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Ask the Expert: I’ve found a Default on my credit file I wasn’t aware of, will it stop me getting a mortgage?
4 minute read
Sometimes people only find out about an issue on their credit file when they apply for a mortgage; but how do you handle it if it happens to you?
We recently received the following question via the website: “I am just going through the process of selling my property and looking at obtaining a new mortgage on a new property. I have just reviewed my personal credit file, which has a default of which I wasn’t aware of. In 2011–2014 I had a personal banking account which I stopped using in early 2014. I left the account with £0.00 balance but, unknown to me, I had banking charges from the previous month which sent me overdrawn and have now accrued additional charges. I have discussed this with my bank and cleared any arrears. This has left me with a really poor credit on Experian, which I would have thought is going to prevent me and my partner from getting a new mortgage. Can somebody please advise?”
First of all, the person asking the question began the mortgage process absolutely correctly – they got copies of their credit report. It is much better to find out about an issue like this by conducting your own checks, rather than learning about it as a result of having your application declined by a potential lender. It can also be advisable to request information from all three main UK credit reference agencies – Experian, Equifax and Callcredit – as they can each hold different information on you.
If you do find something you were unaware of in your report, you will deal with it differently depending on whether the information is inaccurate or accurate. If it is inaccurate, then write to the agency concerned to get it changed or removed. Check it has been done by requesting a fresh copy of your report afterwards. If it is accurate, then consider paying off any outstanding balance, if that is possible. A satisfied default is likely to be viewed more favourably than an unsatisfied one – but paying it off will not remove it from your record. It will still remain visible for six years from the date it was registered.
Paying it off, however, may not be the best course of action nor the best use of your funds so, it may be best to check with your mortgage adviser before making any decisions. If you are left with a less than perfect credit score, there are steps you can take to improve it, including:
• Double check that the personal details held by each agency are correct, and write to them to get them changed if they are not.
• Make sure you are registered on the electoral roll and that this shows on your credit file.
• Manage your credit cards – stay within the agreed limits, pay them on time and aim to reduce the outstanding balance.
• Cancel any lines of credit that you do not use; for example, store cards or a ‘just in case’ credit card.
For more suggestions as to how you can repair your credit rating, check out our guide here. Please remember, though, that having an imperfect credit score does not mean you will not be able to get a mortgage. While high street lenders tend to have a knee-jerk reaction to adverse credit events – default = no mortgage – a small default like this occurring three years ago does not have to mean the end of your house-purchasing plans. There are many lenders who will consider each case on its own merits and be much more helpful. (You might be asked to put down a slightly larger deposit, however, so be prepared for that.)
If you have any concerns about getting a mortgage with defaults or a less than perfect credit score, contact Just Mortgage Brokers. Our team of specialist mortgage brokers know exactly who to speak to out of our network of lenders to find a mortgage to suit the particular needs of each and every client, regardless of their credit history. Get in touch today for free initial advice and no-obligation quotes.