Top credit file definitions

There are a number of factors that could restrict, or even prevent, you from obtaining credit, based on your credit history or current financial behaviour.

Firstly, missed payments and arrears. This would be where you have been late, or not made payments at all, on current or historic credit arrangements. This could be a mortgage, credit card, loan, HP or even a mobile phone contract or store card.

If you missed the odd payment some years ago, the majority of mortgage lenders would still move forward.

If you have missed multiple payments, either on one or across several arrangements, this would make it much more difficult; especially if they are current or even within the last twelve months.

Again, every lender is different, and some will be more flexible than others.

Another credit issue is known as ‘arrangements’. This is where you have had the foresight to realise you are going to struggle to make repayments at the expected level and you have contacted the bank or building society and agreed to defer payment or reduce monthly repayments. This can also show as missed payments or arrears from the original credit agreement.

Again, these are not looked upon favourably by mortgage lenders however, if in the past, they may still lend you what you want.

Next, are defaults. This is where you have significantly fallen behind on repayment of a debt. So much so that a credit provider has needed to write to you and, also, restrict spending.

This would typically be where three to six months or more have seen missed or late payments.

It is unlikely that a mortgage lender would offer you a mortgage unless defaults have been settled; for example, paid off completely and more than a year ago – and with some lenders, longer.

Next are CCJs. This stands for County Court Judgements and is the next level of debt following on from the default.

This means that despite writing and contacting you and restricting your spending, you still have not paid an outstanding debt. So, the lender has chosen to take legal action to try and get their money back.

Typically, these would need to have been settled and paid off for at least 2 to 3 years before a bank or building society would offer you a mortgage.

IVAs, otherwise known as Individual Voluntary Arrangements, are where you have accepted you cannot repay the debt and have chosen to restrict your own credit legally, for a period of time, in order to repay outstanding debts.

Similarly, bankruptcy is where this has been enforced upon you by a creditor.

In both cases, a mortgage lender will not lend you any money until these have been completely settled for a period of usually 3 to 6 years or more.

If you need any further advice, don’t hesitate to give us a call.

August 2019