If you continually miss a payment on a debtor credit agreement, you will likely go into ‘default’. This means that your lender has decided that you are not going to pay this debt back, and has ended said agreement. Every lender will have different rules on how many debts their client can miss.
Your account will not go into default without warning. You will first receive a default notice, stating how much you owe at that time, as well as the terms you have broken, the date the payment should be made by and a clear explanation of the consequences if you do not comply. If you are able to pay this amount back, usually within two weeks, your account will carry on as normal and the lender will collect their debt repayments following your initial agreement. However, if you do not pay back the amount shown in the notice within the two-week period, your account will go into default and your lender can no longer collect payment from you. They can also demand the full outstanding balance (not just the overdue amount), start court action (CCJs), or start proceedings to repossess any assets within the agreement e.g. a car, house.
The default will stay on your credit report for six years, even if you manage to repay the debt. This can unfortunately result in future lenders being less willing to lend to you, as you will be perceived as a higher risk case. After six years the default will leave your credit report, whether you have paid the debt back or not.
Getting a mortgage with Defaults, Or had a offer accepted and need a mortgage with defaults and low credit score?
How have I got a default(s)? It could be debt/credit agreements you have had in the past that have gone bad e.g. you have missed a series of payments in the past and these could have ended up in default (normally 8 missed payments and the agreement has broken down between you and the lender) It could you have moved house, thought your debts were repaid and the lender has been writing to an old address with no luck of reaching you.
This could result in a defaulted debt and the lender will often not change their mind regarding removing it from your report. This will affect your credit score.
Can I get a mortgage with defaults?
The simple answer is yes it will depend on how recent the defaults are and how many there are. The lenders usually work from the date it is registered and this will then stay on your credit report for 6 years whether the default is satisfied or not. If it is a small default (under £500), satisfied (repaid), or is a telecommunication default, lenders will be more lenient and can in fact ignore it altogether.
Generally speaking, the older the default is the better e.g. if you have a small deposit of 5% or 10% and your issue does not fall into the above category you may have to wait 2/3 years from the registration date of the default before a lender will consider you.
If you have a larger deposit this opens up more options to you. For example, a 15% or more deposit can be considered by some lenders as long as the default is at least 3 months old.
Over the six-year period, lenders will pay less attention to the default. This means it is still possible to apply for a loan or a mortgage with a default on your credit report – though please note it is unlikely to be successful if the default has been on your credit report for 2 years or less. Although, depending on the type of mortgage or loan, (e.g. the size of the deposit) some lenders may accept when the applicant’s default is – at least – 3 months old. If the default is small (under £500) and has been repaid, then some lenders will ignore it. Lenders may also ignore communications defaults for example, a phone contract.ave your credit report, whether you have paid the debt back or not.
The way to work this out is by obtaining a credit report as it will show how many defaults you have and the dates they were registered. A View Finance mortgage broker will help you understand this if you are unsure.
Obtain a credit report
It is essential that our specialist mortgage advisors have access to your credit report. They need to see what any lender is going to see before approaching them to perform a credit search. Sometimes there are errors on a credit profile that will result in a decline from a lender. We would recommend using a website such as Check My File as they cross reference the 4 major credit agencies. This way our advisor can see why the score is low and work out which lenders will consider you.
What are my next steps?
Simple, once you have obtained a credit report make an enquiry.
View Finance have specialist mortgage advisors who know the ins and outs of obtaining a mortgage with defaults, knowing which lenders to approach and more importantly which lenders not to approach. We will guide you through the application process and ensure that you have the best chance possible of obtaining the best mortgage for your individual circumstances.