If you have failed to pay off a debt it is seen as a default. It will be put on your credit file with the amount you failed to pay. If you are hoping to get a mortgage you don’t need to worry. Find a good mortgage broker who specialises in mortgage default.
There are mortgage lenders, typically on the High Street that won’t give you money if you don’t have a good credit score with no defaults. But, there are other lenders that are willing to take the risk.
Your Credit Report
One of the first things you need to do is check your credit file. You might have a default you didn’t know about, or an old default may have now been erased. Check your file with the three main credit agencies in the UK. They are Experian, Callcredit and Equifax.
You can get a copy of your report and your credit score free of charge, Look at each credit agency’s website for details.
Read through your report. It will give information about your credit transactions over a number of years. If you have missed payments or made late payments on credit cards or loans this will lower your credit score. Have a look at your default. See when it was registered and how much you owed.
What a Lender Wants
A lender will look at the date the default was registered. Obviously, it is better for it to be some years ago, rather than within the last 12 months. The lender will also look at the type of default you have. For example, you may have defaulted on a mobile phone payment or a mail order account.
This will be looked upon as less severe than say a personal loan default. A mortgage default is one of the most serious defaults.
Your likelihood of getting a default mortgage will also depend on the amount of deposit you have to put down. If you are looking for a 95% mortgage, then a lender will expect you to have no defaults in the last 3 years. On the other hand, if you are looking for an 85% mortgage you may well receive an offer even though your default is less than a year old.
Take your credit report to a mortgage broker who has experience with default mortgages. They can go through it and then find a lender that fits your criteria.