A reader, Mr D, asked:
My partner and I have a combined income of £56,000, We have a deposit of £28,000 (inheritance) and are looking to become first time buyers at a price of £230,000. We have defaulted debts that are being paid off, and previous history of payday loans from over 2 years ago from a time when our financial situation was much more difficult.
The defaults are about 18 months old. We started to try and tidy things up when we knew the money was coming to us. We currently owe around £9,000 on the defaulted debts.
I have an active credit card, and we both have a mobile phone contract in our own names, but that’s all apart from the defaults.
What are the chances of us being offered any kind of mortgage at a reasonable rate?
Contents
When is a default “recent”?
Obviously a default a few months ago is recent and one 5 years ago is old. But many people have defaults in the middle, like Mr D.
Mortgage lenders in general care about two things:
- when did the default happen? the longer ago it was the less likely it is to show you have current problems.
- when did you repay the debt? High street lenders do not like you to have unpaid defaults, even small ones. And the longer ago the debts were cleared, the more obvious it is that you are now fine.
Pre pandemic, there was a common approach used by many high street mortgage lenders that defaults were OK on your credit record if they were all over three years old AND they had been repaid for more than a year. Mr D currently fails on both of those requirements.
Now, mortgage rates increasing in 2022-23, some lenders are being tougher on assessing affordability. To get an OK rate from a high street bank it is good to have settled the debts at least two years before the application.
With recent defaults, your only option may be a bad credit lender
The suggestions below will take some time to improve your mortgage chances.
If Mr D wants a mortgage straight away, he will have to go to a “bad credit” broker. There are three big problems with doing this.
1. It costs more
The fees to arrange the mortgage will be larger. Be very clear about what the fees are before you sign anything. Can you get your money back if a mortgage is not arranged?
Also the mortgage is likely to be at a much less good rate.
2. You may not be able to remortgage with a normal lender
Some people are told:
“This will just be for a couple of years, then you can re-mortgage with a high street lender at a better rate.“
You can’t rely on that happening!
Your own financial situation may be more difficult in a few years – perhaps you have a baby on the way which will affect the mortgage affordability calculations.
And even if you are fine, who knows what the mortgage market will be like in a couple of years after the first lockdown? Will the economy and lending be back to normal? If house prices fall from their current highs, your 15% deposit may reduce to 5 or 10%
3. If you can’t remortgage, your interest rate may jump a lot
If you can’t remortgage at the end of the fix, then you will be stuck on your lender’s standard variable rate (SVR).
Anyone thinking that they can manage a bad credit mortgage needs to ask the lender what their SVR is at the moment. If interest rates go up over the next couple of years – which is what most economists are predicting – SVRs will also go up.
And there is the horror scenario that you may find a bad credit lender’s SVR is increased even when other mortgage rates are dropping. This happened to many people in 2009 and 2010.
Sorting out the old debts
Paying off the defaults
Paying off the defaults is the first key step towards getting a mortgage at a reasonable rate from a high street lender. These debts don’t have to be paid in full – a partial settlement may be acceptable to some mortgage lenders.
You want to pay them off as soon as possible so a mortgage lender can see that your problems were all in the past.
When the defaults have all been settled more than a year ago and you have had a year free of any credit record problems, you are more likely to be able to get an OK mortgage offer.
If Mr D already has the inheritance in his bank account, then it would be best to use some of that right now and repay the defaults, then start resaving the deposit money that has now been reduced.
Say you can afford to pay £400 a month off your debts – that would take 15 months to clear the defaults. If you clear them now and then save that £400 a month, in 15 months time you will have your current deposit back, but your credit records will be looking much better as you will have had 15 months clear of any problems.
Getting defaults removed by winning affordability complaints
If you can win an affordability complaint, defaults and missed payments are usually removed. And you may get the balance reduced or cleared or even cash refunded.
For affordability complaints what matters is your financial situation at the time you took the loan or the credit card lender increased your credit limit, not what your finances are like now. And you can win a complaint even if you made every payment on time, because you may have been robbing Peter to pay Paul, so your debts were getting worse.
See Asking for refunds, which has a different article for each type of debt. This isn’t fast, but if you are looking at some time before a mortgage as your record is too poor, it’s worth trying to clean up as much as you can.
Defaults not showing on your credit record also need to be settled
This reader doesn’t have old defaults, but some people will have debts where the default was over 6 years ago so it has already dropped off their credit record.
These old debts still matter if they haven’t been settled, see “Can mortgage lenders see old debts, no longer on my credit record? for details.
Check the default date is correct
Paying off the defaults doesn’t actually help your credit rating and it won’t make the defaults disappear. They will stay for six years from the first default date.
So it’s worth checking if you think the default date is correct. If any of them should have been earlier, see if you can get the default date changed as that means the debt will vanish sooner.
It also helps if the defaults are older. A mortgage lender would rather see you had problems 5 years ago than problems last year.
What about old payday loans?
If the payday loans are already over two years old, most mortgage lenders won’t care that much about them. And if you are taking the next year to improve your general position then they are getting even older.
However, how much did you use payday loans? If it was a lot for a period, then you should read my article on Can I get a payday loan refund? and see if you might be able to get any compensation. If you do win a complaint about these, the lender will sometimes delete the record from your credit file and will always delete it if there is a default or a missed payment.
Any money you can get back will mean you have a bigger deposit – and the larger your deposit is, the more lenders there will be that may lend despite the defaults on your credit records.
