Can You Get a Mortgage with Defaults on Your Credit Report?

If you’ve missed payments on a financial arrangement, the lender or company may decide to close your account and place it in default. Defaults can have a significant impact on your credit report, affecting your ability to obtain Mortgages for bad credit in the future.

However, it is possible to get a mortgage with defaults on your credit report. In this article, we’ll explore what a default is, how to check if you have any, and what lenders consider when making their decision.

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What is a Default?

A default occurs when you’ve missed payments to a lender or a company for a financial arrangement you have in place. This usually happens within three to six months of missed payments, although the exact amount of time depends on the company. Once a company has decided to close your account due to missed payments, they’ll put it into default. It’s important to avoid this at all costs because defaults remain on your credit report for six years from the registration date, and this can impact your ability to obtain finance in the future.

How to Find Out if You Have Defaults

To find out if you have defaults, you need to check your credit report. There are three credit reporting agencies in the UK: Experian, Equifax, and TransUnion. You should check all three reports because they may contain different information. The easiest and quickest way to check all three reports is to use a company called CheckMyFile, which produces a multi-agency report. This report contains all the required information, and you can see all the agencies in one go. Don’t use the free credit report options, as they’re not always accurate and don’t contain everything you need.

What Lenders Look for When You Have Defaults

Lenders will assess your credit report when deciding whether to grant you a mortgage. When you have defaults on your credit report, the following factors are essential to consider:

1. The Age of the Defaults: The older the default, the less impact it will have on your credit report.
2. The Number of Defaults: The more defaults you have, the harder it will be to get a mortgage.
3. The Severity of the Defaults: The more significant the defaults, the harder it will be to get a mortgage. For example, a default on a mortgage is more severe than a default on a credit card.
4. The Cause of the Defaults: Lenders will look at why you have defaults on your credit report. For example, if you had a default due to an unexpected event, such as losing your job, it may be viewed more favorably than if you had a default due to irresponsible spending.
5. Your Current Financial Situation: Lenders will look at your current financial situation, including your income, employment status, and any outstanding debts.

How Defaults Affect the Amount of Deposit Required

Defaults can affect the amount of deposit required when you’re applying for a mortgage. Most lenders require a minimum of 5% deposit, but this can vary depending on your circumstances. If you have defaults on your credit report, you may need to provide a more substantial deposit to secure a mortgage. This is because lenders see you as a higher risk, and a larger deposit reduces their risk.

If you’re seeking expert mortgage advice in Loughborough, your search ends at Loughborough Mortgages! Our team of skilled brokers can offer valuable guidance throughout the mortgage process, ensuring you get the best possible deal. Contact us now for a complimentary consultation and begin your journey towards homeownership in Loughborough.

KEY TAKEAWAYS

• Defaults on your credit report can impact your ability to obtain Mortgages for bad credit in the future.
• Checking your credit report is crucial to find out if you have defaults, which stay on your credit report for six years from the registration date.
• Lenders consider the age, number, severity, cause of the defaults, and your current financial situation when assessing your mortgage application.
• Defaults can affect the amount of deposit required, and you may need to provide a larger deposit to reduce the lender’s risk.
• To increase your chances of getting a mortgage, take steps to address the issue, such as paying off the debt and speaking to the company to arrange a payment plan.