In This Article
What is a default?
A default appears on your credit file when you have failed to pay your lender for a certain amount of months in a row. The amount of time can vary, but a common time frame is 6 or 8 months. At this point, your creditor may feel that you cannot catch up with your payments and registers a default notice onto your credit file and may sell your debt to a debt collection company.
Defaults are considered more serious forms of adverse credit than arrears or spreading missed payments. This is due to the amount of time that no payment has been made.
Some lenders will not lend to applicants that have defaulted on their credit file, however, this is not the case with all lenders.
Defaults may also be viewed differently for each individual person based on the data of the default.
Some lenders may consider that a default to a telecommunications company for something such as a phone bill is less serious than to a bank for a loan. The balance of a default can also affect how a lender reviews the event and also whether it has been repaid or not.
If you have a default on your credit file, you should speak to a mortgage adviser with experience in adverse credit to find out what your options are.
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Can you get a default removed from your credit file?
When a creditor registers a default on your credit file, the data will remain there for 6 years. It is not possible to remove this data from your credit file unless the creditor agrees to do it.
This usually only happens when your creditor reviews the situation and feels that it should not have been put on the report in the first place.
For example, if a creditor feels that they made an error and you were not to know that there was an issue in collecting the payment, they may be able to help you.
This only happens when there has been a genuine error on the creditor’s part and they feel that the adverse data should not be held against you as a borrower.
If you believe that you have a default on your credit file that should not be there, the first thing to do is speak to the creditor to explain why this is the case to see if they can help you.
If the creditor agrees, they can talk with the credit reference agencies to correct the data held on you.
Which credit reference agency would you recommend when obtaining a credit file?
If you want to know more about your credit history by getting a credit file, Check My File is a good website.
The reason is, that Check My File will show you the full 6 years of credit data. Some credit reference agencies only show you two years’ worth on a free trial.
Check My File also shows you data from three major credit reference agencies which are Experian, Equifax and Transunion.
This will give you and your mortgage broker a lot of information, allowing your mortgage adviser to get a view that is similar to that of the lender.
You can go to Check My File to sign up for a free trial.
Do you need specialist lenders to get a mortgage with a default?
You do not always need specialist lenders if you have a default.
It would depend on the number of defaults that you have, when they took place, the amount of equity within your property, the default balance and more.
Depending on the answers and the lender’s overall criteria around adverse credit, it may still be possible to use a high street lender when there are defaults on your credit file.
If it is not possible to get a mortgage with a high street lender, there are adverse credit lenders that specialise in mortgages for people with bad credit. It may be that a premium is paid on the interest rate and fees due to the extra risk involved for the lender.
An experienced mortgage adviser would be able to assess your credit report to discuss with lenders the detail of the adverse events, along with your full situation. Lenders will likely need to know why the defaults took place to be comfortable that further adverse credit is not expected in the future.
Will paying back my default help me to get a mortgage?
It is always seen to be a positive thing when a default is satisfied by the applicant.
Whether or not it will make a difference from a lending point of view, will depend upon the lender’s criteria and possibly your credit score too.
Your credit score can improve if you pay back a default, but credit scoring is a complicated subject, so the algorithm of a lender’s system will often come into play.
Some lenders require defaults to be satisfied before the lender can consider you for a mortgage but there will also be many other factors affecting their lending decision.
It is never a negative thing to pay back to creditors money owed as this was the agreement in the first place. It may not necessarily mean that a certain lender will assist you immediately, but perhaps they can do so more quickly than if you did not pay back the default.
You should talk with a mortgage adviser to find out what your options will be if you are in a position to repay some of the adverse credit debt that is on your credit file.
Does a new default look worse than one that is a few years old?
If a period has passed since the default occurred, for example, 3 years, and no other adverse credit has taken place, this would usually be seen as more positive than adverse credit taking place today.
The reason for this is because of adverse credit taking place today, this usually means that you are not in a position to pay your creditors.
Therefore it can be hard to convince a new creditor to come on board if others are not being paid.
This is not to say you may not have options if you have a recent default, but you should talk to a mortgage adviser that can give you the advice that you need.
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Do you need a specialist mortgage broker to get a mortgage with a default?
If you have adverse credit on your credit file, make sure that you find a mortgage adviser with experience in bad credit so they can explain your options.
Not all mortgage brokers arrange applications with adverse credit so ask your broker what their background is and the types of applications that they help with to see if they are well placed to help you.
Your mortgage adviser would need a copy of your credit report to understand the full history of your credit background.
Once they have this and details of your full scenario including deposit, income, debts, dependants and more, they will be able to look for a lender accordingly.
Do lenders lend you less if you have a default?
How much a lender will lend you if you have a default will depend upon the lender itself.
If your default is several years old and you have a healthy amount of equity within your property, it may be that you can use a high street lender with a default not affecting the amount that is lent.
If you need to use a specialist lender, better income multiples may be different to the High Street. They will not necessarily be less and it will depend upon the lender’s full affordability calculation to decide what you can borrow.
To summarise, you may still be able to borrow the same amount that you could have borrowed without a default.
Conclusion
It can certainly be possible to get a mortgage if you have a default on your credit file. You may still qualify for a high street lender or if not, there are specialist lenders that arrange mortgages for people with bad credit.
The mortgage market is large and some mortgages are more complex than others, always look for a qualified and experienced mortgage adviser with a background in adverse credit mortgages.
If you would like I NEED ADVICE to match you with a mortgage broker that can give you the individual advice that you need, please complete the contact form. Read more about a mortgage success story regarding a couple with defaults.
They are experienced, which can boost your chances of being approved.
