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Whenever submitting an application for a mortgage you should anticipate your own credit history will be scrutinized, however, do you know how certain events will impact the lender’s decision? In regards to a late or missed payment on a bank loan, credit card or mortgage, even due to genuine mistake or something that was out of your control. It will still show as a negative mark on your credit report. There is not any differentiation made between accidental and deliberate -therefore how can it affect you? Since the credit crunch, the lenders have tightened their criteria. Any late or missed payments are more likely to have impact on your credit history and also that which could look to be a minor issue for a debtor could carry far more weight for a lender.
The difference between a late and missed payments
A late payment occurs once the due date has passed.
A missed payment is whenever you entirely fail to pay of your agreed payments.
They turn up in your own credit report marginally differently – when having one or more late payments, anybody analysing the credit file will probably observe the number “1” next to them which indicates that the money arrived 1 month late .
With missed payments, the number will increase with every month the payment will be left outstanding. For example, the report will show’2′, then’3′, then’4′ and so on. The number will remain the same at the point payment is made.
If a bill has been paid a few days late or even possibly a few weeks late, in certain cases, this may not even show up on your own credit file. Nevertheless, it’s not worth taking the chance with payments. You should try to make payments on time, and be sure to permit time for your payment to be processed and received, too (generally three working days are advocated ).
Can late Payments Influence a Mortgage Application decision?
The brief response is that yes they are able to. Lenders use the information in your credit file to check whether you may actually have the ability to handle your hard earned money, and a brief history of overdue payments would be actually a red flag which suggests you may not pay your mortgage on time. This makes you a much larger risk, therefore if the lender remains ready to produce a mortgage offer, they may charge a higher interest or possibly ask for a larger deposit.
Even in the event that a late payment was not your fault, for instance, you paid off your credit card bill overdue since you did not receive your regular usual statement – it’s going to still have a negative effect. Lenders have the opinion that it is your responsibility to pay all your bills on time; you know that you have that payment every month and if for some reason you did not get the statement then you check your account online or contact the lender. Not having received your statement is not a free pass to avoid paying your bills on time.
For How Long do late payments affect your mortgage application?
Overdue or late payments will stay on your credit file for six years, therefore may potentially impact your likelihood of approval or perhaps the sort of deal you may be given during those six years. Broadly speaking, the longer ago the late payments happened, the less chance there is of it having severe impact.
What Happens When You miss a Payment?
When you miss a payment, the lending institution will report the issue to the credit reference agencies. That begins a process whereby the duration of time it takes until the account is brought up date is registered by them. The amount of months your account remains unpaid will be show on your credit file and is very likely to have an effect on almost any applications for credit for the length of time it stays on your credit report.
When a payment has been missed on a credit card, then your account will be suspended and, even if it is not up to the limit, then you won’t have the ability to use the card until the account is up to date
When a payment has been missed on a car loan for example, then the car could be repossessed.
In case the mortgage is a secured on your property, then your house could be repossessed.
For how long do missed payments affect my mortgage application ?
Just like late payments, missed payments will remain on your credit file for six years. Whether the payment was due on a unsecured or secured loan also plays a part. Missing payments on secured loans such as a mortgage tend to be more serious then missed payments on unsecured loans, such as credit cards and personal loans
Adverse credit events will have more of an impact the more recent they happened, therefore a missed £30 mobile phone payment four years ago will have much less of an effect than a missed payment of £300 on a personal loan six months ago.
When you have one or two missed payments in the previous five or six years showing up in your credit file, then while it is not certain that your application will decline, they may however offer you a mortgage with a higher interest rate or request a larger deposit. The more recent they are, the greater impact they will have.
In case you have several missed obligations these are very likely to have a much greater influence on your credit score, and your choices will be decreased accordingly.
As a rule of thumb, provided you did not fall 3 months behind and have since bought the account up to date, then you should be able to find a lender who will provide you with a mortgage offer .
If you are now behind with payments, however, then your chances of being approved for a mortgage drops .
Late or missed mortgage payments
Late or missed payments on a mortgage accounts are regarded as quite serious indeed. When individuals are in trouble, the mortgage is usually the last account they leave unpaid, so if that also falls into arrears then it indicates serious financial issues. Arguably if you can find only a couple of payments which were made up to a month overdue and those are just four or more years back they will have less affect than a series of missed payments which occurred more recently, if that is because the mortgage has been paid late every month for several months, or went unpaid for several months.
If you’re currently up-to-date with your own mortgage but have I the past missed payments according to your credit report, then your odds of approval and the mortgage rate you’re likely to be offered will depend on your overall credit score
If you’re behind with your mortgage obligations, then your chances of being accepted for a new mortgage deal will be slim to none.
Either way, your very best chance of getting a mortgage would to speak to one of our specialist advisors to explore all your options. At Finbud we offer free mortgage advice
What can I do to increase my odds for a mortgage approval?
There are many steps you can take to help yourself when it comes to gaining acceptance for a mortgage
- 1. Check Your Credit ReportThe initial step is to learn where you stand, and the best way to do this would be to request your credit report from each of the three main UK credit reference bureaus – Equifax, Experian and Call credit. The main reason it is important to examine all three and never only one is they can hold different information, and you need to see the overall picture.Then check your personal details are right. If any details are incorrect, contact the credit agency and ask to get them amended.If you are not on the electoral register then you need to register, since it is a simple step that could make a big difference.If you notice a missed payment which you are unaware of – for instance, in case you changed the gas supplier or mobile phone provider and a payment has been missed while switching over, then make sure to bring that account up to date. It is going to still remain on your record for six years, but the simple fact that the account has been paid off is far better than if it were not.Finally, if some payments were made late or missed entirely because of reasons beyond your control – for instance, you were at the hospital, then suffered a bereavement, or your employer went bankrupt – contact the agencies or agency concerned and ask if they would willing to bring a notice of correction to the document. That is something which may well play in your favour with future credit applications.
- 2. Build Up a strong credit history Be sure that you always pay your bills on time. Reference dates in your diary, set up a reminder on your mobile or, even better, put payments on Direct Debit.
- 3. Save a bigger depositThe more late or missed payments you have in your credit report – along with the more recent they happened – the bigger the deposit you will need. The LTV will be the amount of the property value the lender is prepared to provide and can vary as high as 100 percent for those who have exemplary credit to 70 percent or less for people with poor credit. Certainly, the bigger the deposit you have, the better your odds of approval.
- 4. Seek Expert AdviceIn case you’ve got a history of late or missed payments on your credit report and are applying to high street lenders, not only may you get turned down, but due to them running credit checks on you, may make the matters worse.That is because when a lender carries out a search of your credit file, it leaves a trace, and a great deal of searches in a brief space of time may have a negative impact on your credit rating. (Bear in mind when you search your own records to test for accuracy, there is no trace left. You may search your personal records as frequently as you want to.)As expert mortgage brokers with experience and knowledge of bad credit mortgages we have the ability to find the very best options for you.
How we can help you
At Finbud, we have got a professional bad credit team which helps our customers secure cheap bad credit mortgages with late or missed payments. Our mortgage brokers know the market inside out and know just where to turn to obtain the best rates. With unlimited access to this sector and exclusive rates which are not readily available on the high street, we can assist you fully to consider your best options available to you.
We can also assist you with your mortgage application and provide you with tailored specialist mortgage advice. Call us now to get free advice and no-obligation quotations from our group of seasoned bad credit brokers .
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