A reader asked:
My partner and I have a combined income of £54,000, We have a deposit of £20,000 (inheritance) and are looking to become first time buyers in a new build property at a price of £210,000. 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 now about 6 months old as we started to try and tidy things up when we knew the money was coming to us. We currently owe around £6,000 on the defaulted debts between us, and we have no other debts or finance. I have an active credit card, and we both have a mobile phone contract in our own names, but that’s all.
What are the chances of us being offered any kind of mortgage?
If you want a mortgage right now
Most of the suggestions below will take some time to improve your mortgage chances. If you want a mortgage straight away, you are going to have to go to a “bad credit” broker. This will cost you more in fees – be very clear about what the fees are before you sign anything. Also the mortgage is likely to be at a much less good rate.
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? Will house prices have dropped so your 15% deposit is now only 5%?
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. You want to pay them off as soon as possible so a mortgage lender can see that your problems were all in the past.
These debts don’t have to be paid in full – a partial settlement may be acceptable to some mortgage lenders.
When the defaults have all been settled more than a years 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 you already have the inheritance in your bank accounts, 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 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.
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.
Lifetime ISAs
The best way to build up your deposit again would be by regular monthly saving into a Lifetime ISA if you are aged 18-39 and this will be the first property you buy. MSE has a good guide to LISAs.
So get an LISA each to maximise the help you can get! 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… Use your credit card every month and pay it off in full every month.
What about the 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 normally delete the record from your credit file – so that might even get rid of some of the defaults.
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.
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 mid 2020, the deposit you need has gone up – there are no 5% deposit offers and very few 10% offers.
35-40 year mortgages – be careful!
Should you remortgage after a fix ends?
88 ideas that can save you money!
Steve says
Hi Sara,
Me and my partner are looking to get a help to buy mortgage on a house we have recently viewed. Her credit rating is very high, however mine is not so good. 5 defaults, the latest was Dec 2018 however they are all settled as of June 2019.
The house is well within our affordability. 216k house and a joint income of 76k a year. Any advice would be most welcome.
Thanks and keep up the good work
Steve
Sara (Debt Camel) says
I’m sorry, the HTB mortgage market is a small group of lenders, you need to talk to a broker who specialises in this market.
Steve says
Hi Sara thanks for the speedy reply!
We’re using a local one at the minute but becoming more and more frustrated with them.
Do you have any recommendations of a national one perhaps you have heard good things about?
Regards
Sara (Debt Camel) says
I’m sorry, not for HTB. all I can suggest is googling and then phoning up and talking to them. But if you are changing broker, make sure you won’t have to pay the current one a fee :(
A says
Hi Sara
Please can you help! We are at a lost spoken to two mortgage advisors and getting no where. My partner credit is perfect score of 999! Mine on other hand I have 5 defaults from October 2018 all paid off and never had any trouble since! We have a good deposit of around 25k a joint income of over 46k and can’t seem to find a mortgage! Anywhere do you have any recommendation. Thank you
Sara (Debt Camel) says
how much do you want to borrow?
when were the defaults paid off?
A says
Between 190-220
They was paid off around June 2019
Sara (Debt Camel) says
There are very few 10% deposit mortgages around at the moment.
Before the current situation, many lender had a rule that they didn’t mind about defaults paid over a year ago – you just squeeze past that – where the defaults are more than 3 years old. Which yours aren’t.
I’m not sure you can do much except come back when the mortgage market improves.
A says
Thank you
Yes that’s what we are getting really maybe in 6 months we have a chance. Just feel like hitting a brick wall as we have a deposit ect
Sara (Debt Camel) says
People with a spotless credit record are finding it very hard to get a mortgage at only 10% deposit. Tough times.
Rosie says
Hi Sara
I currently own my £400k home and have a mortgage of £154k on it at 2.5%.
I am due to remortgage next month and my now husband wants to join me so that we can borrow around £130k to do some works to the house.
He has a great credit history with just a loan on a car and a small balance on a credit card o/s (which he plans to clear with some of the above cash).
I however have a very poor credit rating – mainly from 2 defaults back in 2018 on overdraft fee’s. I have since paid these off in full and also only now have 2 credit cards one with a £3k balance that I plan to clear with the cash and also one with a £0k balance that I have kept opened.
Please could you advise what you think our chances are of getting accepted – do the rules for remortgaging differ.
Our joint income is over £80k a year.
Thanks in advance.
Rosie
Sara (Debt Camel) says
This is a very difficult mortgage market at the moment. I suggest you talk to a broker about your options. If your fix is now ending, find you what the standard variable rate would be.
If the broker is not optimistic about your chances at the moment, a sensible choice for you wmay be to just change to the SVR and concentrate on clearing your credit card db=ebts. You have a good combined income and a very low mortgage so it shouldn’t be hard. Then in 6 months come back again – at the point your defaults are older, you have both cleared off debt and you will need to borrow a little bit less as well.
Matt says
I’ve managed to get my credit score up to 995 after years of sorting myself out. Just had my first year accounts bk, looking at 44k profit. Would this be enough to go for a 190k mortgage with a 10% deposit, no debt as all has been paid? Cheers
Sara (Debt Camel) says
Probably not just at the moment…
a) there are almost no 10% deposit mortgages on offer
b) many lenders want more than a years accounts fro the self employed, or will only take into account 80% of their profit or have other obstacles.
You can talk to a broker, but the best advice may be to wait 6 months or a year.
