A lot of people assume that a CCJ is the end of the road for their finances. CCJs are so feared because many people assume it will land them on some sort of mortgage blacklist and will prevent them from ever getting on the property ladder. The good news is that none of this is true, and even those with a CCJ on their record can often find a way to secure a mortgage.
Finding a mortgage is a headache for anyone, but when you have an adverse credit history, the process can get even more complicated. However, it isn’t impossible to get a mortgage with bad credit, even if you have a CCJ on your record. There are companies that specialise in adverse credit mortgages. A mortgage advisor will be able to help you to find a lender that matches your profile and is, therefore, more likely to accept your application.
More and more lenders are opening up to the idea of approving mortgages for individuals with CCJs. Since a CCJ is just one factor on your record, many lenders are now choosing to look at the bigger picture rather than focus on one component. Every lender will have their own limits as to what they consider to be acceptable, so if you’re ready to put your CCJ behind you and start building your credit profile again, there’s no reason you won’t be able to.
A County Court Judgement, or CCJ, is a type of court order in England, Wales, and Northern Ireland. They are registered against individuals if they fail to repay money that they owe. A CCJ is often the last resort for lenders and it won’t come out of the blue. If possible, you should always work with lenders to find a solution to the problem before a CCJ is registered.
If you pay off the full amount within 30 days of receiving notice of your judgement, you will avoid it being entered on your credit score. Once on your credit report, it will stay there for six years, even if you pay it off in this time. Lenders look at your credit report when making lending decisions and a CCJ on your report can make them less likely to lend you money.
When making a lending decision, mortgage providers aren’t just looking to punish people with bad credit. They are tasked with finding out about your financial history and using this information to make a decision about the likelihood that you will be able to pay back your mortgage. Having a CCJ on your record isn’t ideal, but it isn’t the end of the story. In general, a mortgage provider will consider the following factors…
The date of the CCJ is perhaps the most important thing that a mortgage provider will consider. If your CCJ was over three years ago, it will be far easier to get a mortgage than if you have had a CCJ registered in the past 12 months.
The date that the CCJ is settled it also of relevance to lenders. Some do not require the CCJ balance to be settled while others will require it to be settled in full for at least 12 months before making a mortgage application.
The size of the CCJ is another important factor that mortgage providers will consider when looking at your application. Some lenders will have their own limits as to what they consider to be the maximum allowable size for a CCJ. They will weigh the size of the CCJ against things like your deposit and how recently the CCJ was registered.
For example, if the CCJ is over three years old, then most lenders won’t take the size of the debt into consideration. If the CCJ was registered in the past 2 years and are applying for a mortgage of 85% of the total property value, then the maximum CCJ allowable would be around £2,500. A CCJ in the last 12 months should be no more than £1,000.
There are some lenders that will consider higher values, but they will require you to have a higher deposit amount.
If you have a healthy deposit, then you are more likely to be eligible. Essentially, the most deposit you have, the better your chances.
With a 25% deposit, you could still secure a mortgage even if you have a CCJ registered in the past 12 months.
Leaders won’t just look at the amount on the CCJ but also the number of CCJs you have. A single CCJ is less of an issue than 2, and most lenders won’t consider those with more than 2 CCJs registered in the past 2 years.
Lenders are looking for indicators that you could be a high-risk borrower and also want to ensure that your mortgage is affordable.
Most people don’t realise that you can still get a mortgage, even if the CCJ remains unpaid. An unsatisfied CCJ doesn’t automatically mean that lenders will rule you out for a mortgage. Paying off might give you wider access to more lenders, but there are still some lenders that will consider your application, even if the CCJ remains unpaid.
Sometimes, retaining the money for a bigger deposit makes more sense than paying off the CCJ.
There are many different types of mortgage and the kind that you choose could impact your eligibility for a mortgage. A standard purchase mortgage offers the best chances of success with a CCJ on your record. Likewise, a remortgage application is likely to be accepted provided you meet the other requirements such as a healthy deposit and regular income. A secured loan against an existing property offers some of the best chances of success for an applicant with a CCJ.
If you are applying as a first-time buyer, the lender might have further restrictions for applicants with CCJs. For example, they might want to see evidence of satisfactory rental payments or they might place a limit on the CCJ amount of around £1,000.
Buy to let mortgages are perhaps the most difficult to access with a CCJ, but again, it isn’t impossible. In most cases, the lender will require a much larger deposit, or they might make you wait for longer than with a residential mortgage.
A CCJ is an indicator that one or more of your loans went unpaid. Lenders recognise that it’s easy to get into financial trouble and that people shouldn’t be punished forever for falling behind with payments. This is why most lenders will look at your credit profile as a whole when making lending decisions. Late payments in the past 2 years can be overlooked if you have a healthy deposit of above 15%. More severe issues such as IVAs, repossessions or bankruptcy can be a lot more problematic.
When shopping around for a mortgage, it helps if you have a complete picture of what situation you are in. Download your credit file from the three different UK credit referencing agencies so that you have a complete overview of how lenders look at you. If you only had one credit account and this resulted in a CCJ, it’s important that you start building up your credit as soon as possible. Lenders want to see a track record of you making payments on time. Time can heal most issues on a credit report, so the sooner you start demonstrating that you can be responsible with money, the better.
Above all else, lenders look at the affordability of the loan. They want to make low-risk lending decisions and so they want to lend to people who can afford the repayments. They will look at your income, your existing commitments and make a decision on how much they are willing to lend. Most high street mortgage providers will offer around 5x your annual salary, but when you are working with more niche mortgage providers, this might be reduced to 4x your annual salary.
The following table outlines the different conditions and considerations that lenders take into account when making lending decisions. As you will see, a higher deposit means that a CCJ will have less impact on a lending decision. Likewise, time can help to heal most issues with your credit.
|Lender||LTV*||Date of CCJ||Date paid off||Other factors|
|1||95%||All CCJs over 3-year’s old ignored. Declined if registered in last 3 years.||Does not need to be repaid.||No other adverse credit history. Occasional late payments permitted.|
|2||85%||2 allowed in the last 2 years. No more than £1000 in the past year and up to £2,500 in past 2 years. Ignored after 2 years.||Does not need to be repaid.||Maximum of 2 late payments per month and 2 defaults permissible. No other adverse credit history.|
|3||80%||Does not need to be repaid.||Maximum of 2 late payments per month and 2 defaults permissible. No other adverse credit history.|
|4||75%||No defaults in the last year.||Does not need to be repaid.||Only considers adverse credit history from the past 12 months.|
*Maximum loan to value
As you can see from the table, different lenders will approach CCJs in very different ways. The theme that links all of these situations is that a CCJ doesn’t have to mean the end of the road for your mortgage application. You don’t even have to wait six years for it to be removed from your record if you have a healthy deposit and your credit report is otherwise clean.
When shopping around for a mortgage provider that will accept CCJs, it’s important to shop around just as you would with a regular mortgage. There are plenty of niche mortgage providers out there that will still consider your application, so don’t assume that you can’t get a mortgage if your first application is rejected.
If you need to work on building your credit up following a CCJ, there are a few simple steps you can take to speed the process along.
While CCJs on your record might not be ideal, it doesn’t mean that you can’t get a mortgage so you should never give up. Work on building your credit and ask for help from the right people if you are serious about getting a mortgage.