Bigger deposit or debt free? Poor credit rating!!

SDavies84

gizmo111 said:

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.

Ah ok, thank you. I will put a post on there as well and see if anyone has any tips etc!

SDavies84

MaryNB said:

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. 

Ah that makes sense. I just kind of assumed 25 years was the standard that was offered as when I looked at mortgage calculators, they all seemed to say 25 as the default