Mortgage Denied…..Due to Late Card Payments!

by Mark Johnston

                                Mortgage Denied…..Due to Late Card Payments!

In the current economic climate lenders are no longer as free as they once were with their money!

Borrowers may well have a good paid job, plenty of money in the bank to cover the inevitably large deposit that is now required, but they could still find themselves turned down due to their credit history.

Since the credit crunch borrowers should be more aware than ever before the importance of ensuring their credit record is not only accurate but also as good as possible.

It seems that some lenders are now turning down mortgage applications as a result of minor discrepancies on an applicant’s credit history.

According to some recent research 5.5 million Brits either missed a bill payment of were late paying last year.

A late payment on a store card or credit card bill may seem a minor point especially when everything else has been well managed , after all no one is perfect and most people have at least one late payment on their credit report.

However in the current credit squeeze it appears that something as small as this can affect a lenders decision.

A poor credit report will reduce the likelihood of borrowers receiving a market leading rate from a lender, basically the worse the credit score the higher payments will be.

Ray Boulger, of independent mortgage adviser’s john Charcol, said “even if you have a very small blemish on your record, something as simple as a 10 pound phone bill you have not paid, it could be enough to mean you could be rejected from a mortgage”.

James Jones, from Experian, the credit reference agency, adds “a track record of missed payments, even occasional, may be enough to convince a lender that you are not a good risk”.

How creditors respond to late payments can continue to affect borrowers for months and even years to come. Four things can happen when a consumer pays late:

–         the creditor charges a late fee which is added to the next statement

–         the interest rate may increase to a default rate

–         credit agencies are notified and an entry is added to the credit report which will stay for 7 years

–         as payment history makes up 35 per cent of a consumers credit score, the score will drop

However, all is not lost…if a potential borrower thinks their credit rating may already be worse for wear, then they can take action to boost their credit score.

Firstly consumers should obtain a copy of their credit profile by applying to a credit reference agency. Once they have received a copy they need to ensure that it is up to date and correct. Credit reference agencies will allow consumers to explain a period of poor credit performance by attaching a notice of correction to explain why payments were missed, providing there is a valid reason.

Borrowers should also ensure that all future payments are made on time!

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