Lifetime ISAs
If Mr D clears some of the old debts and then wants to rebuild their deposit, the best way would be by regular monthly saving into a Lifetime ISA. You can have one if you are aged 18-39 and this will be the first property you buy. MSE has a good guide to LISAs.
Whilst you are saving there four good things happen:
- the defaults are getting older;
- your deposit is getting bigger
- you are getting a bonus from the government; and
- it is showing a future lender that your money problems really were in the past and you can afford to put money aside from your income.
Of course during this period you also need to be fanatical about making sure all your credit cards and bills are paid on time. The last thing you want is a new late payment showing on your file…
Then talk to a broker
When you have saved your deposit up again and the defaults have got older, you need to talk to a mortgage broker.
Some high street lenders say they won’t consider a mortgage with defaults in the past three years. Some won’t lend to you at all with defaults – you need to avoid applying to these lenders. A broker will be able to advise you – at this point though you shouldn’t need to go to a bad credit broker.
In late 2022, there are some 5 % mortgages on offer, but you need a very clear credit record.
35-40 year mortgages – be careful!
Remortgage and save money when a fix ends
88 ideas that can save you money!
Charlotte purcell says
Hi. Thank you for getting back to me. I hadn’t visited the property due to Covid 19. I had been living at another address during the pandemic and thought I wouldn’t need to set up a water account until I moved in as no water would be getting used whilst unoccupied. I settled the bill soon as I opened the mail. The default was applied in July and I settled the default this month.
Would I still be able to remortgage or and apply got a mortgage next year ?
Thank you.
Sara (Debt Camel) says
Well you can ask the water company to remove the default as a goodwill gesture. This is worth trying, but you can’t really say it is unfair as you never contacted them to let them know of the situation and, from their point of view, you ignored the letters they sent you.
Is your current mortgage fix ending? You should be able to get a new fix from your current lender. But if you want a mortgage from a different lender, talk to a mortgage broker about your situation.
Jamie says
Hi Sara
Me and my partner are currently looking to get a mortgage we have an decision in principle with Halifax (who I also bank with )
My partner has 996 credit score and my credit score is high range ofpoor borderline fair
I have 3 defaults 2 are 4 years old 1 is 5 years old
All paid off and full satisfied in 2019 over two years ago we have a 75k deposit and looking to borrow around 225k mortgage , I earn 30k a year before over time bonus and after tax my partner earns 26k a year , I have 2 car loans totalling 12k no other debt
Taking in mind the aip would we still be accepted as I’m unsure if the bank is aware of my defaults which I would guess would come up on there soft credit check?
We do have a broker by the way I’m just really unsure what the chances are here even with a decision in principle
Sara (Debt Camel) says
It sounds like it may well be ok to me. Come back and say how it goes – good luck!
VJM says
I have 2 defaults, one is 5.5 years old and fully settled, the other is 2.5 years old and there is still a £2500 balance which I have been paying at £80 a month.
I am splitting with my Partner and should have around £90-100k for a deposit when we sell our property. If I am looking for 70% LTV mortgage will this make my chances any better?
I earn a £50k base with £10-£20k annual commission on top.
My credit rating dropped from 778 to 548 since July, I took out a £1k Vanquis CC and and a £1k loan for a holiday. I plan to clear the credit card this month, I didn’t think that it would have such a huge impact on my score, I also plan to settle any outstanding debts when we sell the property.
I have submitted a credit report, payslips etc to a specialist broker and I’m waiting to hear back.
The loan was from Lendable who I didn’t think were payday lenders however having done some research it seems they aren’t viewed very favourably either.
Sara (Debt Camel) says
the Lendable loan – what is its term?
The outstanding default needs to be settled asap. This is likely to be your biggest problem.
Why with such large commission payments have you not been able to settle the outstanding default and did you need to take out the credit card and this small loan? What other debts do you have outstanding – car finance? other credit cards?
VJM says
No car finance, it’s in my partners name because of my bad credit, although I cover the payment, if we split up I’ll need to try and take on the lease not sure how that will go, 2 years out of 4 left but not my biggest concern at the moment.
I was going on holiday and commission was delayed by a few months (it’s paid on a monthly basis rather than a one off lump sump) because of covid and the nature of my sector. I know in an ideal world I shouldn’t have taken them out however the holiday was paid and I would have had no spending money for me and the kids. These were the only credit options available, I have paid back a large overdraft in the past few years too, I requested an OD from bank for holiday but it was a no.
The loan is over 12 months and I will be paying the Vanquis card in full at the end of this month. I have a small amount on a store card, £200 which I have been paying down and I plan to pay off this month also. I have 3 other defaults that I have been paying off, they are older than 6 years so not on credit file. I have around £10k left to pay and have been paying £300 a month to these too. I know they will show in bank statements for lenders and I plan to clear these from house sale also.
Sara (Debt Camel) says
“if we split up I’ll need to try and take on the lease not sure how that will go”
It won’t be possible. The lender will not agree to you taking on the debt in your name. I think you may have to plan on carrying on paying the lease even though it is in your ex’s name.
It sounds as though you will only be able to get a “bad credit” mortgage. Having a large deposit doesn’t change the fact that you have a lot of uncleared defaults – the ones off your credit record are bad because the lender will see them And recent defaults show that this wasn’t some historic problem but your finances are still not on a good footing.
frogman says
I was just wondering if anyone here with default has recently managed to get a mortgage with 10% deposit. I have been doing a lot of research online and I am a bit confused as to the chances of getting one with 10% when default is over 3yrs. I even read somewhere here that 10% deposit is now difficult with a squeaky clean credit file.
