A great many of clients who are looking for a mortgage are very surprised when their application is declined by the lender due to late or missed payments on existing credit arrangements. The payments in most cases are relatively small, but what clients do not understand is that late or missed payments, however small, will leave a footprint on their credit file. This will have a big impact on their credit score. There may of course be other issues which the client may not have appreciated would have a negative impact on their credit score. What clients may not be aware of is that any credit issues will stay on your credit file, satisfied or not, for six years which clients may have forgotten or ignored as it was historical. This again confirms the importance of accessing your credit file prior to making any application for a mortgage. An application for a mortgage will for most lenders leave a HARD footprint on your credit file which will have an automatic negative impact on the client’s credit score.
With this in mind, all clients should access their credit file prior to making any application for a mortgage in order that they are fully aware of how they maybe viewed by any lender.
What we do have in todays very complex mortgage marketplace is several very specialist lenders who want to lend to clients who do not have a perfect credit score. To take advantage of these specialist lenders we at A Mortgage 4 You need to have access to your credit file, either directly from yourself, or you allow us access to your file from a Credit Agency at our cost.
When we have viewed your credit file, we would then be able to advise you correctly on how any lender would view an application for a mortgage, and what terms maybe available to you if they would accept an application at this time.
There are a number a factors that will influence your credit score and how you are viewed by lenders. It could be as simple as the fact that you have not registered on the Electoral Roll, which does have a negative impact on your credit score.
When you are applying for a mortgage and have accepted the fact that you may not qualify for a “High Street mortgage” you should be aware of all the factors which may have a negative impact on your credit score.
The very positive attitude of our specialist lenders is excellent, as they set out very clearly what level of adverse credit they are prepared to accept and what terms would be available depending upon the level of adverse credit and when it was registered on your credit file, and whether it has been satisfied.
The principal factors that may impact on your credit score are:
1. Late or missed payments on existing credit arrangements
2. Credit Defaults
3. County Court Judgements (CCJ’s)
4. Bankruptcy / IVA
5. Arrangements to repay debts outside of agreed terms
6. Payday loans
7. Debt management arrangements
What clients must accept is that lending today is based on foreseeable risk therefore the more historical the credit problems are, the more flexible the lender will be. The date of any credit issue is critical as to how the lender would view the problem.
Any lender will of course take a far more positive attitude towards an application if the client has tried to satisfy some or all the outstanding credit issues, which would give any lender more confidence that the client may have had a one-off dip in credibility due to an unplanned change in lifestyle. This could have been a loss of employment, a breakdown of a relationship or health problems, to name just a few.
If we are looking at late or missed payments on existing credit, we would not want to see any late or missed payments on credit cards or loans within the last six-months. With regards to CCJs or defaults, depending upon the loan to value (i.e., the size of deposit that you have) most lenders would not want to see anything within the last 12 months, which may extend to 24 months, again depending upon the loan to value (lenders are always more flexible at a low loan to value) or the size of the problem.
With regards to Bankruptcy, we do have lenders who will consider an application the day after discharge, but you would be looking at a loan to value around 50% LTV. With most of our specialist lenders they would prefer that you have been discharged for at least 24 months, with the loan to value reflecting your current credit score.
In todays very complex mortgage market we have lenders who are regarded as main stream lenders but who are prepared to accept an element of adverse credit. What our experience has shown us is that these lenders will take a view on “historical adverse credit” providing that it has been satisfied. They will look for a minimum deposit of around 15%. In todays market the bigger deposit that you have available, the more flexible the lender will be in accepting historical adverse credit, and the more attractive the terms of the mortgage will be reflecting the perceived less risk.
What many clients ask us is why the High Street lenders seem to automatically decline clients who have had a Poor/Bad credit profile, despite what might appear to be very good and acceptable reasons for the adverse credit. What most clients do not appreciate is that the majority High Street lenders base their decision to lend, or not, on credit scoring which does not allow the underwriters any wriggle room in decision making.
With our specialist lenders, they make an informed decision based on what they see and how and why this may have occurred. This gives underwriters the responsibility of accessing the risk based on the credit profile and the loan to value (the lower the loan to value the more flexible the underwriters will be, and the terms would be more attractive).
When you come to A Mortgage 4 You, with our years of experience and expertise in this very complex market, and we are made aware of your credit position today, it puts us in a very unique and strong position to not just to advise you of what we can offer you today, but when your credit profile would allow us to approach certain lenders and achieve more attractive terms providing we “tidy up“ your credit file and come back to the lender in a given time frame. We have the very strong advantage of being able to talk to and discuss any aspect of your application, that may not appear to fit the underwriting criteria, to see how this may be viewed if an application is made, and to gather any other information which the underwriter feels may help them to make an informed decision.