Matt says
Hi
I still have an ongoing debt management plan after 8 years which I pay a small nominal amount. £3k left to pay. All defaults and history has now dropped off my report. My credit score is excellent now.
How will this affect a mortgage application? I have plenty of disposable income but have been using this to save for the deposit…
Many thanks
Sara (Debt Camel) says
You won’t be able to get a mortgage at a reasonable rate from a high street lender until tour debts are settled. the lender will ask to look at probably 3-6 months of bank statements and will see the payment to your DMP even though the debts are not on your credit record.
You don’t have to settle the debts in full – a partial settlement, also known as a full & final settlement is fine, see https://debtcamel.co.uk/dmp-partial-settlement/
Hyal says
Where can I find a mortgage broker as I have a recent default and am looking to get a shared ownership mortgage,
Sara (Debt Camel) says
Sorry, I can’t recommend a bad credit mortgage broker.
Scott says
Hi.
I am looking to get a mortgage with my girlfriend. I have an excellent credit history however she has a 4.5 year old satisfied default. Other than that her credit history is squeaky clean. We have an agreement in principle with Santander but worried it won’t be accepted when reviewed. How much of a problem do you think this will be?
Many thanks
Sara (Debt Camel) says
how long ago was the default satisfied?
Scott says
Was satisfied about 2/3 months after the default date so over 4 years
Sara (Debt Camel) says
I would hope that would not be a problem then as she has been “problem free” for so many years. Good luck!
Scott says
Fingers crossed! Thanks for your help
Yetty says
Hello Sara,
I am applying for Right to Buy with my local Council for a 2 bed flat. I am applying with my husband who has a slightly better credit score with clearscore. Mine has just gone up to 316 after I cleared my credit card balance last month. Combined income is £51000
However, the main issue is a default was added to my account in November 2018 through a guarantor loan on behalf of my brother. He has now set up a payment plan with the lender and they will review in 3 months.
Do you know if I will still be able to get a good mortgage rate or any mortgage with high street lenders with my RTB discount of almost 10 years? Please your insight will be greatly appreciated? Thanks.
Sara (Debt Camel) says
I can’t answer your question – there are few mortgage lenders in this sector.
BUT can you suggest the borrower of the loan reads https://debtcamel.co.uk/how-to-complain-guarantor-loan/ ? If they can win an affordability complaint, you should be released as guarantor and any negative marks on your credit record should be removed
Yetty says
Thanks. I will look into the affordability complaint.
Vicky says
Hi, I have 2 defaults both in 2017. I repayed Both debts March last year (Down as satisfied) as me and my partner got decline because of my defaults caused me to have very poor credit score. We are looking into trying a mortgage again next year so the default will be 4 years old, what do you think my chances would be next time round please?
Sara (Debt Camel) says
Improved! But what the whole mortgage market will be like next year is tye question. Go through a Broker, don’t apply direct.
Sam says
Hi I have a 5 year old default for £100. My 5 year fixed mortgage is due to end in 3 months and I was wondering how much of an impact this will have. I have an otherwise immaculate credit report? The debt was repaid immediately after default.
Sara (Debt Camel) says
I think that is unlikely to matter. But if you want a new fix from a different lender, go through a broker.
Sam says
The lender I am currently with is peppermoney and because they are a specialist lender they don’t put you on another deal when your fixed rate ends. We will have to go to another lender, hoping my silly mistake has not cost us as we worked so hard to get the mortgage in the first place due to ccjs and defaults on mine and my partners
Sara (Debt Camel) says
is your partner’s record now clean?
Sam says
Yes it completely clean and my default was for a closed npower account, part of the final bill i thought i had set an arrangement for.
Sara (Debt Camel) says
ok so talk to a good broker, not a bad credit broker. Hopefully you have enough equity to get a good offer from a mainstream lender.
Sam says
Thank you so much I have been worrying like mad. Our remaining mortgage is £50k on a house worth 90k
Jessica Riding says
Hello,
I am wanting to make an offer on a house. I have 15% deposit ready to go but I have 4 defaults, one finish’s October and the other three finish in December 2020. Do you think this will make somebody decline a mortgage application? I have mortgage in principle but I know that they don’t always give you the mortgage.
Sara (Debt Camel) says
When you say the defaults “finish” do you mean they will be paid? Or that they have been psi’s already and they will drop off your credit record?
Zara Turn says
Hello,
I am wanting to get a mortgage in the Summer of 2021.
I currently have two defaults on my account from February 2019 (settled September 2019) and August 2019 (settled June 2020), my last missed payment was February 2020 and I have no debts (except phone bill and car insurance).
I am wanting to get a 5% help to buy property costing around £170,000 and I am earning £44,000 per annum.
What are my chances of being able to get a mortgage as I am concerned that I won’t be eligible to any mortgage lenders, except for the “bad credit” ones with sky high interest?
Sara (Debt Camel) says
The help to buy mortgage market us a small set of lenders. I don’t know anything about it specifically but next summer your defaults and missed payments will still be less than three years old, so I think you may well find this very difficult.
Eilidh says
Hi,
We got a MIP and an offer accepted on a house, all going fab till 3 default accounts were found on my credit history from 2015 ( although they all appear to be the same amount from the same lender) this was probably a shop credit account from when I was a student. I have no idea about how to find out the details for the accounts. They are just under an umbrella of shop direct. For £100. My question is should I pay them now, if I can find out how. Or will it have very little effect on securing the mortgage at this point?