I have managed to clean up my mess but still have 4 defaults on my credit file, 3 of them are over 3 yrs and the fourth will be 3yrs on the 2nd of January. I am desperately looking to buy and already have the deposit
Sara (Debt Camel) says
Other people’s history, even recent, may not be of much help to you.
You have several problems – first that you have not yet settled all the defaulted accounts. And the accounts with missed payments. And there is a payday day loan with payment arrangements still showing. These make it HIGHLY unlikely you will get a mortgage from a high street lender – you need to talk to a broker about your chance of a bad credit mortgage.
frogman says
Thanks Sara,
Things have improved slightly.
The payday loan is gone, 247moneybox took it off, meaning last payday loan is now over 3yrs.
I now have only one outstanding default which is not settled – Natwest CC, it’s the one that will be 3yrs in Jan, it has a balance of £2400. Credit score on experian (I know this doesn’t mean much) has moved to FAIR.
Sara (Debt Camel) says
The age of the default only matters if it has been settled.
You are not going to get a mortgage from a high street lender with unsettled defaults. Most like the defaults to have been settled a year or more ago.
A credit score is irrelevant.
If you don’t mind a bad credit lender, talk to a broker now, I have no idea if they will want more than a 10% deposit.
Otherwise you need to settle the outstanding default and wait a while. January is not at all likely.
frogman says
Thanks very much Sara,
Please do you know if partial settlement will matter for the mortgage if I settle the account today and wait 1yr for the mortgage? Balance is now £2300 on that credit card and I plan to speak to Moorcroft (Natwest passed it to them) tomorrow if they will accept part settlement. Thanks
Sara (Debt Camel) says
That is hard to say – see https://debtcamel.co.uk/dmp-partial-settlement/. If you can’t settle the debt in full, then settling it partially and sooner may be better than waiting and settling it later in full.
Obviously I have no idea what the mortgage market will be like in a year time. A year ago, it was VERY difficult.
frogman says
Thanks very much Sara,
I have decided not to settle the default account after speaking to a broker today. As you rightly said, it wont make any material difference until probably around a years time.
We ran through my credit file and other bits and he said I will pass the criteria for 2 or 3 lenders that they work with from the first week of January – when all defaults are over 3 years with one unsettled default allowed. He said a 10% deposit would be in the 4.5% range whilst 15% would be around 3.9%
We have a fact-finding meeting middle of December to make sure everything is covered in preparation for a DIP application first week in Jan.
In my case, all my adverse entries are around the same time so its either waiting another 3yrs when everything is clear, or I go ahead with this high interest one.
Sara (Debt Camel) says
ok so I am not trying to talk you out of this but:
In my case, all my adverse entries are around the same time so its either waiting another 3yrs when everything is clear, or I go ahead with this high interest one.
Surely another option is to settle that the default account now and wait a year. At which point all your defaults are over 3 years old AND have been settled for more than a year.
frogman says
Yes, you are right Sara,
but settling the credit card will reduce the amount of deposit I have, especially when considering that we may end up with 15% for a reduced interest in January.
My understanding is that I am still going to be limited with options even if I wait till next year, plus we’ve massively outgrown where we currently live. So it’s either I pay more in rent to move elsewhere or pay more in interest rate.
What is broker said is that we aim for the shortest possible fixed term so that in 2 to 3 years time, we would be able to switch with a much better credit history
Sara (Debt Camel) says
broker said is that we aim for the shortest possible fixed term so that in 2 to 3 years time, we would be able to switch with a much better credit history
That is what they always say.
But find out what the lenders variable rate is when the fix comes to an end…. Because there is no guarantee that you will be able to switch at the end. It isn’t just your credit record, it’s what has happened to house prices (that affects your equity, it doesn’t always go up) and the mortgage market which is out of your control.
You may be stuck on a very high variable rate. That’s why debt advisers don’t like these lenders.
If the variable rate is tied to base rate, at least they can’t artificially jack it up. Some bad credit lenders increased variable mortgage rates in 2008-10 at the same time as normal lenders were cutting their rates.
HLTCO says
My fiance and I will likely look to buy a property together at the end of 2022. We have a great joint income and will be in a position where if we needed to, we could put down at least a 25% deposit without stretching ourselves at that point. She has a squeaky clean credit history however I do not from 2016 through to early 2020. I recorded two defaults – one in Nov 2017 and one in Jan 2018. The Nov 2017 one was on a personal loan and significantly large at the point of default at £24k and the Jan 2018 was for a credit card for £9k. I also went through a period in 2016-2019 of taking out numerous payday loans (probably 50 in that time). I have settled all of my outstanding debts repaying everything in full, with the Nov 2017 default finally being paid off in June 2021. The Jan 2018 one was paid off in Jan 2021. Following advice from this website, I applied for and received resonable compensation from most of the PD lenders in 2020 apart from ones that went into administration. My defaults will be 5 and 4 years old by the time we are looking to buy our property, and there will be no PDL history for at least 2 years as well. Given we are still a fairly long time away from applying for a mortgage, assuming there are no further changes in our situation, what would make the most sense from a mortgage application perspective? Would a broker be the best port of call instead of direct applications? What are the chances that my negative history is not an issue for high-street lenders?
Sara (Debt Camel) says
Which payday lenders that have gone into administration do you still have loans showing for?
The 24k loan – who was it from and have you looked at an affordability claim for that?
The 9k credit card – was your limit increased too high? After you were only making minimum payments? After you had started using payday loans?
HLTCO says
I have no loans outstanding for anyone – everything was paid off before any administrations happened but then my affordability claims didn’t close before the administration. They are on my credit file still but not sure I can do anything about that.
