Adverse Credit Mortgages
In my guide for first time buyers, I advise that you should nurture your credit rating like a delicate bloom, because any late payments or defaults will stay on record for 6 years and will make it much harder and more expensive to get a mortgage.
This advice is equally relevant for anyone needing to arrange or rearrange a mortgage.
It is very important to have direct debit arrangements in place for all of your finance agreements, and credit cards should have a direct debit in place at least for the minimum payment each month so that they will not show up as being in arrears if you happen to be late with the main payment one month due to unexpected circumstances.
And don't set up any credit agreements in your own name unless you have personal control over the repayments.
HOW CAN ADVERSE CREDIT AFFECT YOU?
Many mortgage lenders, and especially the well-known "High Street Lenders" have an absolute rule that they will not lend to anyone with adverse credit on record of any sort.
Missed mortgage payments are the worst, and will prevent you from getting a new mortgage deal anywhere, with the best you can hope for being a very expensive mortgage after 12 months of clean credit.
County court judgements and defaults are the next most damaging, but even late payments on unsecured debts such as credit cards or hire purchase agreements can cause a real problem when trying to source a mortgage.
It is all too easy to get a black mark on your credit history that could blow your chances for a mortgage. One wealthy client recently cancelled the direct debit a week early on the hire purchase for his Range Rover, and even though the whole account was settled when he changed the vehicle a few days later, he ended up with a missed payment on record, so don't be too aggressive about cancelling direct debits!
It is a good idea to keep track of your credit record. Free services that simply give you a credit score are not particularly helpful because the devil is in the detail and it is the detail that a lender will look at when you are applying for a mortgage.
If you can afford to do so, open an account with Experian or Equifax, which will enable you to download detailed credit reports whenever you wish, or look for one of the services that does give detailed reports free of charge.
HOW CAN STRICTLY MORTGAGES HELP WITH ADVERSE CREDIT SITUATIONS?
Once adverse credit has been recorded it is extremely difficult to shift, but there are occasions when we can persuade a finance company to remove an entry as we did with the Range Rover case referred to above.
Records of late payments, CCJ's, defaults and so on normally stay on record for 6 years from the date they were incurred, but we do have access to lenders that will take a more lenient view on some of these issues as time passes although you will have to be prepared to pay a slightly higher interest rate.
If you have adverse credit on record that is coming up to 6 years old, it might be worth deferring a mortgage application for a short while because it will disappear from view after that time. Don't let an unprofessional adviser put you into an unnecessarily expensive mortgage deal if you are in that situation.
And finally, don't panic if you were a few days late making a payment because it may not have been recorded as late. This is where it is good to have access to your credit record.
When preparing for a mortgage application we often request a detailed Experian report from our clients, partly to ensure that there is no adverse credit on record but also because it provides very detailed information about all your credit accounts that we will need to supply to a mortgage lender on application.
And if you do have some adverse credit on record and need to apply for a mortgage don't despair, we can usually find a solution for you. Give as much detail as you can on the Enquiry form below and we will do the necessary research on your behalf.