Feel gutted. In a much better financial position now. Looking for a mortgage of £110k between my husband and I, he has a good credit history with no black marks. Hoping offering a guarantor might help swing it for us. Both secure NHS and mod jobs. Do you think we can still get accepted?
Sara (Debt Camel) says
What a pity you did not check your credit record 6 months or a year ago!
Do these accounts have default dates recorded, or are they just showing 6 month in arrears?
Jenny says
Hi their
I their there is a default on my credit file for £200. it was from 2016 oct. Next month will be 3 years since I had default. It was cleared and all paid of in a debt management plan last payment was last november 2019. A high street lender declined an underwriting stage as they accepted the default but because it was on a dmp it didnt fit their criteria. My credit score isnt the best but I’ve worked so hard to improve it. It’s gone up 23 points in last month. My partners score is amazing tho. I currently dont have any debts. We have a mortgage advisor and he has applied for a specialist lender we have had are mortgage in principle and also done the full application. We had to pay the survey fee and now they said we just have to wait for them to be in touch. We have applied for the specialist lender I know the rates are higher but were in the situation were we need to buy are house asap . Looking on criteria it says they accept people who are actually on a debt management plan currently mine was paid of last year and it’s been nearly 3 years since I defaulted. Anyone got any advice as I keep worrying and stressing thanks
Sara (Debt Camel) says
My suggestion would be to wait another 6 months until it is more than a year since the DMP ended and go for a high street lender. Sorry. I have seen too many people trapped with very high mortgage rates unable to remortgage later onto a better rate.
Terri says
Hi there,
Myself and my partner are looking to purchase a new build house (completion date may 2021) My partner has an excellent credit score however mine shows as fair across the 3 CRAs asI have a default of £798 from a utility company dating back to October 2017. I wasn’t aware this was outstanding so luckily I had checked my credit file and spotted it, it was cleared and marked as satisfied in August 2020. I have a credit card and overdraft which are both kept at a 0 balance but no other credit agreements.
We have a combined income of £75K and have a 15% deposit is it likely we will be accepted for a mortgage?
Sara (Debt Camel) says
Sorry, you need to talk to a mortgage broker about this as the default has only recently been paid.
Ben Smith says
Hi there,
My partner and I are in the process of looking for a new home together. She has excellent credit history and score whereas mine is poor.
She is currently a homeowner as she owns the flat we’re living in.. We would be looking to sell her place and use the equity from this in combination with a joint mortgage to get a joint place. I have defaults on my account from last year and January this year – but everything is completely paid off. What are our chances of being offered a mortgage?
Sara (Debt Camel) says
I don’t know what your timescales are or when you have repaid these very recent defaults. I think you need to talk to a broker about this.
Ben Smith says
Hi Sara,
One of defaulted accounts was settled in November 2019 and the other was settled in early June 2020. We’re looking to try and move in January/February time.
Sara (Debt Camel) says
Talk to a broker. A default that has only been settled on the last year can be problematic.
PPPP says
I got 5 k from family towards deposit but Im on debt management plan and both me and my partner got defaults on accounts in that situation is there any chance to be able to get a first time buyer mortgage or there is no chance for us ?
thank you very much
Sara (Debt Camel) says
Are you talking about a Help To Buy?
How much debt is remaining on your DMP?
John says
I have one default from an account with an energy provider from 2019. Is this likely to be a limiting factor when it comes to a mortgage approval?
Sara (Debt Camel) says
Yes. Talk to a broker about your options.
John says
What kind of options are usually available?
Sara (Debt Camel) says
That will depend on your situation – if the default was very small or it was paid off very quickly and you have a big deposit, it may be fine.
Lucy says
Hi Sara,
I am planning to buy a shared ownership property for a 40% share at 166k. I have a £45k deposit (personal saving the gifted money) and an annual salary of £50k. I ran the credit check online and noticed I had two defaults (one in December 2019 and one in May 2020) linked to my previous address with a water company. The defaults were mainly due to moving home and the bill was incorrectly sent to the previous address and had been fully settled now. I have contacted the water company to see whether they can remove the default, they say they need to go through an investigation process and will get back to me. I would like to understand how this will impact my mortgage application if the water company can’t remove the default/can’t remove it before my mortgage application.
Thank you very much.
Sara (Debt Camel) says
It will make your mortgage application MUCH harder if the defaults are not removed.
Lucy says
Thanks, Sara, I am still waiting for the water company to come back to me and it seems like they had made no progress so far. I have updated my credit file to show the defaults are in dispute. I have been allocated a property successfully so have to start the application ASAP. Any chance I will be able to get a mortgage from the mainstream bank? I will have a 25% deposit. Thank you very much.
Sara (Debt Camel) says
You need to talk to a good broker, sorry.
Lindsey says
Hi I have default on my credit score which is nearly 4 years old and I paid it off 3 months ago. My partners credit file is squeaky clean nothing on it . We went yesterday and we got a decision in principle from Halifax and accepted for an offer we put on a house. We go tomorrow to apply for the full mortgage application and I’m scared that we will get declined! Have Halifax seen the default on my credit file already or will the decline me now when I put my full application in
Sara (Debt Camel) says
I don’t know what Halifax checked before giving you this decision in principal. It would have been better to go through a broker, not direct to Halifax.
Rachael says
Hi Lindsay, i wondered how you got on with your full application as your situation is identical to mine including the MIP from Halifax. Many thanks.
Al_JR says
I have defaults, from the end of 2019, on three credit card accounts, that I’m going to settle imminently. The defaults arose during a sustained period of depression. .