The 24k loan was from Zopa – I haven’t done an affordability claim. I took the loan out in April 2016 and then got into some gambling issues and defaulted Nov 2017.
The 9k – limit was increased before I got into trouble so at the point it wasn’t unreasonable I’d say.
Sara (Debt Camel) says
They are on my credit file still but not sure I can do anything about that.
which are the lenders? There may be something you can do…
So the Zopa loan was before you had a gambling problem? Can I ask why the loan was so large?
If there is any way to get the default challenged, it improves your mortgage application. I would hope you will be able to get a mortgage by end 2022 but all improvements before then will help!
But 100% go through a broker. you don’t have to go to one specialising in bad credit. Why play Russian Roulette by applying at random to a high street bank only to find they turn you down bot another one wouldn’t?
HLTCO says
It is lenders like MrLender, 247Moneybox, QuickQuid, OnStride, Moneyboat
I stand corrected – I had pushed the situation so far out of my memory that I was wrong. I took the Zopa loan out after having lost my savings through gambling. The loan was an attempt to win money back and give my sister a loan as she needed help with a house purchase. I am putting together a complaint now to Zopa with bank statement evidence showing enormous sums going out from the account in the 3-4 months before the loan was approved.
Thank you for the advice and broader help I have had from here. Some great wins and I hope for one more here!
Sara (Debt Camel) says
ok so 247 Moneybox and QQ/Onstride are in administration. By mid 2022, the administrators are very likely to be past the point at which they reply to queries from the CRAs – at that point you can contact the CRAs and ask them to suppress the payday loans, see https://debtcamel.co.uk/correct-credit-records-lender-administration/
HLTCO says
Just wanted to say Zopa has rejected my complaint because their underwriting process showed the loan was affordable despite me attaching the bank statements showing the sizeable outgoings.
I’ve asked them to review again before I forward to the FOS.
Do you think the FOS might uphold this or is it unlikely at this stage?
Sara (Debt Camel) says
Lenders reject a large number of good complaints saying their checks showed the loan was affordable.
You know it wasn’t affordable because of the gambling.
The question for FOS will be whether Zopa should have made more checks when they would have seen the gambling… this is such a huge loan, I do not know what FOS will say but it seems worth a go!
HLTCO says
So update! I replied to Zopa to say I would like them to take another look at the decision and they finally came back to say they agree the loan should never have been given and they will remove it!!! Zopa have said they will buy the loan back from Cabot and agree a repayment plan, and also remove the default. When I defaulted, they passed the loan to Cabot Financial and I worked on paying it off completely, which I managed in June 2021. I’ve sent them the letter showing that I have paid it all off and no need for them to buy it back so hopefully they will still remove the default from my file!
I can’t tell you how huge this is for me – thank you so much!
Sara (Debt Camel) says
You should get a refund of the interest you paid so that should be good.
Thanks for coming back with what happened – it’s helful to know which lenders are prepared to “look again”
Andy says
Hi Sara
In your opinion what are my chances of getting a decent rate on a mortgage at the moment? I have a deposit of £20k and will be in the market for a property around £180k.
It will be a sole mortgage in my name. I earn 43k per annum and have no debt whatsoever as this was all cleared during lockdown. I now use my credit card regularly (6.3k limit) but settle in full every month.
I do however have a sketchy record from the past. I had a default of around 10k applied to my file for a personal loan with the Halifax around 4.5 years as go. This was settled 15 months ago but is of course still visible on my file for around another 18 months.
I also have 6 payday loans from 247 moneybox showing on my file (no late payments). This is what I’m most concerned about as my unaffordability claim was found in my favour but they are dragging their heels in removing the accounts from my file. The most recent loan was paid off in November 2018.
I really value your opinion so any guidance will be greatly appreciated.
Thank you in advance
Sara (Debt Camel) says
I think you need to talk to a good broker about your chances. I’m sorry but there isn’t much point in me guessing.
Jon says
I think you’ve got an excellent chance.
I’ve got 8 defaults around 4 years old and my last was paid off around 10 months ago.
2.6% interest with a high street lender at 4.5x joint salary.
frogman says
After waiting out my defaults to be over 3yrs, I am now fully in the market searching for a good broker and a mortgage, thanks to this website, otherwise I would never be in this position.
We have a 48k deposit and looking at houses around £320k which is 15% but we are still struggling. What I can gather from the brokers I have spoken to is that there doesn’t appear to be a middle ground lender between high street lender and adverse credit lender which is really frustrating.
The best I have got so far is 4.6%, I am unsure what to do as we really need to move house.
Credit file
– 6 defaults – 3 credit cards and 3 mobile phones, all over 3yrs with only one credit card outstanding with £2300 balance)
– Payday loan over two years ago
-Last missed payment almost 2yrs ago
Thanks
Sara (Debt Camel) says
As I have said to you several times, the criteria that many high street lenders use is that default dates have to be over 3 years old AND to have been settled for more than a year. You have passed the first of those points but not the second. I suggested you should have settled tha5 last defaulted credit card last year, but it seems you haven’t.
So far as I know there isn’t a middle ground lender between bad credit lenders and prime lenders.
Unless you want to be stuck with a very expensive mortgage, which I do not recommend as there is no guarantee that you will be able to remortgage to a better rate after a couple of years, you need to find somewhere suitable to rent.
frogman says
Hi Sara,
Just thought I should quickly post an update.
I chose not to settle that credit card because it was always going to be the case that I will end up with an adverse lender and a bigger deposit, except I wait 2 or 3yrs which I really can’t, so rather then settling the credit card, it decided to put it towards our deposit.
