In the enchanted world of credit, where ancient scrolls whisper secrets and your financial history weaves a tale, even the bravest of seekers may face challenges.
Payday Loans, late or missed payments, Defaults, County Court Judgments (CCJs), Individual Voluntary Arrangements (IVAs) and Bankruptcy can create obstacles on your path to securing a mortgage.
Fear not! You can still achieve your homeownership dreams with less-than-perfect credit by exploring your options and taking steps to enhance your financial health
Understanding Credit Issues
Payday Loans
Beware the allure of payday loans, for they can be a double-edged sword. These short-term, high-interest loans may seem like a quick fix in times of need, but they often lead to a cycle of debt that can completely maul your credit history. Exercise caution, for the temporary relief they provide will come at a steep price, and most likely cast long shadows over your financial future.
Not to be confused with short term 0% loans, like Klarna, that are used for purchase and paid over a 3-month period, these are generally fine and will not tarnish your credit’s reputation.
Payment History
Your credit history tells a tale of financial responsibility. Late or missed payments can cast shadows on your credit score, and lenders tend to watch out for these.
Defaults
A default occurs if the lender decides to close your account because you’ve missed payments. This might happen to an account you have with a mobile phone company, bank or utility supplier (e.g. gas, electric and water).
A default can occur regardless of how much money you owe, whether it’s a few pounds or a few thousand. It usually happens if you’ve been missing payments over the course of three to six months, but this can vary depending on the lender’s terms. So, it’s important to keep track of when you are due to be charged and set money aside for it. These will show on your credit profile for six years and then magically disappear whether settled or not.
CCJs (County Court Judgments)
CCJs are court orders that arise when people fail to repay debts. Having a CCJ can alter your fate, limiting your mortgage options. Fear not though; there are still pathways to explore. Depending on the amount of the CCJ, the date it was issued, and if the debt is settled or not. These will also show on your credit profile for six years before magically disappearing, settled or otherwise.
IVAs (Individual Voluntary Arrangements)
IVAs are formal agreements between individuals and creditors (agreed via a court) to repay debts over a specified time frame. While IVAs can help to manage debt, tread carefully; they stick with you for a very long time (can be up to 12 years!) and leave a sizable dent on your creditworthiness. However, there are some slim paths towards acquiring a mortgage should you currently be in an IVA.
Bankruptcy
Like a phoenix rising from the ashes—bankruptcy offers a fresh start. Yet, its presence lingers on your credit report for several years and may pose challenges when applying for a mortgage. Fear not the lingering flames; they shall fade with time, revealing new paths, with possibilities after being discharged from day 1.
Options for Individuals with Credit Issues:
Improve Your Credit Score
Take steps to improve your credit score by paying bills on time, vanquish outstanding debts, and disputing any inaccuracies on your credit report.
Build a Larger Deposit
By amassing a larger deposit, you wield a powerful talisman—a sign of financial stability. Lenders shall nod approvingly, their risk diminished.
Seek Specialist Lenders
Specialist lenders hold keys to hidden doors. They craft bespoke mortgage spells for those with adverse credit histories. Beware, they may come with higher interest rates and fees.
Provide Explanation
When you approach the sacred council of potential lenders, be prepared to explain the circumstances behind your credit issues. Demonstrating accountability and providing evidence of financial recovery will help strengthen your application.
Work with Us
Enlist the help of Endeavour Magic Mortgages; our scrolls bear witness to countless journeys alongside people with existing credit issues. We can help you navigate the mortgage market, identify suitable lenders, and negotiate terms on your behalf.
F.A.Q.
Frequently Asked Questions
“Can I get a mortgage with a CCJ or bankruptcy on my credit report?”
Yes, the gates of mortgage approval remain ajar, even if shadowy CCJs or bankruptcy clouds obstruct your credit. Specialist lenders may consider your application, but brace yourself for higher interest rates, product fees and stricter eligibility criteria.
“How long do credit issues like CCJs or bankruptcy stay on my credit report?”
The length of time that credit issues remain on your credit report varies depending on the type of issue. CCJs typically remain on your credit report for six years, while bankruptcy can linger for six to ten years, depending on the type.
Like a shimmering gemstone, a larger deposit radiates financial stability, catching the eyes of lenders and improving your chances of approval, especially if you have credit issues. From the lender’s point of view, they want to mitigate their risk and offset the impact of adverse credit.
“Should I wait until my credit issues are resolved before applying for a mortgage?”
It depends on your individual circumstances. While improving your credit score and resolving credit issues can increase your chances of securing a mortgage, waiting may not always be necessary. Specialist lenders, versed in mystical exceptions, offer pathways for those with ongoing credit tribulations.
“How can I demonstrate financial stability despite credit issues?”
Demonstrating financial stability involves showcasing responsible financial behaviour, such as maintaining stable employment, managing existing debts effectively, and saving for a larger deposit. The evidence of your positive financial habits shall fortify your mortgage quest.
By understanding the enchanted nuances of your credit and taking these magical steps, you can overcome obstacles and move confidently towards securing your dream home.
For more personalised advice and to discover which options best suit your needs, feel free to contact us. Your enchanted path to homeownership awaits!