I understand that 90% mortgages are really thin on the ground. I also understand that my credit history is poor, during the period of depression (it was decent prior to that, I had a mortgage that was up to date, loan payments and credit card payments were up to date) – my question is, will lenders take the reasons for defaults into account when considering credit worthiness? Alternatively, is there anything I can do so that my credit history reflects the reasons for the defaults?
Sara (Debt Camel) says
I am sorry I don’t think you have any chance of a 10% mortgage at the moment without a squeaky clean credit record. You can talk to a broker now, it won’t do any harm, but I don’t think you have much chance of success.
Once the defaults are settled, then in a years time when the defaults are older and settled longer and the mortgage market may be back to normal then talk to a mortgage broker.
John says
Hi Sara. We are trying to purchase a £235,000 property and need a mortgage of around £30,000. I have one default only on my credit report that was from July 2020; I settled it in full in October 2020 – an otherwise clean credit history. My salary is £20,000. With such a recent default is there anywhere that will lend us £30,000, or anywhere near that?! Is it best to approach ‘bad credit’ companies first – or have we no hope of getting a mortgage at all? Thank you so much.
Sara (Debt Camel) says
why did you default this year?
John says
The default was from the electricity supplier to the property we are selling, my mother’s house, who passed away. The account was transferred into my name when we moved in to the property (we moved in to deal with the sale of the house), but the meters were located in a different house (next door), and we were unable to gain access as the person who lived in that house also passed away. It took months to sort it all out – and the account defaulted. We settled it as soon as we realised by using estimated readings until we could gain access to the property next door. We were obviously very frustrated at our stupid mistake in not just settling the account sooner, we had no idea it had defaulted.
Sara (Debt Camel) says
Weren’t you sent any bills?
John says
Yes we were, it was our fault entirely, there was a lot going on with the recent passing of my mother after a long terminal illness and various family matters to deal with. We’re not suggesting the default was anyone’s fault but our own, the bills were all estimates and we foolishly waited until we could access the meters rather than just paying them. So the default was entirely our fault. We just wonder whether, given it’s the only default and we settled it as soon as we realised it was there, there are any mortgage lenders that might consider lending us what we assume is a relatively small amount? Or have we no hope with such a recent default? Thank you so much.
Sara (Debt Camel) says
Well try talking to a good broker (London and Country, Habito), as you say it is a very small mortgage.
I would not touch a bad credit mortgage with a barge pole. Too many of them saw interest rates being hiked in 2009-10 when interest rates everywhere else were being cut – if you can’t get a mortgage with a highstreet lender better to wait a year or try to find somewhere that is 30k cheaper?
John says
Ok, thank you so much for your advice, much appreciated.
James says
Myself and my partner are currently looking to get a mortgage, we have £45k deposit and looking at properties between £250/280k, our combined salaries are 56k plus 7k annual bonus. Her credit rating is very good, but I have 3 unpaid defaults and several settled defaults inc payday loans, the unpaid defaults are approx 4K in total and are more than 2 and half years old. I have a credit card with a £500 balance which is up to date and no other late payments in over 2 years. Do you think there based on current circumstances there are likely to be mortgage options available to us?
Sara (Debt Camel) says
No good options. You need to settle the old defaults and then wait a year – have you tried to get settlement offers accepted?
James says
I am going to settle 2 this month, £600 in total, the other would not accept my offer so was going to pay a chunk then monthly.
Our broker said we would be considered by someone like Kensington but obviously high interest. Their website does state the will consider unsettled defaults if older than 2 years
Sara (Debt Camel) says
With that deposit why cant you repay both in full?
My strong suggestion is to repay both now and then wait a year to apply for a mortgage, do not go for a bad credit mortgage. During this year also look at making payday loan affordability complaints, see https://debtcamel.co.uk/payday-loan-refunds/ as if you have a good complaint and win the case, any default is likely to be deleted.
James says
Would paying in full make more of a difference to partial settlement? I offered settlement as paying in full would eat into the 15% deposit we have
Sara (Debt Camel) says
Bad credit lenders won’t care.
Some high street lenders may not like a partial settlement but others may not care- this is why its important to go through a broker who will have a better idea at the time you apply.
At the moment it is vital to have a 15% deposit..
Steven Howarth says
Hi Sara,
I’ve been reviewing my credit report ahead of a mortgage application next year and I’ve got a couple of issues that I’d like to get some advice on.
We had mortgage arrears on our mortgage in January 2017 which we paid off by March 2018 meaning when we come to apply for a mortgage in May or June next year the arrears will be overs 3 years old. It was down to me suffering from depression following the sudden death of my dad In (March 2017), I got a default on a Vanquis credit card for £631 for the same reason. This was paid off in full in September 2019 and is showing as satisfied on my report. What impact will the missed payments / default have on our mortgage application given the length of time 3 – 4 years since missed payments / default? Would it be worth putting a statement on my credit report explaining the circumstances at the time?
Sara (Debt Camel) says
I am unconvinced that a statement on your credit report has much influence with mortgage underwriters, but you can try.
I suggest strongly you go through a mortgage adviser, don’t apply direct to a lender.