We’ve now managed to come up with a 20% deposit and already have our offer accepted for a £310k house. DIP is showing 3.89% and we’ve submitted a full application. We also have a back up for another kangaroo lender at 4.85% which should be easier than the 3.89% (according to broker).
I will settle the credit card once we are able to get the purchase over the line and should ‘hopefully’ be in a much better position in 2 yrs time for a remortgage.
Thank you very much for all your comments
Stu says
Hi,
I’m looking at applying for a mortgage next year, by which time the 2x blemishes on my credit report will be 4 years old. Both are loans, £900 in total. The creditor has marked these defaults as ended with a current balance of £0 on both accounts. Would mortgage lenders view those more favourably than defaults currently “open”?
Sara (Debt Camel) says
Yes.
But what happened? Did you make a partial settlement or what?
Stu says
I didn’t offer any settlement and stopped payments. The lender ceased visiting the address to collect once the loans defaulted and marked the accounts balance as £0 and closed at the same time. I’m aware one default is more favourably considered than two, of course, but I wondered the impact of having 2 x defaults, marked as £0 balance, which would be 4 years old at the time of application.
Sara (Debt Camel) says
who is the lender?
Stu says
Loans at Home
Sara (Debt Camel) says
had you had a lot of loans from them before these last two?
Stu says
None, and no other adverse markers.
Sara (Debt Camel) says
that is very odd. I had hoped you might be able to make an affordability complaint and get the defaults removed, but with only 2 lons that is unlikely.
Adam says
Good morning,
We are in the process of purchasing a property however I am now at the nervy stage as I have two defaults on my file.
These are both due to drop off in April 2022 and were settled in full 5 years ago.
In an ideal world we would love to wait until April but it is a new build and the builder wants the missives done within 28 days of reservation. Move in date won’t be until July 2022.
Property price is £230,000 and we will be putting down a £35k deposit (just over 15%).
My partner has perfect credit and I have had no payment issues since 2017 when defaults were settled.
Using a broker and they have had AIP in place with Barclays and I also have another I done myself with NatWest.
Do you think we should be able to get an offer with a high street lender provided affordability passes etc.
Thanks in advance
Sara (Debt Camel) says
I would hope so, but really your broker is in the best position to know.
Adam says
Thanks Sara.
Just a waiting game.
Scott says
Hi Sara,
I am looking to purchase a house. The only negative thing on my credit file is a CCJ for parking tickets (in Scotland). This is now 5 years old so will drop off within the year. With an outstanding balance of £1400 Would this have a negative impact on finding a suitable mortgage? Would you recommend paying this or waiting until this falls off?
Sara (Debt Camel) says
Many lenders won’t consider people with CCJs even if they have been rapid.
You could talk to a broker now, but if you are quoted a high interest rate it may be much more sensible to wait until they are gone from your credit record. Don’t believe a broker who says you can remortgage at a “normal rate” in a couple of years – this may not be possible.
Scott says
Thank you for your response.
The home I was looking at was a new build and was ready in the Summer so before my CCJ dropped off. I believe there is no way to fight this? or request it be set aside early? Or is that just wishful thinking?
Sara (Debt Camel) says
if you have unpaid CCJs I don’t think you have any chance of a mortgage at a half way reasonable rate. if they are paid it will still be very difficult.
I don’t know if you have any reason to say the CCJs should be set aside so they are removed from your record – I suggest you talk to a Scottish adviser about this – https://www.advicescotland.com/ – the webchat is pretty good!
Jj says
Hi Sara,
I’m looking to get a mortgage.
Had multiple missed /late payments 18months ago on credit cards but since have not late payments all debts paid.
What are the chances of getting a mortgage my credit score is nearly excellent and my husbands is excellent
Thanks in advance
Sara (Debt Camel) says
when were the debts cleared?
18 months ago sounds like covid-19 time = were your problems caused by that?
Jj says
I’m so sorry Sara I meant over 2and half year ago we’re the late payments debts all settled last month. I never had any defaults though just the late/ missed payments
Thanks
Sara (Debt Camel) says
That’s a bit soon if you have only just cleared the problem debts. You can talk to a broker but it may be better to wait a year.
SB says
Hi Sara
My partner and I are looking to buy a property around June/July.
I made some mistakes in the past with taking out payday loans and struggling to pay them back so ended up defaulting on many of them. I haven’t had a payday loan since 2018 and all defaults are now satisfied.
We will only have a 5% deposit but my partner has a good credit report.
What are the chances of us being accepted?!
Sara (Debt Camel) says
when was the last default repaid?
SB says
It was repaid in 2019
Sarah says
Hi,
I have three defaults on my credit file: 2 are due to drop off in September 2022 (not satisfied – I pay these off monthly) and one default in March 2023 (this was satisfied two years ago)
I’d like to apply for a mortgage, I will be borrowing roughly £100,000 and I have a deposit of £40,000 (inheritance which I can only use to buy property) – I’m assuming that my best option is to wait until September when I will only have one satisfied default? The two not satisfied defaults I will continue to pay monthly, am I allowed to pay these from my daughter’s account so there are no signs of these payments on my bank statements? How many months bank statements will I need to provide for my mortgage application?
I also have a car loan with a balance of £8000 on it (monthly payment is £210 and two credit cards each with using around 70% available funds, I will try and lower these between now and September too although this may be difficult.
Any other advice would be greatly appreciated especially if I have missed something important?
Thanks,
Sarah
Sara (Debt Camel) says
Is your daughter an adult? How large are these remaining defaults and how much are you paying a month?
