What Happens After Six Years?

Tatters26

So I at one point had 5 defaults and a terrible credit score. These were all from a period in 2018 when I got divorced, moved country, things weren't paid die to squabbles and stupidity, etc and yes, I ended up in a bad situation.

Anyway fast forward 5 years and I sorted a mortgage, bought a house and have had no credit errors since.

I'm aware that after 6 years these things all disappear, as it stands I still have four defaults. But the day after it drops off, what happens? Does your score climb significantly overnight or is it a slow burner? Surely if your low score is caused by a CCJ or default, once they've dropped off the score climbs back to where it would've been without that?

I'm asking as I want to get a new car and being offered terrible finance options, and wondering if literally waiting for all of these to drop off later this year will make that better overnight once they're gone.

MorningcoffeeIV

No. Your score will normally drop further once the defaults come off, because it's another significant change. But the score isn't seen or used by anyone but you, so it doesn't matter.  Just ignore it.

Lenders only look at the actual contents of your files.

Tatters26

MorningcoffeeIV said:

Lenders only look at the actual contents of your files.

I get that for a mortgage, but what about a "computer says no" scenario where you apply for say a loan from post office? 

MorningcoffeeIV

The same. They're looking at your credit files, never the score.

born_again

Tatters26 said:

MorningcoffeeIV said:

Lenders only look at the actual contents of your files.

I get that for a mortgage, but what about a "computer says no" scenario where you apply for say a loan from post office? 

Lenders do not see your credit score. They look at your credit history & available credit to income.

If computer say no, then either you do not meet their lending criteria at that point. Or something is not matching up. So might not be in electoral role, address or other details not matching etc.

CliveOfIndia

Tatters26 said:

MorningcoffeeIV said:

Lenders only look at the actual contents of your files.

I get that for a mortgage, but what about a "computer says no" scenario where you apply for say a loan from post office? 

Doesn't matter whether you're talking about a mortgage, personal loan, credit card, mobile phone contract, whatever - when you apply for any form of credit, the lender will take the data in your credit file, churn it through their computer systems, and the computer will say "Yes" or "No".

As other have said, the score you see on your report is utterly meaningless.

To confuse things slightly, when the lender churns your data, their computer will spit out a score.  But this is internal, confidential to that particular lender, and bears no resemblance whatsoever to the CRA score you see.  So you'll sometimes hear tales of someone being told that they were refused due to their credit score - strictly speaking this is correct, but it's the lenders own internal score they'll be talking about, and no-one (not even the applicant) will ever be told or can know what this is.

So yep, as mentioned by previous posters, your credit history ("credit-worthiness", if you want to call it that) will gradually improve over time as the negative markers start to age and eventually drop off your history, and you're hopefully building up plenty of positive history to supersede the negative stuff.

cymruchris

Just because the bad data drops off - doesn't mean you'll be seen in a new light overnight, but you may get access to products that you didn't previously.

As your existing errors have faded into the distance, and you've been paying your mortgage, your positive history has been growing, and your negative history is moving into the past.

Future credit providers, whether it's a loan, a credit card, a store card, a mobile phone contract, will all look at your history. The more positive they see, the more chance you have of success. But it's a slow burner as you put it, it takes time. Lenders look at so many facets of you before deciding. Such as how long have you lived where you are, are you a house owner or a renter, are you on the electoral roll, your salary, your commitments, what's the average age of your accounts, where you do have credit - what's the percentage of utilisation, and lots lots more (they aren't questions for you - but questions that lenders ask themselves before deciding to lend).

Three years after my bankruptcy, when the official receiver sold my property, once they'd taken possession, I stopped paying the mortgage - however the bank then recorded missed payment 1, 2, and 3 until the property was sold, and was settled.

Those 3 missed payments are the only blemish on my 6 year history, and the first of which dropped off last month, the second will drop off this month, and the final one next month.

