Bigger deposit or debt free? Poor credit rating!!

Thrugelmir

Settle your debts. Here's an opportunity to start afresh.  By using a cash LISA you can give your savings a boost. 

Why is your partner unable to go on the mortgage?

mrseff_2

For me (and I am far from an expert!), I would clear the debts tomorrow - you will still have a chunk of cash left over and without having to pay your debts you can throw what you would have paid on those into savings. You mention your age is a factor but don't say how old you are... I'm single and 54 with some adverse credit (longer ago than yours but relatively recently but for a similar amount) and I'm just about to exchange on my first home (fingers crossed). My monthly payments will be slightly higher than my current rent because of teh short term of the mortgage. Are you a first time buyer? I completely understand the desire to have your own place and get on the ladder but if you can hold fire, pay off the debt and rebuild your credit file for a little bit, your home will be all the sweeter! Good luck!

SDavies84

Thrugelmir said:

Settle your debts. Here's an opportunity to start afresh.  By using a cash LISA you can give your savings a boost. 

Why is your partner unable to go on the mortgage?

Thank you. I have just Googled LISA and it sounds interesting. The starting afresh thing is what sounds appealing to me....

My partner has a worse credit rating than me to be honest. He also isn't working at the moment. He normally does work, (and was on a good salary of around £45000 at his previous positions), but he had some mental health issues last year and although is feeling better now, he is finding it difficult to get back into employment. I am thinking it would just be better to get something solely in my name sorted and then when we are (hopefully) in, begin to sort out his situation for when we could hopefully get something with his salary taken into consideration.

SDavies84

mrseff_2 said:

For me (and I am far from an expert!), I would clear the debts tomorrow - you will still have a chunk of cash left over and without having to pay your debts you can throw what you would have paid on those into savings. You mention your age is a factor but don't say how old you are... I'm single and 54 with some adverse credit (longer ago than yours but relatively recently but for a similar amount) and I'm just about to exchange on my first home (fingers crossed). My monthly payments will be slightly higher than my current rent because of teh short term of the mortgage. Are you a first time buyer? I completely understand the desire to have your own place and get on the ladder but if you can hold fire, pay off the debt and rebuild your credit file for a little bit, your home will be all the sweeter! Good luck!

Fingers crossed for you! That sounds positive! I am 36, which maybe doesn't seem too old, but I am thinking if I needed a 25 year mortgage would that be given to me if I was over 40? I am a first time buyer (hopefully!)

I just feel like I've finally grown up this year and got myself a bit sorted and don't want to waste the opportunity of getting this inheritance and actually have something to show for it! 

K_S

SDavies84 said:

I don't know if I'm being really stupid here, but hope this is right. When looking at Experian these are the dates that say defaulted date on them.

NatWest Overdraft - 31st Oct 2020
Three - Jan 2019
Vanquis - September 2018
Quick Quid - June 2018
NatWest Credit - Aug 2016

With regards to house price, I would be looking at anything I can get to be honest. I would obviously like something I actually like and be happy in, but my main priority is getting my foot on the ladder. I have seen a house I quite like that is £109 000

Concerning rate, again, I would accept something like 7% as I know my credit history combined with my salary would not make me the most attractive candidate. I don't know if it helps, but I currently pay £850 a month in rent and manage this fine and have never missed a date.

Thank you everyone for your advice, it is very much appreciated

@sdavies84 I'm not a debt adviser and don't know your personal situation so can't tell you whether you should to pay off your debt or not.

From a mortgage point view, generally speaking you are likely to have a better choice of lenders and products if you settled your defaults, put them in the rear-view mirror and concentrated on building a decent period of time (even 6 months is a start) with no adverse entries on your credit files. Good luck!

brownbagsFTB

Pay off debts first. I’ve just had to do that as any mortgage provider will include outstanding debts in your monthly affordability calculations. The defaults drop off your credit file after 6 years (from date of 1st default) whether you settle them or not. Instead of paying in full, you may as well ring each debtor and ask for a settlement figure, it’s already a black mark on your credit file for 6 years and you could get a discount. Join Experian for a month £14.99 and use it to call them and get advice on how best to pay down the debts with minimum impact to your credit file. Then as others have said, open a LISA and put £4,000 in straightaway. Then put another £4,000 in on 6th April next year and you’ve made £2,000 back. This is all stuff I did and I’m now debt free, with a near perfect credit rating and a healthy deposit. It might take you a bit longer but I’m 38 and can still get a 31 year mortgage, so don’t worry. Good luck!! 

SDavies84

brownbagsFTB said:

Pay off debts first. I’ve just had to do that as any mortgage provider will include outstanding debts in your monthly affordability calculations. The defaults drop off your credit file after 6 years (from date of 1st default) whether you settle them or not. Instead of paying in full, you may as well ring each debtor and ask for a settlement figure, it’s already a black mark on your credit file for 6 years and you could get a discount. Join Experian for a month £14.99 and use it to call them and get advice on how best to pay down the debts with minimum impact to your credit file. Then as others have said, open a LISA and put £4,000 in straightaway. Then put another £4,000 in on 6th April next year and you’ve made £2,000 back. This is all stuff I did and I’m now debt free, with a near perfect credit rating and a healthy deposit. It might take you a bit longer but I’m 38 and can still get a 31 year mortgage, so don’t worry. Good luck!! 

