During lockdown a package of financial measures was put in place to help people in the UK falling into debt. However, as support was reduced or removed, more and more individuals found themselves in financial trouble, with some finding themselves on the receiving end of County Court Judgments (CCJs).
CCJs in themselves are a worry, but of equal concern to many is the long-term effect of these judgements. In particular, the impact on the chances of getting a mortgage or remortgage with a CCJ against you.
With rising interest rates and the cost of living crisis starting to have an impact on many people in Scotland and England, we spoke to the mortgage with CCJs team at Simply Adverse to clear up the myths.
What is a CCJ?
A CCJ is issued if you fail to repay money that you owe to creditors. You won’t have a CCJ issued against you without quite a long process first taking place. There should be plenty of opportunities for you to come to some sort of agreement with your creditors before you end up in court. Remember, your creditors’ focus is generally to recoup any money they are owed rather than go through a protracted court process. This is why the advice to anyone in debt is to speak to whoever you owe money to sooner rather than later.
However, sometimes circumstances mean that you can’t come to any arrangement and you end up in the unfortunate position of being on the receiving end of a CCJ.
Why is having a CCJ a problem?
When lenders assess your mortgage application they look at a range of factors to decide whether to lend to you. One of these is the risk of you defaulting on your mortgage. As they don’t have a crystal ball to see how you will behave in the future, the only way to assess this risk is to look at your financial activity in the past.
Any problems that you have had in the past with managing money are shown on your credit history. This records all types of adverse credit, including bankruptcy, loan defaults and, of course, any CCJs against you.
Is every CCJ a problem?
Having any CCJ in your credit history will make it more difficult to find a mortgage lender than if you don’t have one, but the details of your CCJ are also important.
Lenders will look at how much your CCJ is for. As you may guess, CCJs for smaller amounts are less of a problem than CCJs for larger sums of money. Similarly lenders will be less concerned with CCJs that were issued some time ago, than they will with more recent CCJs.
Of course if you have multiple CCJs against you this will be a much bigger issue than if you only have one. Lenders are also concerned with whether the CCJ has been satisfied, that is paid off. A fully satisfied CCJ may indicate that you have taken control of your financial health.
What steps can I take to help me get a mortgage?
While a CCJ may make it trickier to find a suitable mortgage, there are some things you can do to maximise your chances of finding a lender.
1 Increase your deposit. The larger your deposit the less you’ll need to borrow which may mean it is easier to find a lender. Many people managed to save some money during the pandemic as they spent less on things like going out and holidays. If this applies to you then using your savings towards a deposit could make the difference between finding a mortgage and not finding one.
2 Get your finances in order. This is particularly true if you are self-employed. Having accurate, up-to-date accounts – preferably signed off by an accountant – are one way of persuading lenders that you will be able to repay your mortgage.
3 Don’t make things worse. This goes without saying, but if you are issued with a CCJ you should take extra care that you don’t get into any further financial trouble.
4 Avoid ‘red flag’ products. Short-term or payday loans signal to lenders that you may not have full control over your spending. If you are considering applying for a mortgage, don’t even think about taking out one of these loans.
5 Speak to a professional. Specialist adverse credit mortgage brokers understand the market and often have access to products that you won’t find anywhere else. Using one of these brokers for your application can massively improve your chances of getting a mortgage.
Hindsight is a wonderful thing, and the best advice to anyone struggling with debt is don’t let it get to the CCJ stage. Life happens to us all however, but it if happens to you, with the right help and information, it doesn’t have to spell the end of your hopes of finding a mortgage.