Getting a Mortgage with a CCJ
If you have a CCJ or multiple CCJs you may be wondering what you need to do to get a mortgage. You may have been declined already by a lender and the process can seem extremely frustrating.
CCJs are serious negative marks on your financial record and have a lasting and damaging impact when trying to obtain finance. Getting a mortgage with a CCJ is not impossible though, and there are some lenders who will potentially offer you a mortgage.
Read our guide on getting a mortgage with a CCJ to find out more.
What is a CCJ?
A CCJ is a County Court Judgement which has been issued against you. If you have defaulted on a debt and a creditor feels you are unwilling or unable to pay, they will apply to the court to get a formal legal judgement for the debt.
Once a court has issued a CCJ a lender has 6 years to commence enforcement action to recover the debt.
After 6 years, most financial accounts drop off your credit record and this can be the case with CCJs. A creditor can however continually reapply for a CCJ providing they have a good reason to so, the CCJ can stay on your record for much longer.
A common reason creditors extend CCJs is if you move overseas, and they are unable to enforce collection of the debt within the initial 6 years. There are also other reasonable legal reasons why a judge may renew a CCJ.
Dealing with a CCJ
There are two ways to deal effectively with a CCJ.
The simplest way is to pay off the amount owed or contact your creditor to arrange a payment plan. Despite the CCJ being in place allowing enforcement to collect the amount in full, most creditors will be amenable to a payment plan because enforcement action can be costly.
The second way to deal with a CCJ is by approaching it using legal avenues. If the outstanding amount is outside of your financial ability to pay you may wish to consider bankruptcy. However, bankruptcy should be considered as a last resort. For many mortgage lenders, a bankruptcy is judged far more negatively than a CCJ.
You can also apply to the court to set the judgement aside providing you do this quickly after the CCJ has been issued and you have a clear legal argument why the CCJ was granted in error.
These legal arguments are narrow. For example, you can’t set aside a judgement if you moved address and didn’t receive the judgement. But you should be able to set aside a judgement if you can prove that you don’t owe the money, or the amount claimed on the CCJ is incorrect.
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Can I Get a Mortgage with a CCJ?
Yes, there are a small group of lenders that will consider people with CCJs. They may even consider you if you have been registered bankrupt. These lenders are normally smaller specialist lenders who you will not find on the high street, and they can charge high interest rates compared to typical mortgage products.
This increased interest rate allows the lender to cover the risk of lending to people with adverse credit. While you may have every intention of honouring your mortgage obligation, the next person they lend to may not enter the agreement with those same good intentions.
As a result, lenders spread the risk of these mortgages across their mortgage book by applying a blanket higher interest rate.
How Much Deposit Will I Need if I Have a CCJ?
This depends on the lender you approach. Some adverse credit lenders insist on higher deposit amounts but there are some who may accept a standard 10% deposit amount.
To find out your lender’s deposit requirement you should ask your mortgage broker and find out how much you will need to contribute to qualify for the product.
Does the Size of the CCJ Affect My Mortgage Application?
A CCJ is considered a serious financial obligation and if it is still outstanding at the point of application it can significantly limit your ability to borrow money. Even adverse credit lenders will expect CCJs to be paid by the time you come to make your mortgage application.
The size of the CCJ may be an issue for some lenders even after it has been satisfied. For this reason, you should check with a whole of market mortgage broker, like Boon Brokers, to see which lender is most suitable for your specific CCJ registration.
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How Do I Rebuild My Credit Score After a CCJ?
Your first step is to pay your CCJ. The faster it is paid the sooner it drops from your credit record. If you are considering a mortgage with an outstanding CCJ you will almost always be better served using your deposit money to pay the CCJ than trying to source a mortgage with a CCJ debt still owed.
Once paid off, your credit score can be repaired by clearing down any other existing debt, meeting your monthly financial obligations and refraining from taking further credit. Each monthly payment you make to your debt and each debt paid off in full can have a positive impact on your score.
Depending on how much disrepair your credit file was in, this process can be slow and painful with only marginal gains made initially. Over a few years though with correct credit file management, you could repair your credit score considerably.
Lastly, your credit score will not be the best it can be until the CCJ has expired from your record. A CCJ will be removed from your credit file 6 years after the registration date unless the creditor manages to reinstate the CCJ through the courts.
Can I Get a Mortgage with Further Credit Problems?
If you have further credit problems after a CCJ it does not necessarily mean that you can’t get a mortgage. It will mean that your chances of getting a mortgage are reduced compared to someone who hasn’t had subsequent credit problems.
If you want to explore your mortgage options, you should discuss your financial situation in full with a mortgage broker. Mortgage brokers are experienced with all types of credit history and there is no shame in disclosing any previous financial difficulties.
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