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Anyway, I paid the debt collection company which O2 used. The default is marked settled on 8 June this year. We are hoping to move sometime after summer next year. Do you think we have any chance of a joint mortgage with this default being so recent? You are right in thinking that defaults on a credit file, which stay on it for six years, are one of the most common reasons for mainstream high-street lenders to refuse mortgage applications as they generally prefer to lend to people with squeaky clean credit records.
However, there are an increasing number of lenders which are happy to approve mortgage applicants with all sorts of defaults on their files. You are also right in thinking that the longer a default has been on your credit record the lower the impact it will have on your ability to obtain a mortgage. Lenders are most interested in your recent credit activity, so if you have a default, even if it was registered in the past couple of years, you should be able to find a mortgage.
The longer a default has been on your record, the less impact it is likely to have on your ability to obtain a competitively priced mortgage. It will stay on your credit record for six years from the date of the default, after which you can start to repair your credit rating. Most people assume that repaying bad debts is important when it comes to being approved for new borrowing but, strangely, this is not always the case in the mortgage world. Which tier you fall into will dictate which rate you are eligible for with some lenders.
Generally, the lenders that accept defaults are really only concerned with when they were registered, not the dates of settlement, so mortgages with unsatisfied defaults are just as likely to be approved so long as the dates of registration are within their criteria.. Generally, adverse credit mortgage lenders are tighter on their affordability calculation than some of the high street lenders.
If you have a clean credit history you can borrow up to 5x income, sometimes more in certain exceptional circumstances. If you have defaults your maximum borrowing may be limited as the lenders who take on higher risk for those with adverse credit like to minimise the risk elsewhere, hence they may require a higher deposit in the majority of cases. If the adverse credit issue is over 3 years old, it may be possible to borrow up to 4.
Generally, the more severe the adverse credit, the higher the risk is perceived to be and so lenders accepting a higher risk will limit loan to income to a greater degree. Some demand those in employment to have been in the same role for 12 months, some with the same employer for 12 months etc.
Maximum loans are also limited by other outgoings and financial commitments. Those with personal loan repayments of hundreds of pounds per month are less able to afford the new repayment than those on the same income with no other commitments which makes sense of course.
To learn more about how your income could affect your mortgage application, ask an advisor here. Although there is no fixed credit rating that lenders will require before offering a loan, keeping your credit as healthy as possible will only increase your chances of approval.
A key point to be aware of is that different lenders refer to different credit rating agencies CRAs when looking for credit reports. It can be a good idea to check your report with a variety of CRAs as your score can vary greatly between them and a lender may not cross-reference the information. You will also need to know exactly how many defaults you have and when these occurred.
Lenders will often have strict rules as to the level of defaults they will allow before declining a mortgage application. They can go through your report and highlight the areas that lenders will focus on as well as give you guidance on how you can improve your chances of approval for a commercial mortgage with a default. At The Mortgage Hut, we have a team of specialist brokers who understand the market inside out and know exactly where to turn to find the best deals on adverse credit mortgages with defaults.
With unlimited access to the market and exclusive rates that are not available on the high street, we can help you fully consider your options.
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