Our guide to mortgages for CCJs settled and unsettled
A story in the Mirror newspaper on the 20th of May 2019 reported that most people consider debt to be a normal fact of life. They only begin to worry about their level of debt once they are owing more than £6,000.
Against that background of mounting debt and credit, the majority of borrowers successfully manage their financial affairs and make repayments when they fall due. Yet an increasing proportion find themselves in difficulties at one stage or another and their creditors are forced to take legal action in an attempt to recover what they are owed.
If you have been at the receiving end of such attempts to recover money you have borrowed, you know only too well the disruption and trauma the experience is likely to have caused. If you have not already done so, you are also likely to discover that those actions are going to make it considerably more difficult to borrow or to raise credit in the future.
That includes your ability to arrange probably the most significant borrowing you are likely to want – namely a mortgage to buy your home or an investment property.
Though difficult, it is not impossible.
So, let’s take a closer look at one of the major markers of bad credit – a County Court Judgment (CCJ) – and see what is involved in trying to raise mortgages with CCJ settled and unsettled.
What is a CCJ?
The Money Advice Service explains that a County Court Judgment may be sought by anyone to whom you owe money and who, despite their best efforts to recover the sum, have failed to do so.
The Court may order you to pay your creditor’s claim straightaway – a so-called judgment forthwith – or it might allow you to repay the claimed amount in instalments over a specified period (a judgment by instalments).
For the Court to exercise its judgment in deciding how quickly you might be able to repay the debt – the size of the instalments over however long a period – it clearly needs to know from you details about your current income and expenditure.
If you have failed to respond to your creditor’s claim and not provided the Court with a statement of your income and expenditure, it will still make an order – called a judgment in default – which might determine the instalments you repay or order the immediate repayment in full (even though you do not have the funds to do so).
Until you have complied with the CCJ and repaid the debt in full, the CCJ remains “unsettled”; once full repayment has been made, it is described as “settled”.
More CCJs than ever are being issued. The Registry Trust Limited reports that a record 1,138,058 CCJs were issued in 2017 – the highest number since records began in 2005 and a total that has been rising steadily over the past five years.
Can I get a mortgage with settled or unsettled CCJ’s?
Whilst your CCJ remains unsettled, it is most unlikely that any lender will be inclined to grant you a mortgage. You allowed the debt to mount in the first place, failed to respond to your creditor’s attempts to recover the debt, received a County Court Judgment and have yet to show that you are able to comply with its terms.
In those circumstances, no lender is likely to take the risk in advancing you a mortgage. Unsettled CCJ mortgages are going to be extremely few and far between.
Once you have settled a CCJ, the situation may improve somewhat. The CCJ remains on your credit file for six years, so you have a bad credit record. But having settled the CCJ shows that you were able to manage your financial affairs sufficiently well to finally repay the debt.
Some lenders may, therefore, adopt a more lenient attitude and consider the possibility of granting a mortgage. Getting a mortgage with a satisfied CCJ may be difficult but not impossible.
I had a ‘judgment in default’. Can I still get a mortgage?
A CCJ by judgment in default suggests that you were insufficiently concerned about the legal action to recover money you owed or took an irresponsible attitude towards the debt and failed to respond to the Court’s request for details of your financial circumstances.
Whether the judgment in default resulted in judgment forthwith or judgment in instalments, therefore, any subsequent request for further borrowing – such as a mortgage – is likely to prove even more difficult.
What deposit will I need if I’ve had a CCJ?
We have explained that lenders are going to be wary of your application for a mortgage if you have settled a CCJ.
That wariness is likely to translate into the demand for a bigger deposit on your part – you are then shouldering a greater part of the risk as far as any lender is concerned.
Whereas an applicant with a clean credit record might be able to get a mortgage covering as much as 90% or even 95% of the purchase price of their home, if you have a settled CCJ that proportion may drop to 75% or 85%. In other words, you may be offered a lower loan to value (LTV) ratio and must find a bigger deposit.
How much can I borrow if I’ve had a CCJ?
In other words, if you have had a CCJ you should be prepared to accept that any lender is likely to offer less by way of a mortgage – the bigger your deposit the better.
How can I improve my chances of getting accepted for a mortgage when I have a CCJ?
With a CCJ on your record, you need to do everything possible to improve the credit rating that is critical to any lender’s consideration of your application for a mortgage.
Request a copy of the information held on your credit file and thoroughly check its accuracy, correcting any errors.
Make sure that your personal information – including your current address – is up to date and make a point of inscribing your name on the electoral role.
The credit reference agency Experian suggests that if there were particular circumstances surrounding previous periods of financial difficulty – you were sick or unemployed, for example – consider adding a note to that effect to your credit file.
A CCJ seriously and adversely affects your credit rating, making it more difficult than ever to raise a mortgage.
If you have settled a past CCJ, continue to manage your financial affairs and do everything possible to improve your credit history, however, there are some lenders prepared to entertain your application for a mortgage.