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A CCJ (County Court Judgement) can have an adverse effect on the ease of obtaining a mortgage or any other type of financing.
When a mortgage application is submitted, the provider considers the whole financial background, including any judgments that have been made against the applicant. Of all of the negative aspects that can be revealed as part of a credit search, CCJs are highly detrimental to the availability of mortgage financing. In fact, most high street banks will not offer mortgages to those with CCJs.
How Does a CCJ Happen
A CCJ is the result of a longer process. Initially, a creditor who has failed to receive any monies owing will issue a County Claim Form (also referred to as a Summons) stating that they intend to take court action in order to claim the money that is owing to them. At this point, you will have the option of declaring to the court that you agree that you do, in fact, owe the money or denying that the debt exists.
If the debt is owed, you need to fill in an expenses and income form which will allow the court to calculate a repayment plan that will not leave you in substantial hardship. From this, the court will then write to you informing you of your payment plan. This judgment is known as a CCJ.
If you deny that the debt is owed, the court will request further information and will then decide whether the money is owed or not. If it is decided that the money is owed, a payment plan will be determined and a CCJ issued.
What Impact Does a CCJ have
A CCJ will have a negative impact on any credit rating to the extent that many high street banks will not offer financing to individuals with a CCJ. However, if a CCJ is being paid and has not been defaulted on for some time, it may be possible to obtain a standard mortgage, albeit at a higher interest rate.
There are, of course, many mortgage companies that will offer mortgages to those who have CCJs or other financial difficulties. Whilst this is good news for people with CCJs, it is important to realise that such specialist companies are unlikely to offer the same favourable rates as some of the high street banks. Nevertheless, if you have CCJs it is still worth considering approaching high street banks, initially, before referring to a specialist mortgage provider in order to ensure that you get the best possible rate and terms for your situation.
How to Avoid a CCJ
A CCJ is often the final step of debt recovery. For this reason, it is important to recognise that avoiding a CCJ is better than dealing with the issue once it has progressed that far. As soon as a CCJ is entered with the court, it will remain on the register of judgments for six years AFTER the debt has been satisfied.
Before the Claim is Issued
Once a claim form or summons has been issued, it is very difficult to avoid a CCJ being entered on the register. The best option is to prevent the claim being issued, in the first place.
Remember, making a claim is an expensive process for the person to whom a debt is owed. Therefore, they too will be keen to avoid the process if at all possible. If you find yourself in a position whereby debts are not being paid and you are in danger of having a CCJ entered against you, it is time to reassess your entire financial position.
Write down a list of all of your outgoings and income and consider how much, realistically, you can put towards paying off your debts. By approaching anyone to whom you owe money and making arrangements independently of any court proceedings, you are putting yourself in a much stronger position in terms of credit rating.
Longer Term Planning Against CCJs
If a CCJ becomes inevitable, the approach needed is a little different. In practice, people who have an otherwise unblemished credit rating may find that one CCJ has very little impact on their ability to obtain a high street mortgage.
On the other hand, anyone who regularly has CCJs against them will find themselves in a difficult long-term situation. It is vital to remember that if a mortgage is defaulted on, the property will be repossessed. Not only do you lose your property, but also the lender takes charge of the sale, which often results in less than market price being achieved. Further, repossession will result in your credit rating suffering, in the future; therefore, this predicament should be avoided, if at all possible. If you are facing the possibility of repossession you can speak to specialist mortgage brokers who may be able to assist with a ‘repossession remortgage’.
Anyone who is struggling to manage debts should think carefully before entering into a mortgage agreement, as this could add to credit difficulties and cause even larger rating issues, in the future. Sometimes, those with CCJs would be better off resolving their imminent issues, before starting on the mortgage trail.
What To Do if You Have a CCJ
If you already have a CCJ on your record, all is not lost. There are still several things that can be done to minimise the impact of this judgment on your ongoing credit rating and mortgage opportunities.
If a CCJ has been received and you are in a position to pay the full amount, then this is an excellent way to improve your situation – immediately. Once the amount has been paid in full, you can request a Certificate of Satisfaction. Whilst the judgment will still remain on your record for six years, this certificate may offer a degree of comfort for likely lenders and should be used whenever a mortgage application is made.
One of the main reasons why mortgage providers are sceptical of people with CCJs is that it indicates to the lenders that they are unable to ensure that all payments are made, on a regular basis. This is not always the case and on many occasions CCJs are simply down to a one-off or short-term problem that has subsequently been resolved.
A great way of minimising the effect of your CCJ is to approach your own bank (even if it states that it does not provide mortgages for recipients of CCJs) and discuss your own personal situation with an advisor. Take along evidence of your current situation including an accurate income and expenses’ statement which shows that you have fully considered your position. Your aim is to demonstrate that you are managing your finances and are confident that you can make mortgage payments, easily. Particularly, if you have a track record with the bank in question, you may find that the advisor is able to use a degree of discretion and offer you an interest rate that would not normally be available for those with CCJs.
It is also worth bearing in mind that credit has become an increasingly common issue. Currently, it is estimated that more than 9 million individuals have some form of adverse credit, be it a missed mortgage payment or a huge unpaid debt. With this in mind, it is important not to lose hope. Even those with very high debts are not in a hopeless position. Although obtaining a mortgage may not be the best or easiest thing to do, this does not mean that it is impossible.
Specialist CCJ Mortgage Brokers
Unfortunately, if you have a CCJ, finding a suitable mortgage provider can prove extremely difficult. In many cases, banks will simply not consider someone with a CCJ regardless of the circumstances surrounding the judgment. This can mean that a borrower does not have the full opportunity to shop around and achieve a favourable interest rate.
High Street Lenders And CCJs
The vast majority of high street lenders will not consider someone for a mortgage who has a CCJ on their record therefore, in order to obtain a mortgage from these sources you will often have to wait six years, until the CCJ has cleared from your record.
When you think the CCJ is no longer on your record, request a credit report from an agency such as Experian. You can get a basic Experian report for free, or there is a Free Trial to Experian credit Expert for 30 days, after this free trial it is £14.99 per month. Make sure that the record has been updated, before you make your application.
In the meantime, it pays to build your credit rating in other ways, while you are waiting for your record to be cleared. For example, it may be possible to start saving for a deposit towards your property which will allow you a better rate, or to clear other debts such as credit cards which again will improve your rating. As soon as you realise that you have a CCJ that will affect your mortgage prospects, you should obtain a credit report so that you can also tackle any other possible rating weaknesses.
If the CCJ is the only negative issue on your record, then it may be worth presenting your case to your current high street bank, as they may be able to make a better judgment on your situation.
Specialist CCJ Mortgage Providers
Specialist providers offer mortgages to those who would not otherwise be able to obtain mortgages through a high street bank. By approaching a Specialist provider you are more likely to obtain the financing you need, even with a very poor credit rating. However, these companies almost invariably offer poorer interest rates compared with high street banks and many have particularly onerous terms such as extended tie-in periods.
If you are considering this route, an independent broker should prove invaluable as they can ensure that you secure the best possible deal for your position.