Sarah says
Hi Sara,
Yes my daughter is 21.
Default 1 is Virgin Media – £125 (not satisfied – paying £5 a month)
Default 2 is Next Catalogue – £425 (not satisfied – paying £5 a month)
Default 3 is overdraft – was £800ish, satisfied in full a couple of years ago)
They are all five years old.
I’d really like to apply for a mortgage in the next few months with the three defaults above or wait until the unsatisfied defaults drop off in September or pay off the two defaults above and apply in a few months.
I’m a little concerned about waiting until the end of the year to apply for a mortgage as house prices are rising and rising and I’m worried that I’ll be priced out of a decent house if I wait too much longer. I’m really not sure what to do for the best!
Thanks
Sara (Debt Camel) says
Those are very small debts. If you offer a settlement amount, they may be settled for less.
I suggest you just clear them asap. If you cannot manage to clear them then I am not sure your finances are in a good enough shape to contemplate getting a mortgage.
You may be asked as part of a mortgage application to list your debts – leaving these off would be fraud.
A mortgage lender will typically ask for 6 months of bank statements.
Chantal says
Hi there, I am looking for some advice on our situation. We found a mortgage broker through recommendations on line and until now I thought he was great but now I am beginning to doubt his abilities, despite me paying all his fees and fees to the lender for our new mortgage. My husband and I have not got the best of credit profiles. I had a couple of arrangement to pays, missed payment within the least 6 years and an IVA which was settled in June 2019. My husband had a few missed payments from 4-5 years ago and 7 defaults for various reasons. Anyway our broker managed to find us a lender that was willing to assist based on conditions that all debts were settled by completion and our broker advised us to settle and send all the evidence now and also advised no further credit checks would be performed. 3 months down the line and with completion only 10 days away now we find out that the lender never received all our proofs back in January that we sent to show all our debts were settled. We were under the impression that they had everything and we were all good to go.
Chantal says
He’s chased them up and resent all the documents and said they suggested they will run another credit check to speed things along. Trouble is now we have put a few things back on the card recently as we had to get two cars through an mot, do a couple of things in the house were moving from like have the boiler repaired and a toilet and buy a few bits for the new house instead of eating in to our deposit. As our broker knows we have balances of approximately £1200 again is he obliged to relay this to the lender? If the lender does want all the balances cleared again, how long is it likely to delay things if say we did settle them all today with our deposit money as it is our only choice? Are they likely to perform another credit check, despite saying they were not going to?
Chantal says
Are they likely to withdraw their offer now on the basis of they believe we can’t manage our finances prior to the mortgage, despite me taking out a new card and getting an interest free balance transfer and purchases promotion on it? I feel sick inside now with how badly it has been handled and worse case scenarios. We currently are in a cramped two bed semi with two small kids, no storage, garage or driveway and it is shared ownership and have the opportunity to purchase a freehold 4 bed detached with a drive and a garage which is perfect for us and has to go through as house prices have risen since we offered on this house and were now priced out as we have our maximum mortgage amount and Max deposit amount already tied up to £325k. If the lender withdraws their offer this late in the game then although our house may have also risen it won’t be as much as 50k which seems to be what all the houses we want are now worth unless we moved to a rubbish area. Any advice or tips on how to get this through and in our favour or what is likely to happen now would be greatly appreciated.
Sara (Debt Camel) says
I am sorry but you should not have taken out any more credit after a mortgage offer – mortgage underwriters will VERY often check prior to exchange. I am not sure what else I can say except that your broker may nor have done a very good job advising you.
Chantal says
So are they likely to withdraw their offer now or just ask us to settle the credit card balance again? Does our mortgage advisor have to tell the lender what he now knows? He says they won’t perform another credit check unless we ask them to? That’s a bit harsh when you are told they have everything they need and won’t be performing another credit check and people have credit card balances constantly that they manage, so why can’t we manage ours too?
Sara (Debt Camel) says
I don’t know. But what I am saying is it is very common for another credit check to be performed and I don’t think they need to ask your permission for it.
Chantal says
Hi Sarah OK. No worries. Thanks for sharing your information of what you know. We will have to wait and see and take it from there then I guess? We were advised they would not perform another one, but of course what you are told and what actually can or happens are two different things.
Simon says
Hello
I have defaults on my file which come off in May 2025.
I was just wondering when they drop off in 202t can lenders (mortgage) still see money owed and would that effect there decision?
Reason I ask is I would rather save now for a mortgage and have a bigger deposit whe they drop off in 2025 and then stay in the DMP until completision in Oct 2029
Or do you think its best to save and PARTIALLY pat them off then save again for a mortgage?
Sara (Debt Camel) says
A mortgage lender asks for your bank statements – usually 6 months worth. So they will see from your bank statements that you are in a DMP and you will be refused a mortgage at a reasonable rate by a high street lender.
Saving up and partially settling the DMP debts is usually the more sensible option. They will still drop off in 2025 after a partial settlement.
Simon says
Hi Sarah
I have 2 banks send pay the £150 out of one and use the other for all my other bills would that help?
Sara (Debt Camel) says
No. The mortgage lender will want to see statements for all your accounts.
frogman says
Hi Sara,
I just wanted to say a very big thank you because if not for your website, I would never be where I am today. It has been a long journey from 2020 when I started making affordability claims.
With the advice here, I was able to get a lot of refund, and even more important were adverse entries on my credit file which was removed.
