A reader asked:
I know a debt drops off my credit file 6 years after it was settled or defaulted. I just want to ask when I apply for a mortgage, can the lender dig up unpaid debts if they are no longer showing on my credit report?
This is a common question. The answer is Yes, sometimes because a lender can see other information that may show the debts.
Let’s look at what the lender can see, so you can tell if you need to be worried about this.
But first, make sure that you have checked your credit records with Experian, Equifax and TransUnion – the three Credit Reference Agencies (CRAs). Not all creditors report to the same CRA, so if you only look at one report, you may miss something important on a different report. See How to check your credit records for free for how to do this.
Mortgage lenders also look at your bank statements
Credit records are just one source of information for a lender – they are not the only thing that matters.
Most mortgage lenders want to see the last three months of bank statements, some ask for six months.
These statements show if you are making payments to debts that are no longer on your credit record. That could be payments to the original creditor, to a debt collector or to a debt management firm.
A lender can’t see payments that are no longer being made, either because the debt is repaid or because you just stopped paying…
But it’s not safe to stop paying a debt just because it has dropped off your credit record. See Do I have to keep paying this old debt? for details.
Unless a debt is very old and statute barred or it’s unenforceable because the creditor doesn’t have the right documentation, you should be aiming to pay off problem debts where there have been defaults before a mortgage application. This could be with a full and final settlement – this won’t cause the debt to reappear on your credit record.
Lenders have their own internal records
Lenders can also look at their own internal records.
A lender may also be able to see records from other parts of the same banking group, so an application to Halifax could perhaps be affected if you had had an old problem debt with Lloyds.
There is no legal maximum time on how long a lender can keep these for – they don’t have to delete them 6 years after a debt has been settled or written off. Banks can keep data for a very long time – PPI claims have been settled for debts that were repaid more than 15 years ago.
So a lender may be able to tell if you defaulted on a debt, you went bankrupt or had an IVA, or you settled a debt with a partial settlement.
Some lenders may not mind if your debt problems were a long time ago, but you can’t assume they don’t know about them!
Who to apply to?
I always suggest that people should go to a mortgage broker.
Even if you have never had a debt problem in your life and have a great credit record, a good broker can still find mortgage deals that you may not be able to see and can smooth the way through what can be a stressful process.
This is even more important when you have had previous debt problems. Old problems may not be a problem at all for many lenders, but why take the risk? If you just apply to bank X, you may find out the hard way that bank X can see that old problem, cares about it and is going to turn you down because of it.
So tell a good broker about all your previous debt problems and you can get good advice on which lender to apply to. See Should you get a mortgage adviser? for how to choose a mortgage broker.
Improve your credit score for a mortgage
Credit score worries can make your debts worse
FAQs on statute barred debt
vanitha says
hi
only one debt 10 years , I am paying DMP , still show the credit file negative mark, how can I remove this.
I have no job, I am sick, my husband look after me.
please advice me.
thanks
Vanitha
Sara (Debt Camel) says
Can I ask what this problem debt is?
Your DMP, how much do you owe?
Are you buying a house or renting?
Gary says
Hello. I have been suffering with a gambling problem for sometime now. As a result I have recently had a number of defaults.against cards etc which i have used to fund my habit. My partner doesnt know the full extent of the issue and I have left her out of it for now. What i want to know it how this affects my current mortgage. Our mortgage is together but we have no ither joint accounts etc. My current account is my own and my wife has her own too. Our morgage come s out her account too.
Will my defaults affect her score or our future mortgage. We havd stayed with the same mortgage lender for the last 10years. Would appreciate some advice.
Sara (Debt Camel) says
As you have a joint mortgage, you are financially linked on credit records. Your defaults will be harming her credit score. I suggest it is better for you to tell her now rather than let her find out at some point when she is declined for credit and checks her credit record to see why. It may help if you can show you have a practical plan to stop gambling and repay your problems debts.
Your current mortgage won’t be affected but if you have a fixed rate, it is likely to be very hard to remortgage with anyone else. You may still be able to get a new fix from your current lender. This also needs to be explained to your wife.
Paddy says
Hi
I had an IVA that failed a couple of months in because lenders couldn’t agree on changes to repayments when I lost my job, this happened over 10 years ago and is no longer on any credit file. Will this make my chances low of getting a mortgage and do I have to declare it?
Sara (Debt Camel) says
What happened to the debts in it?
Paddy says
Unfortunately they never got settled and are all now off my record as well. Since they dropped off my file I have made a conscious effort to never let that occur again and raised my score up to excellent. In addition I’ve put together a 12% deposit on a property now.
Louise says
Hi Sara
I entered into a DMP in 2013. All but two Barclays accounts were defaulted. The two Barclay cards were marked with AP markers, I was advised to remove them from the DMP as these markers would stay on for 6 years from settlement. I settled the DMP 12 months ago, all defaults have fallen off. The AP markers are 4.5 years old and have had all green ticks since. ( They are only showing on my TU credit report). We are looking to move house and take out a new mortgage, Will these AP markers be a problem? Could they lead to further questions about the DMP and the fact that the remaining debts were only settled 12 months ago? (none are on any of the three report). I have had my current mortage for 13 years and never missed a payment. All other credit lines have been maintained and kept up to date with no issues at all.
Sara (Debt Camel) says
I was advised to remove them from the DMP as these markers would stay on for 6 years from settlement
Who advised this? Why didn’t you just ask Barclaycard to add defaults?
Louise says
Clarke Richards the company has since gone bust and I’m not entirely sure there advise was the best but two credit cards have been paid up every month and on my Experian report they are totally fine and Equifax and green ticks all the way for the full report. TransUnion is showing 42 green ticks to date
Louise says
Do you think I will be able to get a mortgage at an ok rate with these markers? Will they ask for details of the old dmp?
Sara (Debt Camel) says
yeah, it sounds like very poor advice. But you are where you are. I think those payment arrangements look pretty old. My guess is they won’t prompt lenders to enquire about your DMp. But I think you should talk to a broker about your options and tell them the full background.
Louise says
Thank you. The actual dmp was settled 12 months ago. Do you think if they did ask that 12 months is enough time to have lapsed?
Sara (Debt Camel) says
Many lenders use a rule similar to “a default is ok if it was over 3 years ago and was settled more than a year ago”. But this is why you go to a broker, to avoid lenders who might care.
Louise says
Thank you so much. Would this be at a high rate? Or do you think I could get close to the normal rate
Sara (Debt Camel) says
I think you should get a normal rate, perhaps not the best.
Louise says
Thank you so much. This website is so helpful. I really appreciate your response and the speed of them too. Thank you
Louise says
One last question…is a dmp classes as a “voluntary arrangement”. I have seen on some mortgage applications they ask have you entered into a voluntary arrangement in the last 6 years.
Sara (Debt Camel) says
They are asking about an IVA which is a form of insolvency.
Amanda dunn says
Hi, I’m trying to obtain endowment policy statement info from an insurance provider from 23years ago, without any success, any suggestions.
Sara (Debt Camel) says
Sorry, no.
Paddy says
Hey Sara
Apologies for bumping this, so if the debts fell off my credit file and the IVA fell through this will harm my chances of getting a mortgage?
(little bit of back story, this all happened at a time straight after I left university and the 2008 credit crisis happened, I lost my job after building up debt to move to London for it so there was a bit but afterwards I wad working for minimum wage so couldn’t afford to repay lenders)