You can have various types of credit issues that can be reported on your credit report. They will remain on your report for 6 years (because it can only hold 6 years’ worth of information) and linked to the address the credit commitment was held at. But having bad credit does not necessarily mean you can’t get a mortgage. Some lenders can consider certain credit issues so not all hope is lost for you if you have had problems in the past.
Types of credit issues-
Late payments– A late payment is where you miss the payment date for a credit commitment, but you make it before the next one is due. – Some lenders will consider a mortgage application if you have late payments but it will depend on how recent they were, how much they were for and if they were connected to utility bills or credit commitments.
Missing a payment– A missed payment is where you totally miss the payment date and do not make it before the next payment is needed – Some lenders will consider a mortgage application if you have missed payments but it will depend on how recent they were, how much they were for and if they were connected to utility bills or debts.
Default– If you fail to make payments after a few months a lender may register the account in default, and this leads to a legal claim over the debt. At this point the debt is sold to a debt collector who will pursue payment of the outstanding payments and the remaining debt amount. – Some lenders will consider a mortgage application if you have defaults, as long as they are paid off at the point of the mortgage application being submitted, but again it will depend on how recent they were recorded on your report, how much they were for, and if they were connected to utility bills or debts.
County Court Judgement– If you fail to make payments on the defaults then you may be issued with a court judgement to make payment, also known as a County Cort Judgement – Some lenders will consider a mortgage application if you had country court judgements, as long as they are paid off, but it will depend on how recent they were recorded on your report and how much they were for.
Bankruptcy– If you are unable to pay any of your credit commitments long term, you may file for Bankruptcy. An official receiver will take control of any assets you own and anything that can be sold will be and the funds used to help pay off the debts. Your bankruptcy will be active for 12 months during which time you will struggle to get any new credit accounts, including mobile phones. Once you are discharged from the bankruptcy and you have started to improve your credit report with some good management of new credit commitments, some lenders may consider you.
Individual Voluntary Arrangements (IVA)- An IVA is where you go into a formal agreement with your creditors to repay a percentage of your debts over a period of time. Your IVA could be in force for several years during which time you will struggle to get any credit accounts. Once you are released from your IVA and you have started to improve your credit report with some good management of new credit commitments, some lenders may consider you.
Other credit issues that might impact you.
Financial Association with someone with credit issues- If you have joint accounts and joint credit commitments with someone who has credit issues on their report it could impact your ability to get a mortgage. You may be able to disassociate from this person under the right circumstances which can help improve your credit report.
Lack of credit history- Having little or no credit history can actually be worse than having bad credit because mortgage lenders can’t assess your ability to handle i. If your credit report has nothing on it, it is recommended that you take some basic credit, something like a mobile phone or a credit card. If you take a credit card only use it to pay for car fuel or regular food shop. You need to pay able to pay most of it back next month, but don’t pay all of it back let a small amount roll over to the next month, maybe £10 because if you pay everything off you are not showing you can handle credit. If you are going to do this, it is ideal to get a 0% on purchases credit card and then you wont pay interest on the element you let roll over to the next month.
If you have any credit issues I would always recommend you use a mortgage broker to help you with the mortgage application process, they will have the experience to know which lenders will consider credit issues as most will not be High street lenders.
