Looking to Quickly Improve a Poor Credit File

TempUserName123

Hi,

I am making enquiries on behalf of a client who is looking to apply for a mortgage in the next year, actually sooner rather than later. The mortgage required is for around £40,000. Deposit available is £10,000. Hence an 80% mortgage would be fine, my client believes she can stretch to 70% or even 60%. Her income is £20,000 after Tax.

The problem lies in that my client has a poor credit file, but we believe it can be quickly improved in that the balances are quite small. There's only about £4,500 on the credit file, but it's all old and no debts have been paid at all in since 2013/14, about 3/4 years.

The accounts range from a loan - £1,000, overdraft - £1,000, a few pay day loans, utility bills, and other misc small debts. A lot of the debts have been passed on to collection companies, and I have seen correspondence that some of these are willing to accept a 50% haircut for settlement. I believe I could talk to all of these companies on my clients behalf and strike a deal to reduce the £4,500 to around £3,000.

My question is what would be the best way forward to manage the accounts going forward? Would it best to settle as many as full, as early as possible? Or would it be better to try and arrange some of the debts to be settled over say a six month period - this would be in the hope that future lenders can see a good history of repayments.

Any other advice would be greatly appreciated,

Thanks in advance

dieselv2

The defaults will stay on file for 6 years and if there's a few lenders are 99% unlikely to touch especially for a huge amount.

Even if settled the payment history would still flag under against lenders criteria.

[Deleted User]

If a mortgage application is expected in the next 12 months, you will at least want to have at least settled them - soon, in one go, not dragging it out with further arrangements to pay.

However, I would keep your/her expectations very low when applying, with that kind of history. You're going to need to pitch the application very selectively, if at all.

Gaz83

Does your client know that his advisor is asking for help on credit files from anonymous internet users?

TempUserName123

Gaz83 wrote: »

Does your client know that his advisor is asking for help on credit files from anonymous internet users?

Yes, it's actually a member of the family and I'm undertaking this as a favour

TempUserName123

Deleted_User wrote: »

If a mortgage application is expected in the next 12 months, you will at least want to have at least settled them - soon, in one go, not dragging it out with further arrangements to pay.

However, I would keep your/her expectations very low when applying, with that kind of history. You're going to need to pitch the application very selectively, if at all.

I would have thought arranging a new agreement would show to potential lenders that the applicant is now able to make regular monthly payments?

ashp_2

I don't know in what form you represent your client but none of this looks good in terms of a mortgage application within the next year. I don't see a history of repayments on a defaulted account being of any benefit. They should be settled in full if this is possible.

A mortgage advisor when it comes to applying for a mortgage will be critical.

[Deleted User]

QuickRebates wrote: »

I would have thought arranging a new agreement would show to potential lenders that the applicant is now able to make regular monthly payments?

It shows that the applicant couldn't pay their debts, is now getting round to it but have very little disposable income so is dragging repayments out.

Not the kind of borrower a mortgage lender is looking for.

TempUserName123

P.S. Even if a mortgage is unlikely to come to fruition in the next year, that's not really a problem - she can wait. But of course at least now she is making the effort to correct the wrongs.

If I understand correctly, if she settles the debts today, would the defaults still stay on her file for a further six years, or would they drop off the record from the date of default?

Thanks

[Deleted User]

6 years from default.

TempUserName123

Also, once these accounts have been closed, settled in full. Would you recommend my client build up a good credit account?

i.e. by applying for a credit card, using it regularly but paying the balance off in full each month, would that assist her general credit rating?