mortgages and poor credit ratings....

dobbollah

I'm not sure if this question is best placed here or on the credit file section but here goes.....

We would like to upsize........we had debt, and at the turn of the year cleared it...(woo hooooooo)

We are now saving £1200 a month and we budget realistically so things are good.

Figures below are rough guestimates

We think we have about £30k equity in the house.

We would want a mortgage of around £230000 giving us a 13% deposit.

I earn £37k and the missus earns £17k, secure jobs.

So in theory everything peachy.....however my credit score sucks 546 on noddle and 237 on clearscore.

I just wondered if anyone with a poor credit rating but with clear affordability has had any joy with mortgages.

amnblog

You don't get low scores without underlying factors and those are the issues to be dealt with.

David_White

A mortgage is very much possible with a bad credit profile, however it very much depends on why it's bad.

What specifically is wrong with your reports... defaults, CCJ's, missed payments?

dobbollah

Oh im under no illusion as to why my credit profile is bad...we had a DMP, my wifes credit file seems to have repaired to the national average now.

there is a default on my file, but the 6 years is slowly coming and will fall off my credit report in January 2017, there has been no activity on the account since May 2015.

The other big negative was a credit card in 'serious arrears' as the report calls it for which the card was settled and paid in full Jan 2016.

I imagine the general answer will be.....be patient but thought I'd raise the question...

ACG

There should be options but the information is very vague, it comes down to how it all appears on your credit reports.

Grab your reports and take them to a broker.

amnblog

As above we don't have the details we need but 13% sounds light for those kind of issues in the background.

I suspect you will need 15% deposit, perhaps 20%.

One thing you definitely will need is the help of a broker.

jamesd

dobbollah wrote: »

We would like to upsize........we had debt, and at the turn of the year cleared it...(woo hooooooo)
...
I just wondered if anyone with a poor credit rating but with clear affordability has had any joy with mortgages.

Well, that was a mistake.

You have no affordabilty trouble so you improved your affordability by reducing debts, which gained you nothing.

You have credit score issues that can be helped by buying at lower LTV but the money you could have used to produce a bigger deposit was spent on reducing debt instead.

Lower LTV increases the chance of being accepted and if you cross over thresholds like 70%, 85% 80% and so on can mean that you also qualify for cheaper loans. Getting rid of that debt might not only cost you a good mortgage it may cost you more in higher interest rates than keeping the debt and getting a lower LTV mortgage at a lower rate.

What does it take to get you to 85% LTV with a 15% deposit? That's a good initial target to aim for. Do something like using a 0% for purchase credit card for normal day to day spending and save that cash which you aren't spending.

dobbollah wrote: »

we had a DMP ... there is a default on my file, but the 6 years is slowly coming and will fall off my credit report in January 2017, there has been no activity on the account since May 2015.

The other big negative was a credit card in 'serious arrears' as the report calls it for which the card was settled and paid in full Jan 2016.

I imagine the general answer will be

Was that full or partial settlement? Full tends to look better to lenders, nobody lost money that way.

When did the trouble with the card start? If it was in the last year or two it might now be the worst single negative thing on your credit report because it might be taken to mean that nothing had been learned since the bigger trouble five or six years ago.

However, back to the mistake bit at the start of what I wrote, getting rid of a defaulted balance was a good move, so if that's all you did, I reverse my comment and say it probably did help you. But Jan 2016 is _so_ recent that lenders will surely want to see a bit of history since then.

So I suggest patience until say Feb or Mar 2017 when the Jan falling off should certainly have happened. By then you can have aggressively saved more deposit and also can have played a little on card 0% offers. To a mortgage lender you can offer to either use higher deposit or reduce debt when it comes to applying, whichever looks best for your case according to their rules.

But there's a catch with 0% for spending. Will it look as though you cleared one card and went straight back to more spending? Maybe. I suggest doing it, if you can get such a card, but then when it comes closer to mortgage time, looking at what it takes to get to one of those lower mortgage LTV thresholds. If you're well under one and too far from the next one down to get there, that'd be the time to consider reducing some of the 0% balance.

