Mortgages with Adverse Credit

Mortgage lenders will assess mortgage applications by looking at the applicants credit history.

Mortgage lenders believe that if your credit history has been good then you are likely to be a low risk customer.

The method they use for assessing applicants is called credit scoring. This an automated system which looks at credit history, employment, age, occupation, marital status. The factors are allocated a score and depending on your score you may be accepted for a mortgage or declined

Some of these factors will be out of your control. However the main influencing factor will be your credit history.

You can view your credit history by contacting the credit reference agencies. The main credit reference agencies are Equifax and Experian. You can request a copy of your credit file and it should be instantly available. There may be a fee to pay for these reports. The credit reports from the agencies should be identical but occasionally differences will appear

What are the things to look for?

Address history - The lender must be able to positively identify you over the last 3 years. Are you on the electoral roll?

Credit history - You might be surprised to see mobile phone contracts listed. Any credit agreement may be here including mortgages, secured loans, car loans, phone contracts and Utility provider contracts, personal loans, hire purchase agreements, credit cards and store cards.

Your payment history is the main factor.

Mortgage lenders will look for evidence of borrowing in the past. So if you have held a recent mortgage and your mortgage payments have been made on time then this will help your credit score.

How much credit do you have?

Too little credit may also be a problem. The lender needs to be confident about positively identifying you and establishing that you will meet your credit obligations. If you have never held any credit in the past there will not be any evidence to say whether you will be a good credit risk or not

Too much credit can also be difficult. If you have a lot of credit - relative to your income - then this will also ring alarm bells. There can be situations where you are spending more than you are earning. This is a situation that lenders will want to avoid

Mortgages with CCJ or defaults

When a credit payment is missed it will show as a missed payment. If 3 or more are missed the creditor may issue a notice of default.

A default is evidence of a breakdown of the credit agreement. There may be all sorts of reasons why the default occurred. Unfortunately lenders, do not have the time to judge whether a default is fair or not. You may find the only recourse is to try and get the default removed. This will not be easy and may only be possible if you can show that the creditor did not inform you of the outstanding money and you were unaware of the debt .

If you miss some payments in a credit agreement and an arrangement cannot be reached with the creditor, then the creditor may escalate matters by taking court action. A successful prosecution will lead to a county court judgement (CCJ) being issued.

County Court Judgements can be removed from the public records if they are paid within one month of the judgement. You will need to apply to the County Court that issued the judgment

Far better to avoid any adverse credit in the first place than have to deal with it later on