Lee Gathercole and Neezam Romjon explain County Court Judgements and what they mean for your mortgage prospects.
What is a CCJ and what happens if I get one?
A CCJ or County Court Judgement is where someone takes court action against you because you owe them money. A common example is unpaid parking tickets. It could be that you’ve not received a penalty letter in the post and you’re not aware of the fine for whatever reason.
If the letters haven’t arrived in the post you might only know you have a CCJ on checking your credit report.
Can you apply for a mortgage with a CCJ? How old does the CCJ have to be?
You can apply for a mortgage – and as brokers, there are a few questions we will ask. How recently the CCJ was registered is probably the most important factor in terms of pointing you to the right lender.
If you’ve had a CCJ in the last 12 months it can be very difficult to find a mortgage lender that will accept you. If it’s been one to three years or longer, you’ll have access to a much wider set of lenders.
Like most things on your credit report, a CCJ will remain there for six years, whether or not it’s satisfied (paid off) or unsatisfied. If it’s paid, it will still remain on your credit report as a registered CCJ.
This can surprise clients – even when paid it leaves a footprint. It still shows that a CCJ was registered, but it also shows that you’ve satisfied it, which will usually help you access more lenders.
Will a CCJ affect me remortgaging?
We previously talked about this in our episode about bad credit remortgaging. In answer to the question, it can do. As Neezam said, it depends on how old the CCJ is and the amount. Some banks are quite happy with a CCJ under a certain value, while others aren’t, particularly if they’re recent or if they’re unsatisfied.
To understand what impact it will have on you, it’s best to speak to a specialist mortgage advisor. We can guide you as to what’s available and what your options are.
It also depends on the reason for remortgaging – whether you just want a better rate, to borrow more or change your mortgage deal.
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Are there many lenders that will accept a CCJ?
It depends on your specific situation and the details of the CCJ: the date it was registered, the date it was satisfied, any outstanding balance etc. If the balance is £500 or less then you’ll find that there are more lenders available to you. That’s especially true if the issue was one to three years ago.
Even if it’s a bigger balance, but more historic – over three years ago, for example – then again, you’ll have access to more lenders.
The biggest limiting factors are if the CCJ is less than 12 months old, or if it’s a high balance of £1,000 plus in the last two or three years. That will limit you in terms of lenders.
The other thing is how many CCJs you have. Lenders want to understand if this is a one-off – perhaps you changed address and didn’t get the parking notices. Or is it more of a habitual problem? Having multiple CCJs will affect how many lenders there are.
The good thing is high street lenders are lending with CCJs for smaller balances that are over three years old. You may be asked to contribute a higher deposit – so you will probably struggle to get a 95% mortgage with a CCJ. You may also be looking at higher rates. Generally the cheapest rates out there are offered to people that present the lowest risk.
You might find a lender offers a variety of different rates depending on how long ago the CCJ was registered. There might be a rate for CCJs in the last twelve months, another rate for 12 to 24 months and so on. Again, a broker will decipher it all and advise a suitable solution.
What criteria do I need to meet?
As we’ve covered, there are criteria around how old the CCJ is, whether it is satisfied, the specific amount and whether it’s £500 or less.
A lot of high street banks will consider you if you can put down a higher deposit. If you have a CCJ that is quite recent or a number of CCJs, the lender may require a 10% to 15% deposit.
What happens once I’ve paid the debt?
Once you’ve paid off a CCJ, within a month or two your credit report will reflect that the CCJ has gone from unsatisfied to satisfied. It also means that whoever has been pursuing you for the debt will stop.
In a lender’s eyes, if you satisfy a CCJ, especially if you’ve done it fairly quickly, you are on top of your finances. It may indicate an innocent mistake or something that has gone further than it should have. Generally, from a lender’s point of view if you have satisfied a CCJ on your credit report, it indicates you’re a lower risk as a borrower.
What else is there to consider when applying for a mortgage with a CCJ?
With any form of bad credit, don’t be afraid to seek advice. A lot of clients who contact us with adverse credit say that they have been turned down by their bank and other high street lenders.
And while a select few of high street banks will consider a mortgage application with a CCJ, it’s not easy for you to identify which ones to talk to. You could save so much time and potentially money just by speaking to a specialist.
If you’ve got a CCJ and aren’t too sure what the first step should be, pick up the phone. We will determine quite quickly what’s possible and which lenders to approach – whether it’s high street or specialist banks.
Whether you’re a month or a year away from looking to buy, move or re-mortgage, we’ll help you prepare. It doesn’t cost anything to have a conversation with a broker. We’ll give you advice so that when the time does come, we already understand your situation and can help.
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