The process of getting a mortgage can be very stressful. A key part of the process is affordability checks, and this will involve delving into your financial past, present and future to help the lender determine if you are a suitable borrower. It can be daunting for first time buyers, particularly if they have had a spotty financial past.
Lenders look at many different factors to determine affordability, including your current income and evidence of your experience with money. Your credit score plays a key role in the decision making process.
A strong credit score shows that you are responsible with money and pay back your debts. On the other hand, a poor credit score can indicate you’ve struggled in the past. One thing that lenders are looking for on your credit report is evidence that you have missed payments or defaulted. This might be seen in the form of a CCJ or bankruptcy.
What is a CCJ?
A CCJ, or County Court Judgement, is an order to repay your debt. If you have missed payments to your creditors, they may apply for a CCJ to order you to pay back the amount. Going to the courts to reclaim the debt is typically a last resort that only happens when you are consistently late on payments. You will also have to pay additional court fees.
A CCJ will stay on your record for 6 years, whether you pay the debt back in full or not. Once the debt is repaid, your credit report can be updated to show that the debt has been “satisfied” or repaid. This will not remove it from your record, but it can make it easier to secure credit. An unsatisfied CCJ will often make it impossible to secure credit, or make the credit very expensive.
Can a CCJ stop you getting a mortgage?
You might be wondering if getting a mortgage with a CCJ is even possible. This often rests on the status of the CCJ. If the debt has not been repaid, you may struggle to secure credit. This is because lenders will see you as a riskier option than a borrower with no CCJ. In this instance, you may need to wait until the debt has been repaid and request that your credit score be updated.
In general, it is easier to secure a mortgage with a CCJ if the debt has been repaid. Once you have repaid the debt, you will have to apply to have this updated on your credit report. You should confirm that this change is reflected across all of the major credit reporting services before you move forward with your application.
Will it affect my rates?
Every mortgage application is different, so it’s difficult to say how a CCJ will impact your application. But it’s worth noting that a CCJ could impact the rates you are offered. Lenders need to manage their risk, and the best way to do this is to charge higher rates to higher-risk borrowers. Unfortunately, this can mean that your mortgage may be more expensive.
If you are approaching the end of the 6 years, it may be preferable to wait until the CCJ falls from your credit report. Remember that this will only happen if the debt has been repaid. An alternative is to work with a specialist lender. The best way to find a specialist mortgage provider is to work with a whole-of-market broker.
A mortgage broker can help you to understand the current market, which lenders are likely to offer preferable terms, and also offer advice on how to spruce up your application. There may be small steps you can take to improve your credit score that doesn’t involve waiting until your CCJ has been removed from your report.