Steven Howarth says
In addition to my other question, I have a some missed payments from British Gas from years ago. I disputed the final bill at the time and have fought it for years since leaving them and have never paid them. The debts were ‘settled’ in January 2018 (£639 for gas) and December 2019 (£80 for electric) with no reference to any payment or settlement. What I didn’t realise until now is that these are on my credit report – I never knew utility companies reported your account on credit reports and I’ve since been with EDF and Bulb and neither have entered an account. What’s interesting (term used very loosely) is that they have reported the payments being 6 months late for over 4 years for gas (before being ‘settled’ in Jan 2018) and 6 years for electric (before being ‘settled’ in December 2019). m I in my rights to have these turned into a default which would subsequently be removed due to the 6 year expiration? Or even have the reporting stopped at a certain point due to unfair reporting (i.e. 4 & 6 years respectively)?
Sara (Debt Camel) says
You can ask for a default to be added but if you have never settled the debt it’s hard to say what is going on.
De says
Hi,
Me and my partner are wanting to buy our first ever home. I have a default that was registered 5years, 8months ago on my credit file.
This was a Santander student account (overdraft) when I was at Uni. I have payed of default over the years and now in July 2019 it was completed and paid in full. We are looking at putting down a 15% deposit.
Would I get a mortgage with most lenders with this default?
Sara (Debt Camel) says
I would hope you can get an offer but the market is difficult for first time buyers.
Don’t apply to Santander!
Indeed talk to a good broker ( eg London & Country or Habito) and explain the Santander problem and follow their advice>
Harold Bingly says
Hi Sara,
I have an offer accepted on a home to live, I need to borrow 60% only (£215k), my salary is £60k per annum and I have a separate buy to let mortgage joint with my father.
A high street lender rejected me because I had £75 balance unpaid on a credit card I didn’t know I did not settle last year, when this defaulted it was sold to another debt collection company who informed me of the balance in October, I repaid the £75 in November. My credit file shows 2 defaults because of this one cancelled credit card that I didn’t know I had a balance outstanding on.
I have a perfect credit file apart from this
What is your advice to get a mortgage now that I can’t get it from normal high street lenders? (I went via hábito)
Thanks,
Harold
.
Sara (Debt Camel) says
What do Habito say?
If they aren’t helpful, you could talk to John Charcol who can sometimes find a large mortgage on good terms for someone with a large deposit in an odd situation.
I do not suggest going to a bad credit broker – you can’t believe them when they say this horrible interest rate is only for a couple of years, people can get stuck and be unable remortgage.
Harold Bigly says
Habit told me i need to go to a specialist lender, they referred me to “Impact sf” , habito said i would be unlikely to get a high street/normal lender because the defaults are recent even if i settle them. The fact that it was a small sum compared to all my other credit card and buy to let mortgages being paid on time at much larger amounts really does baffle me. It feels like ill never move to a home and buy with a residential mortgage just because of £75 of a credit card i was never contacted about…
Thank you i will contact John Charcol as well
Sara (Debt Camel) says
Oh you should be ok to buy with many high street lenders a year after it was settled.
1099Simon says
Hi Sara
My wife and I have a DMP with £30k outstanding, which will take 10 years to pay off. 12 defaults in total, the latest being in May 19. We would like to move house for a bit of extra space, and can’t do this by getting a new mortgage due to our poor credit. We are thinking of selling, paying off the £30k DMP via final settlement offers, and renting for 2 years so that the last default will be 4 years ago. We do not however want to be renting forever. We will be left with £90k to put aside for a deposit. Do you think we would be able to get a new mortgage after the 2 years of renting?
Sara (Debt Camel) says
How long has your DMP been running? Are the DMP payments affordable?
How will the cost of renting compare to paying the mortgage and the DMP?
1099simon says
Hi Sara, thank you for the reply. The DMP has been running 2 years and is affordable. The cost of renting would be similar to that of our current mortgage plus what we are paying for the DMP (or possibly less). We just need to decide whether we should stay and try for a new mortgage in a couple of years, or sell and move out into rented to clear the DMP, and then buy a new house. We just don’t want to move out if it is unlikely we will get a new mortgage in a couple of years. Thank you in advance.
Sara (Debt Camel) says
So the risks in your plan are:
– house prices increase during the time you are out of the market
– when you want to buy again, mortgage conditions have changed so the old rule of thumb – “you should be OK if the defaults were more than 4 years ago and repaid more than a year ago” – no longer applies so you are rejected because of the defaults even though they have been repaid
– when you want to buy again, the mortgage lenders considers you cannot afford the larger mortgage. You are effectively transferring the DMP debt, currently interst free, onto your mortgage and also probably needing to borrow more if you want somewhere bigger. Of course if you are planning on moving from an expensive area to a much cheaper one, this may not apply.
I can’t guess how likely any of those are to happen.
Part of you decision depends on how desperate you are for more space. 3 kids aged from 5-10 in a 2 bed house and something has to give in the next few years! Just fancing a spare room one of you can use as a study – much more discretionary.
Angelica says
Hi Sara.
I defaulted on a credit card in feb 2019 (balance was £6k).
This has now been paid in full (Jan 2020) on a DmP.
Our current mortgage is up for renewal in May 2020.
No other marks on credit file. Existing mortgage is £200000, but we wanted to get additional for home improvements.
Would it be better to wait until default settled date is longer ?
Weatherman says
Hi Angelica
Usually, the further in the past a default is, the less likely a lender is to worry about it. But it’s a bit different for high street mortgage lenders, who quite often run a mile at any default at all (until 6 years have passed since the default, when it drops off your credit record – so Feb 2025 in your case).