I've built up a very positive history over the last 6 years, now holding mainstream credit cards with an available credit of £40k, only ever have utilisation of up to 10 percent, and always paid in full each month, yet the Lloyds group (MBNA, Lloyds, Halifax etc.) would always turn me down on their eligibility check (I tended to check my files often, and what I was eligible for on lenders own websites - I didn't apply for anything and everything I was approved for - but kept a note of who said no or yes as time passed).

When the first of the missed payments dropped off last month - suddenly I was pre-approved for MBNA, Halifax, Lloyds etc (they all use the same eligibility checker) for a credit limit of £6500. I haven't yet pressed the apply button, but am confident that I was being auto-declined for 3 missed payments even with a positive history since. I'm going to check the checkers again next month after the final missed payment disappears to see if there are any changes across the board.

So in short, nothing much will change overnight, your magical score that only you see might go up, might go down, might stay the same - but that doesn't matter, and you'll possibly have access to new products that you might previously have been declined for. The important thing is keep up with your positive history. Ensure all your files are up to date and accurate. If you have the option to hang-on until all the negative history has dropped off, you may get a better deal, but as above with the number of factors lenders take into account, nothing is guaranteed.

Tatters26

CliveOfIndia said:

Doesn't matter whether you're talking about a mortgage, personal loan, credit card, mobile phone contract, whatever - when you apply for any form of credit, the lender will take the data in your credit file, churn it through their computer systems, and the computer will say "Yes" or "No".

So yep, as mentioned by previous posters, your credit history ("credit-worthiness", if you want to call it that) will gradually improve over time as the negative markers start to age and eventually drop off your history, and you're hopefully building up plenty of positive history to supersede the negative stuff.

So that last bit is my main thinking. The gradual bit. All my history for 5 years is great, its the divorce blemish spell where all the negative is. If a company has no eyes on that after 6 years, I'm 100% squeaky clean. 

I do get the concept of a credit score is a made up irrelevant number. What I was asking is am I more likely to get accepted for products very quickly after they drop off, which it appears could be the case from what Cymruchris says, but again not guaranteed.

I just want that part of my life over and done with, and hoped that once they're gone it would be

adamp87

MorningcoffeeIV said:

No. Your score will normally drop further once the defaults come off, because it's another significant change. But the score isn't seen or used by anyone but you, so it doesn't matter.  Just ignore it.

Lenders only look at the actual contents of your files.

Are you sure about that? I had a default years ago drop off and the score (I know doesn’t matter) but it vastly improved. End of the day it’s a closed acccount and default dropping off - not an active account. 

But agree ignore it.

End of the day after 6 years it’ll clean from your file but you’ll still owe the debts. After a few months or even a month yes you’ll be much more approachable as a potential customer if your history is good 

summerb64

adamp87 said:

MorningcoffeeIV said:

No. Your score will normally drop further once the defaults come off, because it's another significant change. But the score isn't seen or used by anyone but you, so it doesn't matter.  Just ignore it.

Lenders only look at the actual contents of your files.

Are you sure about that? I had a default years ago drop off and the score (I know doesn’t matter) but it vastly improved. End of the day it’s a closed acccount and default dropping off - not an active account. 

But agree ignore it.

End of the day after 6 years it’ll clean from your file but you’ll still owe the debts. After a few months or even a month yes you’ll be much more approachable as a potential customer if your history is good 

Agree with this, I only had one default and when it dropped off a few months ago the scores the CRA’s gave shot up instantly, and the eligibility checkers started to suggest main stream lenders (sounds positive - no idea if they are accurate). This is obviously based on me having the 6 following years with no adverse whatsoever. But yes in essence you will be much more attractive to lenders but all the other usual factors apply to you getting better offers etc. 

[Deleted User]

CRA's report, they know no personal details relating to income.

Only a lending body that receives information from us, the applicant, along with a report on us from a CRA will evaluate whether we are worth a risk.

The risk we pose, to that specific lender, determines whether we are offered a financial product.