Small Default

yarrk

Hi, we are both first time buyers with a 15% deposit and have got a MIP from First Direct. My partner has a small default (£165) registered in Sept 2019 for a car insurance policy he cancelled and has missed the last payment on. It is settled. Is this something we should be worrying about in terms of getting a mortgage approved with a mainstream lender? Thanks!

TheJP

A default remains on your credit report for 6 years and is something that lenders do not like. I would advise seeking a broker who could look at lenders that accept active defaults, you will likely be offered a higher interest rate mortgage. 

K_S

yarrk said:

Hi, we are both first time buyers with a 15% deposit and have got a MIP from First Direct. My partner has a small default (£165) registered in Sept 2019 for a car insurance policy he cancelled and has missed the last payment on. It is settled. Is this something we should be worrying about in terms of getting a mortgage approved with a mainstream lender? Thanks!

@yarrk If you've got a DIP from FD and you can see a soft credit-check on your credit report, the default has been factored in to the DIP decision. At this stage, that is the most assurance that you can get. Based on the limited info in your post, I would expect you to be fine.

Even in the unlikely event the FD declines the case, if this is the only issue on the report, I don't expect that it'll stop you from getting a mainstream mortgage at 85% LTV. Good luck!

yarrk

Thanks @K_S. I double checked our credit reports again and there’s no soft check. Do you think it would be best calling and mentioning it to them before doing the full application to save a decline on our reports?

K_S

@yarrk Sorry I have no idea how FD DIPs work. For all the DIPs that I do, the lender will always check one/two of the client's Experian-Equifax-Transunion credit reports and incorporate any adverse showing on there in their automated decisioning when giving a Yes/No on a DIP. I hope that makes sense. If I get a yes, then that's as much assurance as I can get at that stage for the client.

Tbh I wouldn't expect FD's process to be any different to the above and would think it unlikely that their system would issue a DIP (I'm assuming that's the same as an MIP) without checking your credit report.

Based on the limited info in your post, for a case like yours, besides checking published criteria, I wouldn't see any need to run the default past the lender for any mainstream lender app. Again, that's a general statement, don't know about FD.

yarrk said:

Thanks @K_S. I double checked our credit reports again and there’s no soft check. Do you think it would be best calling and mentioning it to them before doing the full application to save a decline on our reports?

TheJP

K_S said:

@yarrk Sorry I have no idea how FD DIPs work. For all the DIPs that I do, the lender will always check one/two of the client's Experian-Equifax-Transunion credit reports and incorporate any adverse showing on there in their automated decisioning when giving a Yes/No on a DIP. I hope that makes sense. If I get a yes, then that's as much assurance as I can get at that stage for the client.

Tbh I wouldn't expect FD's process to be any different to the above and would think it unlikely that their system would issue a DIP (I'm assuming that's the same as an MIP) without checking your credit report.

Based on the limited info in your post, for a case like yours, besides checking published criteria, I wouldn't see any need to run the default past the lender for any mainstream lender app. Again, that's a general statement, don't know about FD.

yarrk said:

Thanks @K_S. I double checked our credit reports again and there’s no soft check. Do you think it would be best calling and mentioning it to them before doing the full application to save a decline on our reports?

A soft credit check pretty much just checks the ID of the person making the inquiry and that they have obtained credit, the hard check will be where they view the whole file which will include the default. Some lenders do a hard check at MIP/DIP stage such as virgin money, this helps manage expectations. 

As innocent and low value the default, it still has 3 years outstanding on his file. I would recommend seeking guidance from a broker on their experience of your scenario. It could all be a wash but a broker will have the insight to give you answers you need.

Hope it works out, especially over £165!

K_S

For the benefit of others who may come across this thread - from experience, lenders can access the same data on the credit file with a soft-footprint credit check that they can with a hard-footprint credit check. The difference between the two is the footprint, one is visible only to the applicant, the other is visible to other lenders.

In many cases all the lender does at full application is update the DIP soft-footprint to a hard-footprint, there is no extra credit report data that they get.