After a very very intrusive 3-month encounter with an adverse lender, we secured a mortgage offer today with a 20% deposit on a £310k house @ 4.39%. I am a limited company director and that didn’t help matters at all considering my 4 defaults (over 3yrs) and other missed payments here and there with old payday loans. The lender asked A LOT questions and requested for A LOT of documents. We are lucky the seller is patient otherwise, we would have lost the house. Now a couple of weeks to complete purchase as we already have other things sorted while we wait for the offer. Plan is to continue cleaning up my credit file so that I am in a better place in 2yrs time to re-mortgage. Once again, thank you so much.
Stephen says
Hi Sara,
I have 3 defaults that are all due to come off my report on the same day 8th March 2023 (they were all Natwest, CC, OD, LO from my students days). So they are all within the last year of their lifespan on my record.
The CC and OD have been fully paid up. The Loan still has a balance on it of 7.5k but I did the CCA request as the debt has been with PRA for awhile now and I’ve already paid them 1.5k towards this. Turns out the debt is currently unenforceable.
I have stopped paying them until they can provide the paperwork and its been around 4 months and they still haven’t been able to provide me with any and I send an email every few months offering them a full and final settlement of around 10%, they refuse and have offered me 90% offer and state the account is still unenforceable but may become enforceable in the future and they’ll let me know.
I just wondered:
a) how likely are they to find the paperwork to make it enforceable just before it drops off my record in March 2023?
b) if it does drop off without any problems from PRA and I am not making any payments to PRA (and just waiting for the time to pass for them to accept a lower settlement offer), will other lenders be able to see this loan? Worried about this especially if applying for a mortgage!
Thank you
Stephen
Sara (Debt Camel) says
how likely are they to find the paperwork to make it enforceable just before it drops off my record in March 2023?
After 4 months it’s not very likely. And every month that passes makes it less likely. there is nothing special to PRA about when it drops off your file, they aren’t delaying until that date, there would be no reason to do that.
if it does drop off without any problems from PRA and I am not making any payments to PRA, will other lenders be able to see this loan?
Well NatWest and RBS (part of the same group) will be able to see it from their records. You shouldn’t apply to one of them for a mortgage.
No other lenders will be able to see it unless you have made a payment to the PRA in the previous 6 months – most lenders ask for 6 months bank statements and they could see that payment.
(and just waiting for the time to pass for them to accept a lower settlement offer)
they may never agree to this. they just hope you will gget anxious and offer them more.
Lorraine says
looking for advice my husband and i have recently made offer on a new home £225,000 we have sold our property and will have £56000 as a deposit went through a broker and was accepted in principle barclay bank but came back and was refused was told it was my husband credit he has a default from 2010 and 1 missed mortgage payment from Jan 22. my credit was good now showing as fair due to hard search with barclays i have capital one credit card with 2250 balance and aquq of 800 been trying to pay every month. went to another broker he said we wouldn’t get a mortgage then another broker is telling us we have a good chance if we put down the £56000 deposit. were are so confused as what steps to take any advice woild he much appreciated
Sara (Debt Camel) says
a default from 2010 and 1 missed mortgage payment from Jan 22
Are both of those correct?
does the 2010 default show on your credit record? It shouldn’t… if it doesn’t, was it a default to the lender you are applying to for a mortgage?
Clark says
Hi we own a homebuy direct propert with a 30% builders support we have equity in the property, it’s a large property band c and costs are getting even higher to run and maintain. My mortgage deal has gone up this year. (December extra £80 and pay interest of £100 every month for 30%) We have a financial situation and have defaults to which we are on dmp. Spiralled due to furlough. Considering selling house paying 30% back to lenders paying debts outright renting for a while whilst waiting for credit to become cleaner then saving the equity to put down on a cheaper property?? Do we have any other options??
Sara (Debt Camel) says
so the property is larger than you need?
how much equity is there in it?
are you currently making payments to the equity loan portion?
how long have you been in a DMP and how large are the debts in it?
Clarke says
Hi yes the property is a 4 bed and we are only using 3. Around £100.000 in equity. Yes we pay £100 per month for the 2nd charge. We have £19.000 in debt and have only just started up a dmp.
Sara (Debt Camel) says
Is one option to get a lodger for the spare room?
Have you looked at the maths – how much money (if any ) would you be left if you sell the house and clear all your debts? What will it cost to rent a 3 bid house? Paying that, how much do you expect to be able to save up each month?
Simon says
Hi Sara,
So I’ve messaged you a couple times before. Just a quick question.
I’m still currently in my DMP play with payplan. I currently owe 12k on 4 credit cards all of which defaults back in April 2019 and are due to drop off in April 2025.
My question is:-
I’m hoping to get a mortgage and have around 25k saved by Dec24 and have all of the DMP plan paid off.
Would it be best to pay the DMP plan off or just continue to pay the £161 a month for the next 5 years and have an extra 12k towards my house as I have read that when the defaults drop off in April 25 (5 months before I buy a house) that nobody can see what money is outstanding to them including mortgage people?
What would you advise? I’m thinking if the above is true its only a 5 months different which I could wait and maybe move out in June 2026 with extra money.
The debt were for barclays, bank of Scotland and vaquish who I would not be looking at using for a mortgage
NoBees says
Hello Sara
I was hoping for some advice. I had a default on a Student Account Overdraft for £1,500. This was due to Domestic Abuse/Financial Abuse. As soon as I knew, I set up a payment plan. I started paying off the Default in Feb 2022. It was fully paid off November 2022. So I realise it was fairly new.
I have no other loans/debts/credit cards against my name. But my credit score did go from around 740 to 579-654 (depending on the site).