That can seem a bit unfair, especially if you’ve kept up with your mortgage, and you’ve now paid the debt off through your DMP. Unfortunately it’s quite possible that they would not be willing to lend you any additional money, and might not even be willing to offer you a new fixed-rate deal (so you’d need to stay on your current lender’s Standard Variable Rate).
The good news is that interest rates are low at the moment, but you might still end up paying more than you are on your current deal. You could talk to your lender and see if they can give you any information about how they deal with defaults on other debts.
Your other option is to look for a lender who specialises in mortgages for people with problems with their credit rating (e.g. by using an Independent Mortgage Advisor) – but these could be much more expensive than staying with your current lender’s SVR, and the mortgage advice would also cost you money up front.
I hope that’s helpful!
Gmaccacool says
Hi,
Myself and my partner are looking to buy this year, we have £22k deposit (inclusive of HTB ISA) with a combined £65k annual wage..
Both have had defaults which were over 3 yrs ago which have all been paid and settled 2 years ago …
would we be best to wait another year ?
Sara (Debt Camel) says
I think you may well be ok – talk to a good broker now.
Emma says
Hi Sara
I would just like some advice so me and my partner applied for a joint mortgage but was kocked back due to a two defaults I payed them off in 2018 and they are 4 years old , my credit score isn’t great but my partner is excellent we both have good jobs that are stable and I have got a credit card to help with my score , I feel I’ve let my partner down and I am worried I will never be accepted for a mortgage. Is their any advice you could give me please ?
Weatherman says
Hi Emma
It’s a nasty feeling I know, but don’t beat yourself up too much, there’s just no point! :)
If the defaults are 4 years old, they’ll vanish from your credit report in another two years. And their negative effect falls as they get nearer and nearer the six-year point, so you could also try again in a few months (but there’s unfortunately no guarantee).
Your other option is to speak to a broker that specialises in ‘bad credit’ mortgages, but you’ll end up paying a higher rate.
You can also have a look at other ways to improve your score – so that once your defaults have vanished, or even while they’re there, you’re in the best position you could be.
Emma Cowley says
Thankyou so would I have to wait another 2 years to get a montage as really we have a good deposit of 25k or does that not matter cause of my defaults?
Sara (Debt Camel) says
Mortgage lenders don’t look at your credit score, they look at the details of your debt history.
Some high street lenders will offer a mortgage when you have had defaults that have been paid a while ago. And 2018 sounds long ehough to me.
I suggest you talk to a good broker now – you don’t have to go to a bad credit broker which can be extremely expensive. So try Habito or London and Country. They have the up to date info about which lenders are looking for what from an application.
I can’t guarantee you can get a mortgage but this sounds worth a try now.
Emma Cowley says
Hi Sara I tried habiot bit they said they carnt help me because of my Bad credit history i feel like I am getting no where we have a good deposit of 25k and I feel like I am getting nowhere cause of my past .
Sara (Debt Camel) says
The mortgage market is difficult at the moment. Wait another 6 months and try again?
Emma Cowley says
Okay thankyou sara
Emma Cowley says
Hi Sara ,
I have found building society that will expect defaults however I am a confused as is says that of you have and defaults you must have a pass score , just wondering if you can help me as I am unsure what this means?
Sara (Debt Camel) says
At a guess, some assessment of your credit record and affordability, but you need to ask them for the details.
Emma Cowley says
Thanks Sara
I have emailed asking about what is the pass of a credit score as I’ve explained as defaults make your credit low anyway until 6 years. So I don’t understand why they aceppet defaults knowing that’s your credit won’t be Great .
Sara (Debt Camel) says
It may be some sort of combined score, where you get extra marks for a larger deposit? or needing to borrow a low amount compared to your income?
GMc says
Hi Sara,
I hope you can help try and alleviate some of my worries about getting a mortgage with my partner this year. We are looking to buy this year and have a 30k deposit and a combined income of 68k. Houses we have been looking at are around 200k.
I hit a rough patch in 2017 and clocked up some defaults, the most recent being registered in March 2018 (this should actually be Jan 2018 and has been changed on one credit report but not another, but hey ho!) All of these were settled as part of a DMP and were paid off by Dec 2019. We were going to get chatting to a broker properly in April when all of the defaults would be over 3 years old definitely.
My question is, do you think we would be likely to get accepted this year or is it a long shot because of my past?
Thanks!
Sara (Debt Camel) says
Definitely worth talking to a broker then, good luck!
GMc says
Thanks, fingers crossed!
Heidi says
I am hoping to get a mortgage this year, around September 2021 with a 10% deposit.
I have a good salary (35k) and no loans or overdrafts etc only a mobile phone.
I have two defaults on my Experian credit report from August 2018 both for less than £500 between them – both were paid off last year however on my equifax I have one default from February 2019 from Eon for £250, settled last year.
Both companies are showing different defaults and apart from these, I do not have any missed payments and took a credit card out last year to build my credit.
Do you think I will be eligible for a mortgage and also, would I be better getting a broker who can find companies who just search one credit company I.e, Experian or equifax?
Weatherman says
Hi Heidi
Unfortunately even if a default has been repaid it’ll show up and might alarm lenders. Some lenders might be a bit more forgiving if you’ve repaid the default, but there’s not a guarantee.
Most companies that report to credit reference agencies report to more than one (check your TransUnion credit report too to see what’s on there), and it’s very unlikely that a mortgage lender would only check one – they usually check at least two.
Don’t forget that a lender doesn’t look at the score itself, but at the information underneath it. So if you have a deposit and a salary that could qualify you for a mortgage, try speaking to a broker that specialises in ‘bad credit mortgages’ – but bear in mind that the rates you pay will be higher.
