A reader asked:
My husband is now 33. When he was 18-20 he was a silly boy and got offered credit cards and loans from everywhere and he took them. Unfortunately he was ran up a £7K debt that he couldn’t afford to pay back.
He’s obviously learned from his mistakes and has a good job, good income, no further debts or credit loans. Will his debt from his youth still affect him? His credit score is good and I think the old debt was defaulted. I’m scared to apply for a mortgage with him in case we get rejected :(
You don’t say so specifically, but it sounds as though your husband hasn’t been paying anything to these debt, not even a token £1 a month for a very long while, well over six years and possibly more than ten years. I’m going to assume that is right…
I’m always reluctant to suggest that old debts won’t be a problem, but in that case, I think you are pretty safe!
Check your credit files and for CCJs
You’ve checked his credit score, but I think you should look at his detailed credit records with all three Credit Reference Agencies. See What is the best way to check your credit file for details on how to do this.
You are looking for any trace of these old debts, including any CCJs. If one of the debts is still there, then it must either not have been defaulted or the date must be way too late. See How to get a Default Date added or corrected which describes what to do if this has happened. I doubt this is going to be a problem, but it’s good to make sure.
To be extra careful, also look at his old addresses and make sure that there is no sign of a CCJ registered against him at any of those, see How to find out if you have a CCJ. But in his case these debts are so very old that even if there had been a CCJ it may well have disappeared from the files.
Also check your credit records as well as his. Every year hundreds of people find a mortgage application is refused because there is something on their credit record they didn’t expect. A £20 default from a mobile bill from several years ago. A stranger’s parking ticket that has nothing to do with you. These are horror stories of course, but better safe than sorry…
Statute barred debt
If a debt becomes statute barred, you don’t have to pay it. Consumer debts such as credit cards and loans become “statute barred” when it has been more than six years since a payment was missed. See Questions about Statute Barred debt for more information about this and the complications, eg with overdrafts.
If there is no trace of these old debts or CCJs and he hasn’t made payments to them in the last six years, these old debts are going to be statute barred. If one ever does surface – which is highly unlikely – he doesn’t have to pay it.
No-one can see these debts, except…
These debts have effectively vanished. There is only one exception here and it matters to you. The lender he defaulted to may still have a record on their internal systems… So you should avoid applying for a mortgage to one of these lenders.
Improving his credit record
You say he hasn’t had any credit cards or loans since his problems. If it’s going to be a while before you apply for a mortgage – more than six months – it may be worth him getting a credit card, using it every month and repaying it in full each month. That way he doesn’t pay any interest and it will help improve his credit score. Mortgage lenders prefer to lend to people who are good at managing credit!
But if you are just about to apply for a mortgage, he shouldn’t make any credit application, as new credit always makes your credit score a bit worse for the first few months.
What if the debts weren’t so old?
For other people reading this, if your “old debts” weren’t as old as this, you have to be extra careful about checking your credit records and looking for CCJs at previous addresses. You can’t assume if you are just past the 6 years point it’s safe – overdrafts can be especially difficult.
Nor can you assume that debts don’t matter if they aren’t on your credit record – this doesn’t mean they are statute barred. If you have been waiting for your credit record to “clean up” because you are in a Debt Management Plan, then read Can I get a mortgage in a DMP? because it’s not that simple.
If you aren’t sure, it’s a good idea to discuss your situation with a mortgage broker, rather than apply directly to a high street lender and then get rejected.