FTB Mortgage Low Credit Score and CCJ

JW2709

Hi 

Looking for some advice please!

My wife and I are FTB's.  Combined income is approx £75K

Wife credit file is clear but score is fair (no adverse credit other than some late payments on a credit agreement about 2 years ago which have all been up to date since and did not result in a default).  Couple of credit cards and store cards all with 0 balances ( credit cards have limits of around £4K but with 0 balance).

My credit file:  Had some credit issues in the past with CCJ's and defaults.  All are clear except for 1 CCJ for the value of £465 which is now paid and was registered back in 2019.  I have multiple credit cards with decent credit limits (AMEX & Barclaycards limits around 3K each) and have low balances (about £200).  I also have a loan for when I purchased a car which will be complete next year.  I have no history of late payments.  Credit score is poor but on the verge or being fair.  Equifax is high and showing a very good score however Experian is showing a poor score which I am assuming is down to the CCJ's and defaults that were only registered on Experian.

We have managed to saved a deposit of approx £50K through lifetime ISA and general savings.

As mentioned we have low credit scores and wanted to understand the chances of being accepted for a mortgage.  Other than the above we only have 1 committed spend which is my child school fees which are about 13K per year.  We are fortunate to live with my parents currently which means all other out goings are minimal but do pay bills and rent.

We have seen some properties in the region of around £325K but would like to understand also how much we could potentially borrow based on the above and how much of a deposit (%) we would need.   We can than look either look for a cheaper property or try and save more of a deposit.

I've looked at various mortgage calculators via google and all say something slightly different.  Appreciate that I will most likely need to speak to a broker which I will do, but before I pick any steps I'd like to understand other peoples experiences/advice?

thanks,

K_S

@JW2709 First off I would suggest that you completely ignore the Experian /Clearscore /Credit-Karma 'credit-scores'. With mortgages, all that matters is what is actually in your credit-report and how different lenders view it as per their criteria and risk appetite.

I'll pick out the important points from your post -

- 75k combined gross income

- negligible cc debt

- car loan

- £1,100 a month school fees outgoing

- deposit of 50k

- CCJ<500, satisfied, registered in 2019 (not clear if its over 3 years or under which may make a difference to your options)

Quick thoughts -

- the exact options you have will depend on what your report actually looks like

- the £1,100/month school fees outgoing will dampen affordability significantly

- the size of the car loan will also have an impact

- how much these outgoings impact your affordability will also depend (to some extent) on how much you can potentially stretch the term to. This will largely be based on the age of the older borrower.

- off of the top of my head, based on the limited info in your post, you will have at least a 15% deposit as I don't think the numbers add up to borrow up to a level where 50k represent less than 15% of the purchase price.
- A 15% deposit should be more than enough to give you borrowing options.

You mention that some of the adverse is only showing on Experian and not on Equifax. That is something you could potentially use to your advantage with a lender who does not explicitly ask about adverse and instead picks up the relevant information directly from the report.

If you've already tried a few lender affordability calculators (google "<lender name> for intermdiaries affordability calculator") and filled them in accurately, then you should by now have a rough idea of how much you may be able to borrow. To get a realistic and achievable figure, I would recommend considering speaking to a broker who can look at the details. 

JW2709

Hi @K_S

Thanks for taking the time to reply.

That's reassuring to know regarding the credit score comment.  That's really been worrying me. 

The car loan can be cleared in the next 4-6 months if needed (and to be honest, it most likely will).

A Barclays calculator suggested I could borrow up to £280K after including the schools fees (not included car loan as I would look to clear that before I apply).

Another suggested £240K.  It is clear that the school fees are making a large difference.  Other than the CCJ, my report is clean as in I have borrowed multiple times over a number of years, have never missed a payment and have certain utility bills in my name which again are all up to date and payments have always been on time.

As for my wife, she did has some mishaps with some missed payments but again no issues when it comes to defaults or CCJ's.  And again other than the few late payments all other borrowing has been on time.

In terms of outgoings, these are very little.  Other than a couple of contracts with EE for mobile phones, paying my parents rent and contributing towards bills, we have no other committed spend (outside of school fees)

You mentioned 15%, given the CCJ and late payment, does that put us in a better position, or should we try and save more or look for a cheaper house?  Ideally I wouldn't like to compromise too much on the price of the house as it seems like it's all becoming more and more expensive and what you used to get for £325K 5 years ago is very different now.

in terms of age we are both 37 and would be potentially to go with a 33 year term if possible.  We have every intention of shortening that time frame but figured to get on the ladder and borrow as much as we can, it would be better to go with 33 years.

What I also forget to mention is that I received a bonus of £9500 gross last year and currently looking like a £6K bonus this year.  Does that make a difference?  

Are broker recommendations allowed on here?

thanks again!!!
 

K_S

@jw2709 As long as it's been paid 2 years in  row, the bonus will definitely boost affordability.

The age should not be a huge barrier as you can go up to 70 with almost all lenders and potentially longer with some lenders depending on the specifics. That might help lessen the impact of the school fees.

If you do pay off the car loan prior to applying (and ideally reflecting as settled on your credit report), that's a definite positive with regard to maximising borrowing.

I hesitate to speculate too much about how much you can borrow as that would depend on the details.

Deposit wise, a 15% deposit is likely to be good enough for the credit profile you've outlined.

JW2709

Thanks @K_S.  The other question I have is should we look to cancel some of the credit cards (if they are rarely used) we have or will that impact our mortgage application?  We've had them for about 3 years or so.  Wife has 3 and I have 2.

thanks,

K_S

JW2709 said:

Thanks @K_S.  The other question I have is should we look to cancel some of the credit cards (if they are rarely used) we have or will that impact our mortgage application?  We've had them for about 3 years or so.  Wife has 3 and I have 2.

thanks,

@jw2709 Unless you're talking about a huge total credit limit (compared to your income), it's unlikely to matter either way.

simon_or

Bumped for the OP.

kingstreet

Answer to PM re Halifax process;-

Valuation is instructed automatically if application doesn’t need reviewing by human being. If automated valuation done and acceptable, once income evidence and other docs assessed and accepted, offer should issue automatically. Process is largely automated and usually only human intervention is to ensure evidence of income meets what is entered on application.

JW2709

@kingstreet thank you, and apologies for posting on the incorrect thread.  just for peace of mind, would it mean credit scoring will have passed if it went straight to valuation?  appreciate it may still need to be reviewed based on docs submitted etc- I guess I'm concerned about the credit scoring aspect.

kingstreet

An application is always credit scored as the application is submitted. If it's declined there it doesn't proceed to paying valuation fee. If human intervention is required after an accept as the application is submitted the valuation doesn't auto-instruct.