Repairing credit for a mortgage ...

Goofy84

Hi guys,

I'm hoping someone could give me a little advice please?

I've got pretty bad credit due to my own errors and late payments, which I'm now working hard to resolve. For the last few months everything has been paid on time and a promotion at work means I have no issues in repaying my debt. I have 2 catalogues and a credit card, with a total debt of around £2000 and this will all be paid off in full towards the end of this year. In the last year or so I have received a number of defaults. Frustratingly, I recently received a CCJ for just £300. I'm sure they hear this excuse all the time, but genuinely I did not receive any notification and so was unable to prepare or pay this back before the CCJ was issued. It stems back from a previous relationship and the debt was actually about 7 years old Anyway, that was paid back over 2 months and it's just something I'm hoping doesn't completely destroy my work in improving my credit.

In addition to repaying my debt, I also pay my rent through Credit Ladder, which I'm being advised will also help show I could make mortgage repayments.

My husband's credit isn't great, but not as poor as mine. He has no CCJ's, however he does have a number of recent defaults due to a repeated issue with credit card repayments. Again, this is back on track and payments are made on time every month. He has a loan which will be paid back in June, an overdraft for which he is in a repayment plan, a catalogue which will be totally repaid in September and a credit card which will be our next project in getting paid back ASAP (in the meantime no minimum payments are being missed).

At the end of this year, the money that we've been using to repay all these debts will then go towards a house deposit. Our plan is to save for around 2 years as I'm sure we will need a much larger deposit than most.

My question is, will 2-3 years be sufficient in rebuilding our credit? Or would an adverse credit mortgage most likely still be our only option?

Please do not comment just to judge. We already know where we went wrong, and I can assure you that we're working hard to turn this around.

Any help, advice or tips will be hugely appreciate. Thanks all

ACG

There are no real facts/figures as such and the devil is in the detail with these sorts of cases.

However, based on what you have said if all of the adverse is cleared ASAP and no issues in the meantime and you have a 10-15% deposit (or more) then there is a possibility of high street rates.

I would work on the assumption that high street rates are not available for 2 reasons:
1) Adverse rates are not actually that bad at the minute, they are starting from around 3-3.5% (which is around what my first mortgage was 4 years ago with a 15% deposit).
2) Expect the worst and hope for the best. If you are expecting adverse rates and you do get high street then its a Brucey bonus.

Keep your nose clean, once you have your deposit more or less in place, get all 3 credit reports (equifax, experian and call credit) over to an experienced broker. The devil is in the detail and that is what will dictate on what is available.

Best of luck.

Goofy84

Thanks for the reply ACG, really appreciate it

In regards to figures, with our own saving (£15k) and a gift from in-laws (£5k) we will have £20k deposit, which should give us about 15%. Our combined wages will be approximately £45k at the time we're hoping to buy. Apart from car finance we're working on getting all other unnecessary outgoings completely cleared. We're both on the electoral roll, and by the time we want to buy a home we will have lived in our rented house for over 6 years and have worked at the same company for over 5 years. Apart from paying off debts and keeping our noses clean, is there anything else you would suggest to help improve our credit?

I appreciate it's not easy to give any definites about how successful we will be. I agree that we just need to keep doing what we're doing and hopefully it will pay off

Thanks again.

Thrugelmir

Time is the best healer as far as credit history is concerned. Once your debts are settled. Focus on what you can influence, the deposit. Both open cash LISA's and utilise the bonuses available. Evidence of regular savings is a positive. As demonstrates both a commitment and an ability to manage your personal finances. Clearly shows you that you've put the past behind you.

ACG

I agree with Thrugelmir, time is the greatest healer.

To be honest with you, if you already hvve 15%, im not sure you really need to wait 2-3 years, although the longer you wait the more chance of normal rates. I suppose you have to offset the higher rates against rent/price rises or reductions.

BLOW_FLY

@OP if you can I would try and get rid of the car finance.

This will have a big impact on mortgage affordablility when the time comes to look at that.

If it's on HP then bite the bullet, sell it, get some money back and buy a cheaper car outright. If you've leased / PCP it then this makes it a little more complicated as you'll probably have to see out the term.

BF

Goofy84

Thanks so much for your comments guys. It's made me feel a little bit more positive that we should be accepted when it comes to applying. We're certainly going to try and get the car paid off beforehand too, but there's other priorities at the moment. Really appreciate you sharing your thoughts

Goofy84

Just wanted to update you all ... we kept our noses fairly clean over the last couple of years. We have a mortgage offer with LBS and should be completing next month. This is with a 5% deposit too, as personal circumstances meant we didn’t start saving as early as we’d have hoped.

I wanted to update this thread so that people in similar situations can see there is light at the end of the tunnel :j

Goofy84

I should just also just make you aware that, whilst our credit wasn’t great, the defaults didn’t actually appear on our credit reports. I believe when Tesco Credit Card informed is we had “defaulted” on a payment as it was made late, they didn’t actually record this as a default. Hope that makes sense