How long does adverse credit stay on your file?

 

The biggest worry most buyers have is around their credit score and if its good enough ‘to get a mortgage’. The first thing about a credit score is that it can be quite misleading at first glance, this is because each credit reference agency scores out of a different figure, some score out of 700 and some score out of 1000. But it also goes deeper than that as your credit history or lack of can cause your score to drop too. Someone who has never used credit may have the same score as somebody who has used credit but not used it carefully. 

 

One thing that can really kill your credit score and impact your ability to get a mortgage is ‘Adverse credit’ which is things like late payments, defaults, CCJs and bankruptcies. All credit history good and bad stays on your credit file for 6 years. Your credit file runs on a 6-year rolling timeline so as soon as a credit transaction reaches 6 years old, it will fall of your record. 

 

When it comes to getting a mortgage with adverse showing on your credit file all depends on the lender and their criteria. Typically, ‘high street’ lenders such as Lloyds, HSBC, Natwest etc will not lend to people who have adverse credit and your ‘specialist lenders like Bluestone and pepper money specialise in lending to people who have adverse credit. But how do you determine which lender is the right lender for you? 

 

Let’s start with the high street lenders, the consumer banks who are often the cheapest in terms of interest rates and fees. Majority will not lend to you if you have the most severe adverse credit – things like IVAs or Bankruptcy if it is showing on your credit file. For IVAs and bankruptcy’s these will show on your credit file for 6 years AFTER you have come out of them. For example, a lot of IVAs last for 6 years, then it will show on your file for another 6 years – so this will impact you and your credit file for 12 years. If you have gone through an IVA or bankruptcy and its showing on your credit file your only options would be specialist lenders which will charge a higher interest rate and larger fees than most other banks. However, once that particular adverse credit comes off your credit file, you will see a noticeable shift in your credit score, and you should then be able to apply to the high street lenders with some success. 

 

For lesser adverse credit such as late payments, defaults and CCJs this will depend on a number of factors. Such as how many instances are on your file, how large the missed payment/ default was, when the instance occurred and what line of credit this relates to. Some lenders will completely ignore things such as a late payment on a mobile phone contract but will decline if it’s a CCJ as a result of a parking ticket. This is where a good broker is your best friend as they can examine your credit file and work with their panel of lenders to find the best fit for you. 

 

Time is a big factor here too as some lenders will ignore historic defaults and CCJs that are nearing the 6-year mark, they may ignore it before it falls off your credit file if you can evidence that you have kept a clean record since that point. If the late payment/ default is for a small amount of money such as a missed Klarna payment or phone contract, again a lender may ignore this. But if the defaults are large and frequent this is a red flag of poor money management for lenders. Again, a good broker can work wonders here as some lenders will work with brokers to establish if the adverse was a one off or if there were any mitigating circumstances as to why there is adverse credit in your past. If for example it was due to a life event and the adverse was issued in error (sometimes the payment letters are sent to incorrect addresses) this can be ignored. 

 

Having adverse credit will impact your choices, but due to the presence of specialist lenders there are always choices. They may not be the ones you want at the time, but they are there. As adverse credit falls off your credit file after 6 years, you may only need to stay with a specialist lender for the short term until that adverse is removed and then when you come to remortgage in a few years’ time you can then look to switch to a cheaper high street lender then. 

 

Its not all doom and gloom if you have adverse credit, you just need some extra guidance, and we are there to help you every step of the way. If you would like us to help you with your next purchase or remortgage, please don’t hesitate to get in touch on 

 

01482 205084 or email info@greenandgreen.net