After about 3 years the impact of the defaults decreases, and after 6 years they fall off altogether – so your option is to wait it out.
Good luck!
Sara (Debt Camel) says
The “rule of thumb” used to be (pre pandemic) that if your defaults are all older than three years AND they have been repaid for more than a year, then you could get a mortgage from some high street lenders at an OK rate. Not their “best” rate, but a decent one, not a bad credit mortgage.
It’s hard to predict the mortgage market for the rest of this year. But hopefully it will go back to that old “normal”.
In that case the two older loans won’t be a problem (if September is more than a year after you repaid them). The Eon one may be a problem but it is pretty small amount. It’s worth talking to a broker about this.
I suggest talking a normal mortgage broker, not one that specialises in bad credit mortgages. A bad credit broker will assure you you will be able to mortgage down to a good rate after a couple of years. But it is you stuck with the expensive mortgage if that isn’t possible. I have seen this happen to too many people :(
You need to assume that all bmortgage lenders will check all three credit reference agencies. Have you looked at your TransUnion credit record?
Heidi says
I tried to check Transunion however it said they couldn’t verify me. The defaults on Experian will be over 3 years old but will have only been paid off 10 months.
Thanks for the advice, I will look for a mortgage broker nearer the time and hopefully shouldn’t need to be for bad credit
Heidi says
Hi, I managed to check Transunion and they are only showing the two defaults from August 2018 and not the Eon default, it seems only Eauifax are showing this, the defaults from 2028 were paid off in September 2020 and one in November and 2020.
Amy says
I did raise an affordability complaint with jd Williams the original lenders but didn’t win and I didn’t escalate this. I asked Lowell about the accounts as I don’t really want any more defaults. A few were bought by Lowell in 2014 however a few were from 2008 onwards so they have had these a long time. A couple were defaults which have just dropped of however I am paying for an 02 account which Is from 15 years ago and still paying £5 per month. I am going to ask about the CCA and also the cash payments or paying online to try get these of my bank statements as they will not offer a decent discount even though I have been paying years.
Amy says
Thank you, Can ijust ask about the CCA, if they can’t provide it, what does this mean? So if Lowell come back to me and can’t provide some and I cancel the direct debit and stop paying? Can they not harass me and send letters or try adding a default?
Sara (Debt Camel) says
Asking for the CCA will only help if the debt is off your credit record. If they cant produce it you can then su=imply stop paying. They can ask you to pay but every time they must tell you the debts is unenforceable in court. And they cannot add it back onto your credit record if it has already dropped off.
But for a debt which is still on your credit record you either have to settle it asap and accept that most mortgage lenders will want you to wait a year after before a mortgage application. OR try to get a default date added that is more than 6 years ago so it drops off and you can then ask for the CCA.
(You can ask for the CCA when a debt is on your credit record undefaulted – but then if you stop paying it will be defaulted and remain there for 6 years – not what you want.)
Nicole Ryle says
Hi,
I currently have a mortgage with my partner and we are looking to sell and move to a bigger property
We recently had a DIP declined and the reason was because of a default on my partners credit report for £15 from Vodafone. When he closed the account in Dec 2017 he had no idea of the outstanding payment. We are trying to get the default removed but do you think a mortgage lender will still consider us for this small default? My credit score is perfect and that is the only thing on his record.
We are looking to borrow more than our current mortgage and will be putting down a 10/11% deposit.
Weatherman says
H Nicole
Because you’re looking to borrow more than currently and with a relatively small deposit, you might be quite close to the ‘edge’ of who that lender is looking for at the moment. So add a default into the mix and that might push you outside of their criteria (the fact there’s a marker matters more than the size of the debt in this case).
However, generally a single 4-year-old default shouldn’t derail things with most lenders. Try another lender!
If you keep getting knocked back, and aren’t able to get the default removed, you could also try a broker specialising in ‘bad credit’ (although the rates will be higher). But I don’t think it’ll come to that.
Good luck!
Sara (Debt Camel) says
Has this default been paid? Do you dispute you owe the debt or just whether a default is unfair?
Nicole Ryle says
He realised in Jan 2021 when we did a credit check, we didn’t realise it was a default so just called Vodafone and paid it. It then came up this week after the refused DIP and we called Vodafone who haven’t recorded the payment as received (even though it has left my partners bank). We are now trying to dispute it all together as we never got any communications of the outstanding amount as we moved address.
What do you think we should do regarding the above?
Gurpreet says
Hi,
I currently have one default with Quickquid dated May 2018 but i recently claimed which was accepted and they will be removing this default. I have a low credit score but I am now debt free including no balance on my credit cards.
My husband has 2 defaults on his account with Tesco Mobile for the amount of £30 dated March 2017 which was settled straight away. He also has a default from Tesco bank for a credit card dated April 2019 which was settled in full Nov 2020. He currently has no balances on his credit card and is also debt free but also has a low credit score.
We have a combined income of £42,000.
How hard would it be to get a mortgage on the new help to buy scheme please? Would we need to speak to a bad debt mortgage advisor? We would be looking to buy towards the end quarter of this year.
Thank you.
Sara (Debt Camel) says
The QQ default will hopefully have been deleted by the last quarter of this year.
Do either of you have other payday loans on your credit record?
The £30 defaults sound minor but the recent Tesco bank one doesn’t. That could cause problems – but no one really knoiws what the mortgage market will be like in 6 months time.
