New Mortgage and bad credit rating

Hi all

and thank you for all your useful information so far.

Here's my situation - have cleared all loans, mortgage, credit card bills, etc after selling my house and am left with €120000 in bank. Plan to self build on a site given by my wife's uncle and would hope to borrow €220000. Our combined salary is €107000, permanent and pesionable.

Problem is I have bad credit rating with my current bank due to error
on my part and poor customer service on theirs - I was originally paying my car loan (€220 a month) by going into branch and paying it at cashier's desk as my salary was being paid into another bank (ridiculous idea, I know!). Once I got my mortgage from the same bank I transferred all money into this accounts...salary, direct debits etc. - I had no idea my loan was in arrears(3 payments) until a received a threatening letter from debt collector in bank about my car loan. I spoke with them and they accepted my case as one of genuine error. However I am now worried that I have bad credit even though I have paid off my loan early, cleared my mortgage and have no outstanding loans or debts.

will this effect my chances of getting new loan, or will the fact that I have cleared all my debts and have a substancial amount in savings help me? Part of savings include SSIA (full amount) which I'll receive in February.

Mr. Tickles said:

I was originally paying my car loan (€220 a month) by going into branch and paying it at cashier's desk as my salary was being paid into another bank (ridiculous idea, I know!).

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Why is that a ridiculous idea? I think it's far from ridiculous to go with different financial institutions for different services especially when doing so helps you get the best deal.

Well, I suppose I thought it was ridiculous the way I wa managing it - I was driving into branch each month and dropping in the cash - it seems on the odd occassion I dropped it in but it didn't register with bank's system til the following day, hence they marked me as being in arrears with payments.

Have you applied for any type of credit since this 'error' occurred? It may not be as bad as it appears. You should contact the ICB and ask them for a report of your credit rating. You should then be able to see if the bank registered the payments as being in arears. If they did and your credit rating is then flawed they maybe give you a letter explaining that the reason for the arears was more of a misunderstanding than you not actually repaying your loan (you mentioned that they were quite understanding in the past). Whether or not any lender will accept this letter is another thing (it really depends on what your ICB profile is), they may insist that there is nothing they can do

Edit
Sorry, just to continue, they may insist that there is nothing they can do unless the ICB is amended, which the bank you got your car loan from may be unwilling to do as they were not at fault. This is probably the worst case scenario and I would doubt that it would go this far. Even if it did you may find the bank you had the car loan with would be willing to offer you a mortgage, knowing the reason for your arears they might overlook it.

I would be surpised if you had a bad credit record after three months of arrears and then you sorted it out straight away. Get a credit check done on yourself just to make sure though

See for info about getting access to your ICB records.

Thanks Clubman, Helen and Sunny - will start the process to check with ICB today.

If the news from the ICB is not good, will I be able to use my current position (no debt, loans /mortgage cleared early, substantial savings) and the fact that I have consistent record of savings over the last five years(full amount on SSIA) as a bargaining tool? Or are they more likely to use the ICB information as an indicator?

Your case looks strong but it really comes down to what is on the ICB. from what you have said though I don't think you have too much to worry about. In the case of one or two late/missed repayments the underwriter would probably only look for an explanation for arears and as yours is worthy one (ie your not claiming that you were out of work for a while and missed a few repayments - possibly the worst excuse ever!) you should be fine.

Here's my situation - have cleared all loans, mortgage, credit card bills, etc after selling my house and am left with €120000 in bank. Plan to self build on a site given by my wife's uncle and would hope to borrow €220000. Our combined salary is €107000, permanent and pesionable.

Are you or your wife self employed?

I spoke with them and they accepted my case as one of genuine error. However I am now worried that I have bad credit even though I have paid off my loan early, cleared my mortgage and have no outstanding loans or debts. Will this effect my chances of getting new loan.

It may effect your chances of getting a loan from one of the High Street lenders......but there are other lenders out there that would be willing to consider this application..

i.e. Start Mortgages and GE Mortgages

Have you consulted an arch to confirm the value of the property upon completion?

Do you have planning permission?

No both my wife and I are in permanent pensionable employment.

The value of the house, based on what similar homes in the area are fetching and providing the market doesn't collapse(!!) would be around €550000. Yes, have planning permission.

If you are declined by the high street lenders there should be no problem getting you a mortgage with Start Mortgages or GE

220K Over 30Yrs approx 1300 pm based on a interest rate pf approx 6%
(Please note this interest rate is above the benchmark rate.
Based on 3 missed payments)

Provided you keep your repayments up to date for the next 6 to 12 months there should be no problem with switching you over to a prime lender...

If someone like the OP has no option but to deal with sub prime lenders after the circumstances described above, there is something wrong. I have a feeling you will find more than one prime bank willing to do business with you!! Just check out your credit record for peace of mind. Reckon it will be clear.....

If someone like the OP has no option but to deal with sub prime lenders after the circumstances described above, there is something wrong

You'd be surprised!

I would recommend that you only use a sub prime lender as a last resort. If, although it is very unlikely from what you outlined above, that you are declined a mortgage from one of the prime lenders, try another. I'm sure you will find one of them willing to take your case on.