A default appears on your credit record when you fail to repay debt within a specified amount of time.
You’ll receive a warning and a final opportunity to repay the debt before a default is registered.
As such, it can alarm mortgage lenders when an applicant has a default on their credit file, as it makes the individual look financially reckless.
However, it is still possible to be approved for a mortgage if you have a default on your credit file.
In this scenario, a lender’s decision will be based on a number of factors surrounding the default, including when and how it was issued.
Some lenders will flat-out refuse your mortgage application if you have any type of recent default on your account.
However, your credit report will show what type of account was defaulted on, and some lenders will consider this before making a decision on your eligibility. Mobile phone or credit card defaults, for example, aren’t always viewed as being as severe as a mortgage or secured loan default.
It is possible to leave a 200-word note on your default, explaining why it occurred. Some lenders will consider this when assessing your eligibility.
A default remains on your credit report for six years, but lenders place less weight on older transactions.
If a default is too recent, you may be refused for a mortgage regardless of an otherwise fantastic credit history. If this is the case, a lender will state it on its minimum eligibility criteria. A document outlining this criteria is usually available on the lender’s website.
Some will refuse applicants who have had any form of default in the past two years. Yet, other lenders are less fazed by defaults and some actually specialise in finding suitable deals for applicants who have them.
These specialists tend to offer higher rates than traditional lenders though.
As a general rule, the more money you’re looking to borrow, the better the credit score you will need.
However, the maximum amount of money you can borrow will depend on each individual lender’s criteria.
A default will remain on your credit record for six years.
However, when the debt is settled, it will switch from an unsatisfied default to a satisfied default. This looks more promising to lenders, especially if you were able to pay off what you owed quickly.
Even if you appear to meet a lender’s minimum criteria, there’s no guaranteed way of knowing whether you’ll be approved for a mortgage with a default.
For your best shot at finding a great deal from a lender that will approve you, enlist the help of a professional mortgage adviser. A mortgage adviser uses expert knowledge of the mortgage market to point you towards the most suitable product.
It’s especially recommended for applicants with credit problems to work with mortgage advisers, as failed mortgage applications will harm their credit score even further.
When you remortgage, your financial circumstances are freshly considered.
If you’ve suffered a default since being approved for your original mortgage, this could harm your chances of finding a good remortgage deal.
If you’d suffered a default before being approved for your original mortgage, you should find it easier to find a great remortgage deal, all other things considered. This is because your default would now be older, and therefore have less bearing on the lender’s assessment of your finances.
Here are some tips to help ensure you’re in the best shape to be approved before submitting your mortgage application.
| Response | |
|---|---|
| Somewhat agree | 31.69% |
| Neither agree nor disagree | 25.1% |
| Somewhat disagree | 16.18% |
| Strongly disagree | 15.7% |
| Strongly agree | 11.34% |
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