Life after debt - coming back from the dead

[River Phoenix]

Time has cleansed the credit record in any case but being away, numerous moves and no association with previous addresses have left a fairly blank credit file. However, full rehabilitation won't be achieved until we've bought a place to live and so forth. And here is the problem.

In the intervening years, since meltdown and 6 figure debts, so many financial institutions have got into bed with each other. My problem is assessing just how much information they have cross referenced and whether I have put in place enough breaks to make linkage impossible.

My thoughts are that if you hit RBS previously, then Nat West and all other associates are off limits. The same goes for Halifax making Bank of Scotland and Lloyds toxic as well.

Now I'm not sure they can clean out your account if you have a 10 year old time barred debt but who wants to risk that ?

The big question is, now that all is good again, how best to nurture a relationship to achieve the end result of a decent mortgage in 2014 ?

[SXGuy]

Re: Life after debt - coming back from the dead

The trouble with a decent mortgage is two fold. Firstly if you are a first time buyer, you wont be getting a decent rate, its likely you will have a rate 2 or 3% above the average. When i first got a mortgage the best interest rate i could get was 5.99%. 2 years on its dropped to 3.69%

Also the deposit you have against the mortgage value will greately increase or indeed decrease your chances of a decent mortgage. So its not just about your Credit File.

Your credit file idealy should have some indication that you are a good payer, someone who is able to repay his debts, but at the same time, not have too many that the lender would think you would not have enough left to cover the mortgage and live off of.

So its a fine line between having a good record while keeping enough income to repay a mortgage.

In regards to banks trying to Roso your accounts after 10 years. its unlikely, and if they did, you would be within your rights to demand the money back. Not that you wish to take that risk, but its very very unlikely they still hold enough data about you 10 years down the line, most would be 6 years max.

And just because a lot of insitutions are now one and the same, doesnt techically mean they would hold info for you from another arm to use against you in this one.

It would be quite easy to test the water, see if you can get a current account.

[River Phoenix]

Re: Life after debt - coming back from the dead

Back in the mid 1990s, a student account with Lloyds was flagged due to a previous account with Lloyds from years and years previously which was overdrawn and then closed. They wanted to take away the new debit card and replace it with a simple cash card. That was nearly 20 years ago and though it took months for then to add 2+2 and equal 4, they could do so with what today would be antiquated computer systems and simple filing. I have no doubt today that it would take 30 seconds for a computer check and then a manual intervention.

I'd like to obtain mortgage funds at around 4% on a 85% LTV with 4 times salary and nil other commitments. There seem plenty of 5 year fixes out there around that money but I'd contemplate a 12/24 deal to swap into interest only at 70/75% LTV or indeed a straight line 10 year fixed to maturity around 4% to 4.5%

[MrsD]

Re: Life after debt - coming back from the dead

if debts are SB, then they are just that, for everyone. so no dipping into accounts. an empty file is just as likely to cause problems as a couple of defaults, so you should now be doing a little credit, but paying it back promptly, like a phone contract or a wee credit card balance. Baby steps

[julian]

Re: Life after debt - coming back from the dead

Note that most of the banking systems are the same as those of 30 years ago, the only difference is the computers are bigger and faster and there is a better interface, but the back end is the same for most. It took too long to put together and if it ain't broke don't fix it.

The older banks have access to many years of data in archive files. There is a cost for storage and for checking it has not deteriorated, but there is a lot of money to be made in transferring the data from one system to another, making copies and providing means of interrogating and matching it. However, in all cases, the cost determines what is done and certain data is not taken forward. Why would anyone pay to keep data they could not use? Usability is a parameter in determining what the company should do. If it ain't worth it, then it will be lost after the 7 years required to be kept for financial reporting. If there is a manager with anxiety he will keep data forever and fights anyone who wants to delete it. Thankfully most of these are in Public Service.

[SXGuy]

Re: Life after debt - coming back from the dead

Yep there is a difference between a debt that is Statue Barred and a bank which "remembers" how it was treated a refuses to give you another account. They are perfectly within their rights to refuse an account, what they cant do, is offset funds to repay a debt that is barred by the limitations act.

On a side note regarding a mortgage. Id be very impressed if you manage to get a 4% interest rate at 85% LTV with 4 times salary.

Im assuming this will be as a first time buyer? im only assuming because you havent mentioned whether you currently have or have had a mortgage previously.

Ill give you a rough idea of what myself and my wife went through. £215k property, £22k deposit, combined income of 48k per year. The best rate we got two years ago as first time buyers was 5.99%. As i say now, 2 years in to it and we are now on 3.69%.

Question, why do you want a 5 year fixed deal? id be very cauious of any 5 year plan. Personally, i wouldnt want to be tied to anything for 5 years, 2 max is my limit.

And please dont do interest only, have you seen how many people have come unstuck with interest only? are you 100% certain that the value of your property less deposit, will be worth more than the amount repayable?

I know far to many people who are now stuck in negitive equity simply because they took the easy route and went for interest only.

That aside, i would be very shocked if you were able to obtain an interest only mortgage, yes they are out there, but you will have to meet very strict criteria. It really isnt as easy to obtain a mortgage now as it once was.

My advice to you, seek an independant broker and listen to exactly what he tells you.