Count court judgements, defaults explained and effect on mortgage applications

 

Count court judgements, defaults explained and effect on mortgage applications

When a lender assesses an application, one of the main factors they look at second to only income and affordability is credit status and risk. Credit reports are good for gauging how a potential applicant might behave on how they will pay the mortgage ongoing. Clients that apply who have kept a spotless credit record will endeavour to protect their spotless credit report by making sure payments are made on time every month, so this used with assessment  off income and affordability to underwrite the case so that the lending is as secure as possible .

From analysis of credit report’s over the years since they have existed its has been found that  clients that have poor credit ( that has not been caused by s sudden major event in their life) have got used to paying their credit poorly and might do so for any  new credit taken out in the future .

 For this reason many lenders especially standard high street lender will turn down applications with adverse credit showing on the applicant’s credit report. This has given rise to the formation of niche lenders that will lend to clients with varying degrees of adverse credit and this is usually reflected in the interest rate depending on how severe the adverse credit is, it will also have an effect on how much the lender will lend towards the property, the heavier the adverse the more deposit will be needed to secure the mortgage.

Lenders take the view that the more money the applicant has in the property that is from their own funds, the more chance they will pay the mortgage as they will have more of their own money at risk if the property was ever repossessed. A higher interest rate will cover the cost of any bad debt that is estimated to accrue from lending to applicants with adverse credit.

County court judgments

A County Court judgment (CCJ) is a court order which tells you to pay money you owe to a debt. It’s one of the actions your creditors can take as part of the debt collection process.

If you receive a county court claim form you have just over two weeks to respond. It’s very important to respond in the timeframe given, as if you don’t, the court could order you to pay the debt back at a rate you can’t afford. This could lead to further enforcement action.

You can only receive a CCJ in England or Wales.

Lenders will look at the date the CCJ was registered and how large it is, another factor will be if the CCJ is still outstanding or has been satisfied. If satisfied this will go in the applicants favour with select amounts of lenders.

A default

A default is usually registered on your credit report when a payment has reached a total of 8 payments missed, the company you owe the money to will issue a letter for default and register this on your credit report as a default, showing date registered and amount of the default. If you pay off the default it will show in the credit report as satisfied and date satisfied , lenders will base decisions on how new the default is, size of default and if it has been satisfied or not .

All adverse credit will come of your credit report after six years from the date it was registered.