I never recommend anyone gets a bad credit mortgage – the brokers will assure you you can remortgage onto a better rate after 2 years, but it is you that ends up trapped if this is impossible. This happens to too many people.
Gurpreet says
Hi,
I havent since 2017 and my husband has never. I did have a loan which was on a payment plan for 1 year due to job loss but it shows on my credit report as late payments. This is now completely clear. I have checked and my default has also been removed from my credit report.
What would be the best option to obtain a mortgage on the help to buy scheme coming out in April 2021.
Sara (Debt Camel) says
we don’t know anything yet about what the lenders requirement will be for the new help to buy scheme.
Scott says
Hi Sara
My partners credit record is very good/excellent. I have 2 defaults registered in 2019. We have received an Agreement in Principle from Yorkshire building society but I’ve read online that the AIP is not worth the paper it’s written on. Is this true?
Thanks
Scott
Sara (Debt Camel) says
Were YBS aware of these defaults? Were they quickly repaid?
An AIP is not a commitment from a lender, your application has not yet gone through full credit checking.
It is usually better to apply through a broker rather then go direct to lender. Have you already found a property?
Scott says
Hi
We applied online and they did soft credit checks on us both. I did put on the application that I had missed payments and the dates. I was completely honest. I had a breakdown in 2018 and was out of work for some time hence the problems. Yes they where paid within 3 months
We are in Northern Ireland so it limits the lenders we can use
Sara (Debt Camel) says
I hope it all works out for you. Repaying the defaults very quickly can help with some lenders.
T says
Hi Scott,
Let me know how you get on.
I’m from NI too and have a default from 2016 and not a great credit score. Due to apply for a decision in principle tomorrow via mortgage broker and really not sure how it’s going to swing. And the fact there’s not many lenders available in NI :(
Good luck with yours!
Adam D says
I have 3 defaults (2 in 2017 and 1 in 2018), the ones in 2017 are both settled but im in the process of removing one of these from Lowell as I had never received any papers and I negligently paid it not knowing what it means.
The 2018 default was for a payday loan with Mr Lender amounting to £875 which isnt settled yet.
I am on a £32k salary wishing to apply for a 40/50% shared ownership. When is the best time to apply for a mortgage given my financial history?
Weatherman says
Hi Adam
There are two different things to think about here. The first is the defaults – if you can, you’ll want to get the Mr Lender default settled, because there’s always a risk that progresses to a CCJ.
Usually, after a few years, the impact of your defaults on a lender’s willingness to lend to you decreases over time. However – some lenders will run a mile at any mention of a payday loan. That really depends on the lender, unfortunately, there’s no single answer there.
The absolute best thing to do would be to settle the Mr Lender default, and wait until 2024 for the defaults to all drop off. But you might be alright to apply for a mortgage sooner – just be aware that the payday loan might continue to trip you up. If you apply before then but are having no luck, you could try a ‘bad credit’ mortgage broker, although the rates you end up with will be higher.
(and of course make sure you’ve got a deposit, and you’re not asking for a loan of more than about 4.5x your salary, that’s the case regardless of when you apply)
Sara (Debt Camel) says
did you have more than one loan from Mr Lender? Because you could look at making an affordability complaint. If you win one, the interest is removed from the loan and any default is removed from your credit record. See https://debtcamel.co.uk/payday-loan-refunds/ for more about these complaints and how to make one.
tori says
Hi Sara,
I had personal career development loan from 2015 I defaulted on payments and have recently paid it off with the assurance the default will be cleared by June 2021. after speaking to a mortgage broker I was told I couldn’t start my application until 6 months after because it is unlikely I will get any lenders willing to offer me a deal. I was hoping to secure a HTB equity loan or shared ownership depending on what I can obtain to be honest. My salary is 34k and I have 10k saved hoping to secure a place by October-ish. Just wanted to get a second opinion as I am quite discouraged. I really don’t want to go into renting.
Marcus says
Hi Sara,
I have recently paid off 6 defaulted accounts in full (last default date November 2018) and am saving up for a deposit with my partner. We have a combined income of £120k and are expecting to have a deposit of around £60,000 by April 2022 for a £300k property. Partner’s credit rating is perfect. At that point are we still likely to have to go through a ‘bad credit’ broker?
Thanks so much,
Marcus
Sara (Debt Camel) says
This is asking me to predict what will happen to the mortgage market in a years time…
You may well be ok, but do go through a “normal” broker, don’t just pick a lender and apply direct.
Sianyyy says
Hello,
Myself and my partner are looking to buy our first house together. He currently has a mortgage and has a excellent credit score our combined income is around £90k. We have a deposit of around £50k to put on a home of around £300kish. I have 3 defaults 1 which is now 4 years old and 2 registered in November 2019 all are satisfied on my file. I only have about £7k debt which is all maintained fully for the last year with no recent credit problems. Just want to know our chances of getting a mortgage? Thanks
Sara (Debt Camel) says
when were the defaults settled?
Sianyyy says
All settled 31/12/2020
Sara (Debt Camel) says
ah, that is very recent. You may well find it hard to get a mortgage at an OK rate, even with a decent 15% deposit and a low income multiple.
The “rule of thumb” pre-pandemic was that most highstreet lenders prefer defaults to be more than 3 years old and to have been settled for over a year. Things haven’t got easier.
I don’t know if it would be possible for your partner to get the house in his own name? Then add you in a few years when your problems are clearly in the past?