Is it possible to be mortgage ready in 2 years?

ktd22

Hi all,
thanks in advance for any help!

I have up until recently had a large amount of debt (£10k+), and thanks to some stressful financial circumstances I unfortunately defaulted on a number of payments in the last 2/3 months. The debt was accrued over the last 7 years thanks to the awful cycle of maxing out cards, then applying for more credit to catch up and maxing out them etc etc.

I have been working on my debt for a while now but by a stroke of good fortune I have just come into enough money to clear all of my debts with a lump sum and these are now all cleared. I have also been made aware that in 2 years time I will be gifted enough money to place a deposit on a home - which is something I frankly never thought possible.

So I am now totally in the black, and I have two years to restore my abysmal credit score - but I’m aware that when it comes to mortgage applications your credit history counts more than just your score.
So is this really hopeless? Will the fact that I have several defaults from 2 years prior mean I can’t get a mortgage, even if my next 2 years are perfect?
I would be applying for the mortgage with my husband, who has a much lower salary than me but a much much better credit score and no defaults in his history.
If we did get approved for a mortgage are we doomed to have a terrible interest rate?

And more practically, what’s the best way to maximise my credit history for the next two years. Currently all the credit cards and my overdraft are all still open and available. There is absolutely no risk of me using them to get into debt again as my spending habits have vastly improved, I am much more disciplined and I no longer have to deal with the difficult circumstances that started my financial issues. 

So would it be better for my credit score to leave the credit available and unused/used for a couple purchases and then paid in full each month? Should I close some cards and leave just one or a couple open? Is it better to have an overdraft you never use or not have one available at all?

Apologies for all the questions and thank you very much in advance!

[Deleted User]

It's aIl about your history. Your score has no impact whatsoever on lending decisions.

You mention a number of defaults. Us this accurate, or do you mean missed payments? If actually defaults, how many accounts did you default on?

With regard to future usage, use your cards and clear on full each month. No need to close anything.

Use a decent broker to help place your mortgage application. The larger your deposit, the better.

MovingForwards

I had my broker for a few years before being mortgage application ready.

I was saving at the same time as paying debt off.
I would occasionally use my credit card, paying it off in full when the statement came; demonstrated I was responsible with credit.

Whilst I have got a sub-prime mortgage lender, it's not forever and 2 years after I purchased my home, I could have remortgaged to a mainstream lender.

Use this time to find a good broker. Save up your own money too as it always looks better to be regularly saving and put in some of your own money towards the purchase, use the CC for fuel / food, but pay it off in full.

If you want more information, post on the mortgage board as there's a few brokers who comment on threads. It helps if you say how many defaults and amounts as that can make a difference between lenders.

ktd22

Deleted_User said:

It's aIl about your history. Your score has no impact whatsoever on lending decisions.

You mention a number of defaults. Us this accurate, or do you mean missed payments? If actually defaults, how many accounts did you default on?

With regard to future usage, use your cards and clear on full each month. No need to close anything.

Use a decent broker to help place your mortgage application. The larger your deposit, the better.

My mistake - I had misunderstood the technicalities of a Default

I had defaulted on one account for several months, so on my credit report it currently says Defaulted since December 2021
That account has now been paid in full

Otherwise I missed a few payments on other accounts but they were not in Default.

Thrugelmir

Time heals. If you are now debt free. Start to save. Make that initial deposit even larger. 

penners324

I think most of the cards and the overdraft should be closed to curtail temptation to spend.

And use 1 card for a tank of fuel or a weekly grocery shop each month and pay after the statement is issued and by the due date 

K_S

@ktd22 Based on the limited info in your post, by the time you apply for a mortgage you'll have 2 years of clean credit history, all defaults registered 2+ years ago, no debt and a decent deposit (I'd characterise that as 15%+). If the lending environment is largely similar to what it is now, you should be fine for a mortgage, albeit with an off high-street/specialist lender. 

It's a not a given that you'll necessarily get a 'terrible' rate as that will depend on the specifics, what your 3 credit reports actually contain, how big your deposit is, etc.

In the meantime, just focus on making sure you don't miss any regular payments, don't take on excessive short term debt, just keep things simple. Good luck!

Missmarple

Having 1 default upsets the apple cart mortgage wise. You can only do your best from now on by using your cards and clearing the balance every month, you will then have 24 months of perfect payments. Accounts show on your file for 6 years ONCE THEY ARE CLOSED otherwise it shows years and years of payments. I would close the defaulted account and let it drop off after 6 years from closing. I wouldn't advise using your overdraft either. People get mortgages with more defaults than one, it will depend on the amount and if it was cleared etc. You will probably need a broker to source one at the time. 

[Deleted User]

Missmarple said:

Accounts show on your file for 6 years ONCE THEY ARE CLOSED otherwise it shows years and years of payments. I would close the defaulted account and let it drop off after 6 years from closing. 

The account will drop off 6 years from default, not closure. 

theoretica

At this point it is more important to avoid negatives than to try to add positives to your credit record.  So make sure everything possible is paid automatically by direct debit and don't try anything over-complicated.