Bad Credit Mortgage - Getting a Mortgage with a CCJ

20/02/2018
Getting a mortgage with a CCJ or any other black marks on your credit history can certainly be a challenge.

The good news is that it is possible to get a bad credit mortgage and you give yourself the best chance if you enlist the help of an independent mortgage broker with access to the whole of the market to steer you towards the most appropriate mortgage product and specialist lender for your needs.

Did You Know?

There are currently around 22 lenders who consider bad credit/CCJ mortgage applications
accurate as of December 2017

You face the following flipsides if you are successful in your application:
  • Higher than normal mortgage repayment interest rates, typically by 5% or more;
  • You may have to present a higher deposit, perhaps a minimum 20%;
  • You face early repayment charges (ERC) and which last for a longer period (e.g. 5 years rather than 2 before you can switch lenders without paying a large fee); and
  • There are likely to be penalties for missing any mortgage repayments.
This article looks at how you should approach getting a bad credit mortgage including:

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    1
    What research must you do to start with?
You should always start by securing your credit report, which you get from any of the 3 main providers (CallCredit, Equifax or Experian).

You'll find out your current credit score, which any prospective CCJ mortgage lender is likely to view, and the lower the score, the more challenges you'll face in your application.

You'll also find out about your black marks such as CCJs, defaults, debt management agreements and Individual Voluntary Agreements (IVAs) if applicable.

Key to this also is when these events happened because the golden rule in all matters of credit is "time is the greatest healer". Additionally you should always examine if there are any inaccuracies in the report such as old addresses and being linked to old partners/addresses with bad debts and fix these issues as soon as possible. Having bad personal credit is one thing but being saddled with someone else's, unnecessarily, is pointless.

You can also search the CCJ register if you specifically want to find out about CCJ information available about you. A search costs between £4 and £10.


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    2
    Which debts are worse than others when applying for bad credit mortgages?
In order, they are the following:

Repossessions and Bankruptcy

These are the 'top of the tree' in terms of creating difficulties for bad credit mortgage applications. A bankruptcy stays on your credit file for 7 or 11 years, depending on the type and a repossession stays on your file for 7 years. It's clear that a repossession is going to dramatically decrease your chances of getting a mortgage - simply, you've defaulted sufficiently on a previous mortgage loan to the extent that your property has had to be resold and possibly at a loss.

When you were made bankrupt or repossessed is the most important factor here; if it was in the last year, it's likely to be very difficult to get a mortgage, whereas if it was more than 6 years ago, it's likely to be much less important.

The size of the bankruptcy or repossession is the next most important factor (defaulting on payments for many properties is counted as more serious than just for one). 

Then the reason for bankruptcy or repossession is a factor as well as which lender repossessed you (Lloyd's group currently owns Lloyd's, Halifax and Birmingham Midshires, so if the latter repossessed you, the others in the group may take a dim view of a new application). 

Finally, where repossessions are concerned, legacy repayments are important: if you still owe money due to a previous repossession, you'll find it more difficult to get a new mortgage loan.

The above criteria have parallels regarding the treatment of all the other black credit marks; we particularly expand upon them in the next section, about CCJs.

How do you get a CCJ against you?

If you owe a creditor money, they can apply to a county court for a judgement (CCJ) against you in order for them to claim the debt from you.

Your creditor applies to a county court and you're sent a claim form, which sets out how much the creditor says you owe them. You're also sent an admission form which gives you a chance to put your side and a defence form to fill out if you choose to dispute the debt. You've 14 days to send this back otherwise you risk having a default judgement entered against you.

Once the claim form's been issued you've 5 options:
  • pay the debt, and any interest and court fees, in full;
  • ask to pay later or in instalments – you indicate this and how you'll look to pay by filling out the admission form; the court will then issue the CCJ
  • dispute the amount owed – you fill out and return the defence form.
  • claim against the creditor – this might occur if a builder's suing you for non-payment but you think the builder actually owes you for breaching a contract, for example. You have to fill out a counterclaim form and return it to the court. There may be a fee involved.
You don't have to attend your CCJ hearing. The court decides whether you owe money and, if it rules that you do, how you'll have to pay the debt, within its county court judgement.

If you don't pay, the creditor can return to court to enforce the judgement; at the very least you'll face further costs and this can end with bailiffs visiting you to seize your goods.

If you can't pay, you should ask the court to change the amount of your repayments and/or the repayment schedule and you might even ask for the repayments to be suspended.

CCJs stay on the publicly available Register of Judgments, Orders and Fines for 6 years and while any are on the register, you will find it much more difficult to get credit and will have a significantly reduced credit score. Any debt you do secure will be more expensive to service and subject to more stringent conditions.

