Getting a Mortgage with Bad Credit History

Poten

In early 2013 I ran in to some problems and with little to no income couldnt service my debts. Although not as bad as it could have been (and Im sure others have done much worse) the following happened:

- Defaulted on a £1600 overdraft with Natwest. They were charging me £6/per day interest and I entered in to a payment arrangement with them paying £13/month towards it. After a year of payments, they registered the default on my credit file.

- Had a £2900 credit card debt with AMEX. I currently pay £60/month towards this and have a letter from them confirming that so long as I stick to the repayment plan they will not register a default, so there is no default on my credit file from them.

- Had a £300 payday loan with vivus.co.uk. I have paid circa £500 back to them. We entered in to a repayment plan where I was paying £5/month and I had about ~£100 outstanding. I was then contacted by a debt collector who informed me vivus were no longer trading. They quoted an incorrect figure for the debt (which ignored a lot of the money I had paid off) but I have not heard from them for over 6 months. I am unsure whether to contact them and arrange to pay the outstanding amount? I am afraid of them adding a raft of charges to the account. There is no record of this on my credit file.

I am far better off financially now and I could easily up my repayments. It is likely that I will clear the outstanding total amount (~£4000) within 2 years. I am thinking long term and am probably going to be interested in buying a house in 1-2 years time with my partner. Both our families will help and we should be able to easily get together a 10% deposit and potentially as much as up to 20%.

I imagine by the time that comes around my debts will have been 'satisfied' but will still remain on my credit file. So, with a long term view, what should I be looking to do over the next 2 years or so in order to improve our chances of being accepted? My partner has a perfect credit history. I have not made any later payments at all for the last two years but my 'credit rating' seems stuck in the doldrums and hasnt moved upwards (and yes, Im aware there is no such thing as a score!).

Thanks in advance for the help, if there is a guide for this then please link me to it as I could not find one (but imagine this is a common question)

Thrugelmir

Clear your debts asap. Time will heal your credit record.

MEM62

Clear your debts first. The look to build your deposit. By the time you have done this any negative data on your credit history will close to dropping off. Then see a mortgage broker.

I may be a lesson you have learnt already but when taking on any further debt, including your mortgage, consider how you would make payments if you were out of work for a while of you level of income dropped.

chuckley

as the debts are just 2 years old, you won't get a mortgage within the next two years, even if cleared.

You'll need to repay and then apply once the 6 years has passed. Although I hear PDLs on credit files are a NO-NO to mortgage advisors.

unless you do everything in the wives name.

alchemist.1

Go and see a broker who specialises in mortgages for bad credit. It will depend on the size of your deposit and when you defaulted. You wont necessarily have to wait 6 years after default like it has been suggested on here.

Poten

Thanks for the replies. It seems most of you suggest I should clear my debts asap. I am not being charged interest on the outstanding balances so I was doing so at a relatively calm pace but I will increase my repayments.

Getting a small 'credit builder card' would be no good then? On the assumption that it was paid off in full every month.

HaydenB

I recently got a mortgage even though still in a Debt Management Plan. Its with Aldermore, and obviously the rates arent too cracky, but I needed one and managed to get one.

chuckley

is that through a guarantor?

HaydenB

No. None required.

Mummyto4kids

We recently got approved for a mortgage with the Halifax, with a 5.5 yr old default and some PDL's on hubbys credit file from 3 years ago. Every case seems to be different - it doesn't look like there are hard and fast rules about what a lender will accept or not because they all want different things but our broker has been worth a fortune to us, and I would recommend using one definitely.

HaydenB

I agree. My situation was quite complex and my broker was worth their weight in gold.