I am looking to buy a house with my partner (he has a good/excellent credit score). The home is £250,000 and we have a deposit of £80,000. Meaning we need to borrow £170,000. I earn £27,055 and he earns £25,500. So total income of £52,555.
We have a Mortgage Broker who got us an AIP from West Brom Building Society – to borrow £170,000 – 5 year fixed rate, 35 year Mortgage, 4.54% with Monthly Repayments of around £808 – which we can afford.
West Brom have since come back with a question regarding the explanation behind the Default – so the broker has informed them of the Domestic Abuse/Financial Control and that the Default has been paid off.
Do you think they will approve the Mortgage?
Sara (Debt Camel) says
I’m sorry I can’t guess. I would hope they would… have you supplied any details of the domestic/financial abuse?
simon bowery says
Hi Sara,
I’m still currently in my DMP play with payplan. I currently owe 12k on 4 credit cards all of which defaults back in April 2019 and are due to drop off in April 2025.
My question is:-
I’m hoping to get a mortgage and have around 25k saved by Dec24 and have all of the DMP plan paid off.
Would it be best to pay the DMP plan off or just continue to pay the £161 a month for the next 5 years and have an extra 12k towards my house as I have read that when the defaults drop off in April 25 (5 months before I buy a house) that nobody can see what money is outstanding to them including mortgage people?
What would you advise? I’m thinking if the above is true its only a 5 months different which I could wait and maybe move out in June 2026 with extra money.
The debt were for barclays, bank of Scotland and vaquish who I would not be looking at using for a mortgage
Sara (Debt Camel) says
I am a bit confused with some of those dates.
A mortgage lender will look at your bank statements, usually going back 6 months. If they see any payments to payplan they will realise these are repaying old defaulted debts. So your DMP needs to have been finished at least 6 months before a mortgage application.
PS don’t forget Halifax is part of Bank of Scotland group.
simon bowery says
i see your point. but even though the defaults will drop off in April 2025 but i will still be paying pay plan would that be a cause of concern with them?
as i say i have read that when the default drop off, even if you owe money still the debt doesn’t show on your credit file.
i do have 2 banks, what if i change the payments to my other bank which i very rarely use. i understand it would show £162 a month leaving over that 6 month period for what they want but i could just say its just saving for a car maybe???????
Sara (Debt Camel) says
Yes this is VERY likely to still be a problem.
Mortgage lenders don’t care about your credit record, they care about what problem debts you are repaying. the credit record is one tool that shows these, your bank statements are another.
Don’t commit mortgage fraud by trying to conceal things.
simon bowery says
i understand, i was just thinking of ways to save an extra few grand by doing it this way. would they ask what the £162 was leaving my HSBC account to my Lloyds account?
surely thousands of people in the UK have 2 banks with money going between like savings for example
Sara (Debt Camel) says
then they may ask for bank statements for the other account.
If you would like to be able to save some money, look at making full and final settlements offers to the DMP debts – see https://debtcamel.co.uk/debt-options/less-common/full-final/
NooBees says
The Broker has informed them of it. Waiting to hear back if they need anything else. But I do have documents confirming the abuse if needed.
Sara (Debt Camel) says
Have you told your broker you can supply documents?
NooBees says
I hadn’t yet but – my partner just received a text today saying “We are pleased to confirm that your mortgage offer of loan has been issued today”. We’re double checking with the Broker before we get excited – but it looks like we got the mortgage!
Minnie says
Hello,
Can someone with a 3-year-old default join an existing mortgage?
I bought a house 2 years ago with my sister who now wants out. We’re nearly coming out of our 2-year fixed so this would be a good time and I already have the money to buy her out. I met my partner a year ago and he wants to move in.
My mortgage is with Halifax (1.4% rate, we bought at £270k, 22 years left and we have 217k outstanding).
My partner has 1 x NatWest overdraft Default from 2019 (£1700 satisfied and settled in 2021 account closed) which will be 3 and half years old when my sister and I come out of our fixed. I made him take out a credit builder card with Barclays a year ago and his score has improved.
But with his credit history would we have to go to an adverse credit broker?
Also, would I be subjected to new credit and affordability checks if I try to keep my mortgage with Halifax with or without him? I have since taken out a £16,000 home improvement loan solely in my name with Natwest. I have 3k interest free credit card balance paying off slowly. I’ve never missed a payment on anything ever. I make 32k income (32yrs), my partner (34yrs) is on 25k income.
Thank you for your time
Sara (Debt Camel) says
would I be subjected to new credit and affordability checks if I try to keep my mortgage with Halifax with or without him?
yes. This is a new mortgage, not just a new fix.
I already have the money to buy her out.
you mean to repay her her share of the equity? That is good, but the Halifax may refuse to take her name off the mortgage unless you can afford the mortgage without her. And your income on your own looks way too low to be approved.
I think you need to talk to a broker about the possibility of you buying with your partner. It may be possible as the default is old and has been settled for a while.
If you try to get a new mortgage on your own, my guess is you would struggle as your income isn’t close to being anough. In this situation Halifax will usuaully refuse to give you a mortgage in your own name and the joit mortgage with your sister will continue.
Louise says
Hi,
We are up to date with payments with Kensington Mortgages, however they are refusing to consider our request for a more competitive rate, how can we escalate this. We don’t want to change anything about the term/lending requirements of the mortgage. They don’t know whether they had signed up to the government scheme or not, despite being brought by Barclays. Any advice welcome.
Thank you
Louise
Sara (Debt Camel) says
Do you have any arrears? When did your fix end and what SVR are you paying now?