How can you improve the situation?

  • If you pay off the debt within a month, the CCJ will be removed permanently from the register if you do).
  • Even if you can't pay off the CCJ within a month, if you manage to pay if off, it will be recorded as 'satisfied', which is significantly better in ongoing credit terms than 'unsatisfied', i.e. not paid off.
  • If you have a genuine reason to dispute the validity of the CCJ, you can apply to the court to set aside the judgement – if they do this, the CCJ is removed from the register.

County Court Judgements (CCJs)

County Court Judgements can stay on your credit file for up to 6 years, however their ability to affect your bad credit mortgage application differs according to these main criteria:
  • Date of the CCJ
This is the most important factor. A CCJ which is over 3 years old is much less of a black mark than one registered in the last 12 months. Equally, how long ago you satisfied a CCJ is also a factor.
  • Amount of the CCJ
This is less important than the time elapsed since you had a CCJ put on your file but it is linked to it. In other words, the amount may not be much of a factor if the CCJ is more than 3 years old, but if the CCJ was given in the previous 12 months, you may find that a lender will only lend if it's £1,000 or less and you wish to borrow an 85% loan to value.
  • How much deposit you are presenting
If you've a CCJ issued within the previous 12 months, you'll most likely need to have a deposit of 25% or more. Conversely, if you're going for a 5% mortgage, your CCJs will need to be at least 3 years old as a rule of thumb.
  • Number of CCJs
The more CCJs you have against you, the greater the deposit percentage you'll need, but once again, how long ago the CCJs were issued affects this: the older they are, the less they affect you.
  • CCJs satisfied or unsatisfied?
You are likely to have more options if you have satisfied, i.e. paid off, any CCJs registered against you.
  • Mortgage type
The more secured your mortgage is, the more options you have. Buy to Let mortgages are more difficult to obtain vis-a-vis bad credit and first time buyers may face further restrictions, for example any CCJ may need to be restricted to £1,000 or less.

Individual Voluntary Agreements (IVAs) and debt management agreements

Both of these are agreements which you take up if you're in severe debt and which allow you to pay a creditor a limited amount of a debt each month in return for no demands for full repayment, assuming you make the payments agreed as part of the agreement.

They have the slightest 'advantage' over CCJs, particularly unsatisfied CCJs, because at least you have taken steps to improve your debt situation.

IVAs can be long term, i.e. 5 or 6 years and are more serious in that they are recorded in a public register.

Both agreements act to create a series of defaults on your credit file and if you don't make an agreed monthly repayment for one, your credit rating takes a serious hit.

You can expect most lenders to require you to have finished making the payments on your agreement and, for a debt management plan, for you to have then made at least a year of on-time payments before they'll offer you a mortgage. In the case of an IVA, you may be required to wait 3 or 4 years after you've completed the plan before considering an application for a mortgage. Naturally, you'll have to be seen to be improving your credit history during this period.

Defaults

The worst type of defaults in this sphere are mortgage repayment defaults and for obvious reasons. Then, as before, how long ago the defaults were, how many defaults there were and how big they were are all factors in determining how much they will affect your ability to get a mortgage.


    3
    Why is it so worthwhile to consult an independent mortgage broker?
You can appreciate that with any serious debt issue on your credit file, the chances of securing a mortgage from normal high street lenders diminishes.

So you may have to apply to a specialist mortgage lender to help you. This narrows down the field, however your chances of success are likely to be greatly increased if you have someone on your side who knows which lenders can help you and which products are appropriate.

Just as importantly, an independent mortgage broker can stop you from making an application to a specialist lender which may be doomed to failure. Bearing in mind that being turned down for a specialist bad credit/CCJ mortgage will itself worsen your credit score and history, this is a very good thing!

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    4
    What are some sample parameters/conditions of bad credit mortgage lenders?
Roughly half of the specialist lenders we viewed would not accept a poor credit score for a bad credit mortgage application so it's always worth bearing this in mind before you make one: remember, time, above all, is the greatest healer.

You will struggle to get a mortgage if you have more than one CCJ in the last year. A handful of specialist lenders don't have an upper limit on the size of the CCJ/s and one lender imposed a maximum of 3 CCJs in the last 2 years. At the other end, one specialist lender has a maximum of £500 for CCJ amounts and you can't have had any in the previous year.

The majority of specialist lenders we examined will not accept applications from people with IVAs, but one would if the IVA was satisfied over 1 year before an application is made.

The majority of specialist lenders would not accept applications from people who had been made bankrupt, however a couple of them would if the bankruptcy had been discharged for more than 3 years.


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