the advice.

nicp60

Firstly, well done on getting the help you need and making the necessary changes!

Ginger.ice wrote: »

Yeah, there are at least 5 defaults, all have been satisfied, but only this year. ...

Sounds like I might struggle to get a mortgage for 6 years, which won't please my incredibly supportive girl friend. At least I know the situation, and can now manage both of our expectations.

The defaults will drop off your credit file 6 years from the date of the default, not the satisfaction date, not the last time you paid, but the date of the default.
That should be sooner than 6 years from now, hopefully.

Some lenders will consider you with historical defaults, as long as they are under certain amounts and you don't have any CCJs. For these mortgages though, expect to pay a higher interest rate and possibly arrangement fee.

In my experience, my default stopped me from getting anything at all whilst it was still on my file. I could have gotten a sub-prime mortgage (only with a 20% deposit though) and the occasional bad-credit credit card, but considering I only had one default, it was really limiting.
I think the size of the defaults will impact too. Mine was pretty massive (8k).

You will almost certainly benefit from using a broker when the time comes, they know the market inside out and will be able to advise if you do decide to apply before the defaults are off your report.