Getting a mortgage with a default
ith a default on your credit file, there’s no doubt that getting a mortgage can be a challenge.
In the past few years, high-street banks and building societies have tightened their lending criteria and increasingly will only lend to mortgage applicants with a clean credit history and high credit score.
However, while a poor credit rating can present barriers to those looking to buy a new home or remortgage, there are solutions available.
Defaults Or Missed Payments Can Happen Without You Realising
When people think about credit defaults, they often consider such credit commitments as mortgages or personal loans, credit or store cards, car repayments or other types of retail credit.
However, it’s also possible to default on other common commitments such as household utility bills or mobile phone contracts – and because we often don’t think of these as “credit”, it’s easy to underestimate the impact that missed or late payments can have on your credit record.
The good news is that there are lenders out there who can help applicants with defaults on their credit history. Most of these are smaller lenders who you won’t typically find on the high street, and many of them specialise in adverse credit lending.
When looking for a mortgage, it is important to be realistic about what to expect. If you have a poor credit history you will usually find mortgage interest rates higher, as well as arrangement fees, and there may be restrictions on both income multiples and how much you can borrow compared to the property value.
Whilst a one-off missed payment 3 years ago is unlikely to cause lenders too many concerns, several missed payments or defaults will. Particularly if they are recent.
Satisfied And Unsatisfied Defaults
Mortgage providers also take into account whether the defaults have been satisfied. In other words whether you have settled your debts.
If you are aware that you have had credit problems in the past, the first step in applying for a mortgage is to obtain a copy of your credit records to check exactly where you stand. You may also want to check out our handy guide on how to improve your credit score.
There are three credit reference agencies in the UK – Experian Credit Expert, Equifax and Call Credit – and it’s a good idea to obtain a credit report from each of them, as different lenders refer to different agencies when assessing credit applications.
Each of the credit agencies offers a variety of subscription-based services with free trials including credit scoring and monitoring, identity theft protection and so on.
However you can obtain your credit report from each for a simple statutory payment of £2, without having to subscribe to any other service.
Once you have received your credit record, check it for accuracy against your own records. Credit report errors are rare, but not unknown, and you have the right to have them corrected.
To discuss getting a mortgage with a default, tell us about your situation by quickly filling out our 60 second application form. One of the adverse credit mortgage specialists we work with will be in touch to advise you of your options and provide a free mortgage quote, with absolutely no-obligation.