Adverse Credit Mortgages

You may have applied for a mortgage recently only to be told that your credit history was not acceptable to the lender. To make matters worse, the bearer of this information may also explain that they are unable to tell you what is the problem.

Most lenders use a system of credit scoring to assess potential clients. This system has proved statistically reliable for the lenders but does not take into account individual circumstances. Fortunately there are still some lenders who will look at applications individually

Allowing that you satisfy the lender's requirements with respect to your income and employment, there are two areas which may need examination

• Proof of residence: The lender will need to be able to establish where you have been living for the past 3 years. If you are not on the electoral roll, or do not appear on a credit file, then they will not be able to assess your credit worthiness.

Action: You cannot do much about previous addresses, but you can ensure that you are on the electoral roll now.

To add your name to the electoral roll at your current address contact your local authority and ask for a registration form. To register you need to be:

• A British or other Commonwealth, Irish, or European citizen
• 18 years of age or over (although if you are soon to be 18 you may be eligible to register)

The electoral roll is updated on a monthly basis

You may need to provide proof of where you were living, for example bank statements, utility bills, driving license etc. If you are unable to provide sufficient proof then another avenue might be a 'non status' mortgage.

• Credit history: Poor credit will obviously count against you, if you have no history at all then that will also go against you, as you have no credit history by which to be judged. If you have, or have had loans in the past and the payments have been paid on time then this is positive proof of your ability to service a credit agreement, and will be looked on favourably.

Action: If you do not know the nature of the credit problem then you should apply to the credit reference agencies for a copy of your file. You can now obtain a copy of your credit file online. Please click on the agency names below.

Experian, PO Box 8000, Nottingham NG1 5GX required: cheque for £2.00 payable to Experian full name, present address, previous addresses for last 3 years

Equifax, PO Box 1140, Bradford BD1 5US required: cheque for £2.00 payable to Equifax full name, present address, previous addresses for last 3 years

On-line applications can be dealt with instantly. Postal or telephone applications may take up to 7 days.

Be aware that your credit file may include anyone else living at the addresses given. If someone else living at your address has had problems then you may be 'tarred with the same brush'. If you think this is the case then you should request a copy of your credit file, you can then request that your files be separated providing that there is no financial connection between you.

If you know the nature of your credit impairment then contact us over the choice of lender

The following is a list of credit impairments and the likely options open.

Arrears

Arrears with a current or previous mortgage are taken very seriously by mortgage lenders. The more recent the arrears the more difficult the mortgage is to place. Mortgage lenders are interested in the following:

• How long ago did the arrears occur.

• How many months were the payments behind

• Over how many months was the mortgage behind

If you have had arrears with mortgage payments, loan payments or rent arrears then a 100% mortgage will probably not be available to you. A 95% loan to value mortgage may be available depending on the above factors.

If you have current arrears then it will be possible to remortgage however the interest rates offered will be above high street rates and will reflect the increased credit risk 

Defaults

Default notices are issued to holders of credit agreements where a sequence of payments have been missed. They are regarded as quite serious and will prevent the holder from achieving a 100% mortgage.

2 or 3 defaults up to £5000 will require a minimum 5% deposit. As with all credit impairments the more recent the default occurred the more serious it is taken.

County Court Judgments (CCJ)

Unless the CCJ is small (less than £250) and over 1 year old a 100% mortgage is unlikely to be granted. 

3 CCJ's up to £5000 will require a minimum 5% deposit.

CCJ's up to £10000 will require a minimum 10% deposit.

It is not always necessary to settle a CCJ prior to taking out a mortgage although it will obviously help if you have done so.

Bankruptcy

If you have been made bankrupt, you will not be permitted to take out any credit until you have been discharged. If your partner has been bankrupt, it is likely to affect your mortgage application unless you can show that there is no financial connection between the two of you.

Immediately after discharge, mortgages will be available, we can arrange a mortgage with a minimum deposit of 5%.

Action

Rejection by one mortgage lender does not mean that a mortgage is unavailable, there are several  lenders who specialize in this market. Some do not lend direct to the public but through authorized intermediaries, such as ourselves.

To enable us to properly source your enquiry you should complete our fact find giving us full information about the nature of the credit problem. In particular:

• The date when the arrears/default/CCJ occurred

• The amounts involved or monthly arrears

• Whether cleared or not and when cleared

• The reason for the credit problem

The information provided above provides a guide to lending criteria. The offer of a mortgage depends on your circumstances as a whole. You should complete the fact find for an appraisal of your situation.