@brownbagsFTB thank you so much. That makes it all sounds so much clearer. You've set my mind at ease a bit saying that you were in a similar situation would be able to get a 31 year mortgage! I have just literally emailed all my debtor and asked if I can have a settlement discount, so fingers crossed!

brownbagsFTB

SDavies84 said:

brownbagsFTB said:

Pay off debts first. I’ve just had to do that as any mortgage provider will include outstanding debts in your monthly affordability calculations. The defaults drop off your credit file after 6 years (from date of 1st default) whether you settle them or not. Instead of paying in full, you may as well ring each debtor and ask for a settlement figure, it’s already a black mark on your credit file for 6 years and you could get a discount. Join Experian for a month £14.99 and use it to call them and get advice on how best to pay down the debts with minimum impact to your credit file. Then as others have said, open a LISA and put £4,000 in straightaway. Then put another £4,000 in on 6th April next year and you’ve made £2,000 back. This is all stuff I did and I’m now debt free, with a near perfect credit rating and a healthy deposit. It might take you a bit longer but I’m 38 and can still get a 31 year mortgage, so don’t worry. Good luck!! 

@brownbagsFTB thank you so much. That makes it all sounds so much clearer. You've set my mind at ease a bit saying that you were in a similar situation would be able to get a 31 year mortgage! I have just literally emailed all my debtor and asked if I can have a settlement discount, so fingers crossed!

Great! Just check with Experian or another financial expert before you partially settle to make sure it doesn’t go against you when applying for a mortgage (that’s why I suggested becoming a full member of Experian for a month, to double check). It made no difference to me as mine were coming up to 6 years and dropped off the credit file anyway. If you can get at least 25% discount on your debts and make £2K in your LISA in the next year, it won’t make much of a dent in your inheritance 

gizmo111

brownbagsFTB said:

SDavies84 said:

brownbagsFTB said:

Pay off debts first. I’ve just had to do that as any mortgage provider will include outstanding debts in your monthly affordability calculations. The defaults drop off your credit file after 6 years (from date of 1st default) whether you settle them or not. Instead of paying in full, you may as well ring each debtor and ask for a settlement figure, it’s already a black mark on your credit file for 6 years and you could get a discount. Join Experian for a month £14.99 and use it to call them and get advice on how best to pay down the debts with minimum impact to your credit file. Then as others have said, open a LISA and put £4,000 in straightaway. Then put another £4,000 in on 6th April next year and you’ve made £2,000 back. This is all stuff I did and I’m now debt free, with a near perfect credit rating and a healthy deposit. It might take you a bit longer but I’m 38 and can still get a 31 year mortgage, so don’t worry. Good luck!! 

@brownbagsFTB thank you so much. That makes it all sounds so much clearer. You've set my mind at ease a bit saying that you were in a similar situation would be able to get a 31 year mortgage! I have just literally emailed all my debtor and asked if I can have a settlement discount, so fingers crossed!

Great! Just check with Experian or another financial expert before you partially settle to make sure it doesn’t go against you when applying for a mortgage (that’s why I suggested becoming a full member of Experian for a month, to double check). It made no difference to me as mine were coming up to 6 years and dropped off the credit file anyway. If you can get at least 25% discount on your debts and make £2K in your LISA in the next year, it won’t make much of a dent in your inheritance 

Forget about Experian - best place for advice on settling debts is the DFW board on MSE.  Also do not pay for your credit report you can get it free if you join the MSE credit club.

MaryNB

SDavies84 said:

mrseff_2 said:

For me (and I am far from an expert!), I would clear the debts tomorrow - you will still have a chunk of cash left over and without having to pay your debts you can throw what you would have paid on those into savings. You mention your age is a factor but don't say how old you are... I'm single and 54 with some adverse credit (longer ago than yours but relatively recently but for a similar amount) and I'm just about to exchange on my first home (fingers crossed). My monthly payments will be slightly higher than my current rent because of teh short term of the mortgage. Are you a first time buyer? I completely understand the desire to have your own place and get on the ladder but if you can hold fire, pay off the debt and rebuild your credit file for a little bit, your home will be all the sweeter! Good luck!

Fingers crossed for you! That sounds positive! I am 36, which maybe doesn't seem too old, but I am thinking if I needed a 25 year mortgage would that be given to me if I was over 40? I am a first time buyer (hopefully!)

I just feel like I've finally grown up this year and got myself a bit sorted and don't want to waste the opportunity of getting this inheritance and actually have something to show for it! 

A lot of lenders base the max mortgage terms on retirement age. Presuming you plan to work roughly until your pension age this be will be 68. I got my mortgage at 30, gave a pension age of 68 and my lender said I could have a max mortgage term of 38 years.