Getting a Mortgage, bad credit including recent arrears.

shaaan1329

Hi everyone,

I am in the process of cleaning up my credit file, which is dire if I'm honest. I have numerous defaults, relatively recent some from this year and I have two CCJ's. I will be able to be completely debt free by June this year and hope to see a gradual improvement in my credit rating, file and score in the coming months. Please do not judge, I have had issues in the past with management of money and I have only really gained motivation to sort myself in the last few years since meeting my parter.

Myself and my partner are looking to buy however and he is pretty much ready. We have a 25% deposit and are looking around the £220,000 mark. My salary is £21,000 and his is around the same (he is self-employed, another hurdle!).

I know it won't be an easy ride to try and get accepted for a mortgage but I wonder if there are any tips you guys can share? Obviously once I am debt free, my income to debt ratio will be more pleasing but should I just give up my hope of being on the mortgage and look into my partner buying in his sole name? I want to be realistic really.

mi-key

Being self employed is no real problem as long as he has a couple of years tax returns to show.

If the mortgage is just in his name though, it is going to impact you quite a lot, you would be looking at houses more around £140K on your rough figures if he has no debts

The best thing to do is speak to an independent mortgage advisor. They will be able to go over all the figures for you, and will know which lenders are likely to be able to help 

mi-key

Do you have the 25% deposit in cash? If you do it may be better to pay off all your debts now before looking around for a mortgage

amnblog

You have defaults from this year? Within the past two months?

Do you mean formal defaults (where the account has gone into default), or missed payments?

ACG

Really, you need 6 months clear of any adverse. If you have defaults from this year, that suggests you only have maybe 1 month clear. 

With a 25% deposit it should be doable but I think you are going to have rates of around 7-8%. 

shaaan1329

Sorry, I realise I didn't add much context. 

Me and my partner decided to start putting money away each month to save towards a deposit for a house. Between us we have around £12,000 and the remainder is coming from my inheritance which I will be receiving in the near future. 

The issue is, while logically I have known in the back of my mind I needed to be paying my debts off, I was ashamed and secretive and therefore my partner didn't know. I didn't want him to know so instead of paying them off, I just kept putting money away to keep up pretences so to speak. 

The inheritance I am to receive has come somewhat out of the blue and therefore the possibility of buying a house has come to the forefront a lot sooner than I had intended meaning I have had to buck my ideas up and pay off what I owe instead of burying my head further. 

Yes, the recent ones are defaults, not just missed payments. So the majority of my debt was taken out between 2014-2019 and it is these missed payments that turned into defaults and it is the default payment I have been missing. Essentially I had £9000 of debt taken out between 2014-2016, this accrued interest and in turn have mostly gone to debt collection agencies who continue to report to the CRAs that the debt has not been satisfied. 

When I say my credit file is dire, I really did mean dire. I regret getting myself into so much crap but am willing to put in the effort to pay it off ASAP and try and get a mortgage. 

shaaan1329

I say I have been missing default payments, when actually more realistically there isn't even any payment plans in place, so I am not missing payments I should be making, the debt is just sitting there unsettled but reported if that makes sense?

ACG

Lenders go off the default date. 
If you defaulted in say 12/2022 and it then shows as a default in Jan and Feb this year, lenders will be using the december date. 

You need 6 months without any new registered defaults (ie 6 months from December in the example above). 

Once you have that you should have options. Probably not high street for a couple of years, but with 6 months you should be able to buy.

shaaan1329

ACG said:

Lenders go off the default date. 
If you defaulted in say 12/2022 and it then shows as a default in Jan and Feb this year, lenders will be using the december date. 

You need 6 months without any new registered defaults (ie 6 months from December in the example above). 

Once you have that you should have options. Probably not high street for a couple of years, but with 6 months you should be able to buy.

Thanks for this. I’ve checked my Experian full credit report and the last default date that has been added was May 2022 and that was settled last month. 

I have about £1000 to go and I’ll be debt free. I do have a credit card but I’ve recently paid that off in full. 

I know it takes time to heal a credit report, but I’m hoping that if I give it 6 months from what you’ve said I should be okay? I’m not expecting a great interest rate and my partner knows that we’re looking at a worse rate because of this but just to get on the ladder is enough for us at the minute. We have food disposable income, the main hurdle is my credit unfortunately. 

Would you say there’s any point instructing a broker now to take a look at things and see how we can improve or shall we wait until I’ve got my inheritance and we’re closer to the point of actually looking at houses? 

Again thanks so much for the info  

ACG

You could do something now assuming you had the deposit. 
Once you are where you want to be with the deposit, speak to a broker. 

There wont be much you can do in the meantime.