Defaults and CCJs: What they mean for your mortgage application

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If you’ve had financial hiccups in the past, like defaults or CCJs, you might be wondering how they’ll affect your chances of getting a mortgage. But don't worry, you’re not alone, and there are options.

What is a default?

A default happens when you miss payments on a credit agreement - like a loan, credit card, or mobile phone contract - and the lender decides you’ve broken the terms. They’ll usually report this to credit agencies, and it stays on your credit file for six years.

What is a CCJ?

A County Court Judgment (CCJ) is a legal action made against you if you fail to repay a debt – like a bill or parking ticket. It means someone took you to court, and the court formally decided you owe the money. Like defaults, CCJs stay on your credit file for six years, unless you pay the full amount owed within 30 days of the judgment.

How do defaults and CCJs affect getting a mortgage?

Defaults and CCJs suggest to lenders that you may have struggled with repayments in the past, so they’ll look closely at:

• How recent the default or CCJ is
  The older it is, the less concerning it'll be to lenders. If it's within the last 12-24 months, your options might become limited.
• Whether the debt is settled
  A debt that's been paid is better than one that's still outstanding. It shows you've taken responsibility and paid what you owed.
• How many you have
  The less defaults and CCJs you have, the better your options may be.
• How big your deposit is
  Even if you've had defaults or CCJs, the larger your deposit, the lower the risk for the mortgage lender. So saving a bigger deposit could make a difference.
• Your current financial health
  A stable income and good credit behaviour since the default or CCJ could improve your chances of getting a mortgage.

How to improve your mortgage chances with a default or CCJ

Having a default or CCJ doesn’t mean your homeownership dreams are over. With the right guidance, you can still get your dream home. The key is to try and address anything outstanding before you apply and then talk to a mortgage adviser.

Here are a few tips to help improve your chances:

• Check your credit report and make sure everything’s accurate.
• Pay off any outstanding debts. Even partial payments help.
• Build a positive credit history by using credit responsibly and paying on time.