The lower you can get the LTV the greater the chance to get a deal and the lower your mortgage rate will be, so really work on it.

Property selection can also help, of course.:) The cheaper it is, the easier the LTV will be to hit.

ferry

Just wanted to add my own experiences with trying to remortgage with poor credit history. The two areas causing issues were mortgage arrears and defaults, so,basicaly, terrible recent history recorded.
About us:We had around 2 months worth of mortgage arrears that we knew would understandably hinder us and the general broker advice was clear this then come back for a review. Having fought tooth and nail to clear the priorty mortgage arrears, Two months later (post arrears) we are still none the wiser or can be considered for better rates as the defaults now hold us back.
No secured/second charges,CCJ's,DMP's or bancruptcy etc but the result : £150 worse off a month as our only option once the fixed rate ended was to revert to our current lenders SVR as we couldn't move anywhere else.How was that a help during a period of unforseen financial difficulty?
There is no way round the defaults so we're destined for bad rates and no chance of any further consideration in the mortgage market anytime in the near future.
We have a 38% LTV (or £250k deposit in layman's terms)and havent required the use of credit for 12 months as we're now starting to get back on our feet but it seems this has no standing in todays climate whatsoever. We've even approached bad credit mortgage brokers and the advice seems to be wait a year at least with perfect payment history during this time then look at the options. Again, its likely even at that stage we'd only qualify for sub prime products.
The mortgage qualifying criteria has changed significantly, we appreciate this needed to happen, but when advice is given that suggests a good mortgage is possible when your credit file reflects poor performance basically means that your recent credit history needs to be relatively quite good in reality...
Basically we are doing everything possible to sort this out but there are no options available to us at the moment
As I say, just my own experiences shared..

David_White

I can appreciate your frustration Ferry, but think of it from the new lenders point of view.

Mortgage arrears is very close to home so naturally a new lender is going to want to see distance from the issue before considering you otherwise they could easily be taking on a bad debt.

dobbollah

We wanted to clear our debt, we made mistakes in 2008/2009 which led to a dmp that ended in Jan this year.

The credit card showing arrears was paid in full..

I aim to get a credit card and use it for fuel and settle the balance each month, which is what we done for my wife...and her credit file is repairing nicely

I think patience is indeed the way....we can save towards a larger deposit by which time my credit file should be well on the mend..

Jon_B_2

ferry wrote: »

Just wanted to add my own experiences with trying to remortgage with poor credit history. The two areas causing issues were mortgage arrears and defaults, so,basicaly, terrible recent history recorded.
About us:We had around 2 months worth of mortgage arrears that we knew would understandably hinder us and the general broker advice was clear this then come back for a review. Having fought tooth and nail to clear the priorty mortgage arrears, Two months later (post arrears) we are still none the wiser or can be considered for better rates as the defaults now hold us back.
No secured/second charges,CCJ's,DMP's or bancruptcy etc but the result : £150 worse off a month as our only option once the fixed rate ended was to revert to our current lenders SVR as we couldn't move anywhere else.How was that a help during a period of unforseen financial difficulty?
There is no way round the defaults so we're destined for bad rates and no chance of any further consideration in the mortgage market anytime in the near future.
We have a 38% LTV (or £250k deposit in layman's terms)and havent required the use of credit for 12 months as we're now starting to get back on our feet but it seems this has no standing in todays climate whatsoever. We've even approached bad credit mortgage brokers and the advice seems to be wait a year at least with perfect payment history during this time then look at the options. Again, its likely even at that stage we'd only qualify for sub prime products.
The mortgage qualifying criteria has changed significantly, we appreciate this needed to happen, but when advice is given that suggests a good mortgage is possible when your credit file reflects poor performance basically means that your recent credit history needs to be relatively quite good in reality...
Basically we are doing everything possible to sort this out but there are no options available to us at the moment
As I say, just my own experiences shared..

Imagine you had a brother/sister who was owed overdue money by a friend who they had been chasing for some time.

Imagine that friend only a few months later was asking you to lend them some money promising to pay it back.

Based on this recent history, what would you do?