The main thing any lender is concerned with is your ability to meet your monthly repayments. However, they are also very interested in your track record on previous loans – are you a punctual payer and financially mature type, or a head in the sand, ‘make it go away’ defaulter?
Whatever you are, your bank will soon know. Before approving your application your lender will carry out a credit check to review your current borrowings and to ensure you have never been declared bankrupt or had any judgements registered against you for non-payment of a loan or unpaid bills.
The Irish Credit Bureau (ICB) is the institution used to provide information on current and previous repayments on any loans you have, or had in the past.
The lender wants to build a profile about how you have conducted, or currently conduct, the repayment of credit.
Most lending agencies and financial institution are now registered with the credit bureau and the days when you could borrow your deposit from the credit union without it showing up in your records are on the way out.
- So what if you are turned down for a mortgage?
- Lenders take it on a case-by-case
- What to do if you are a ‘non-conformist’ mortgage seeker?
- Examples of options apart from the mainstream
- Here is the list of financial institutions that are listed with the Irish Credit Bureau
So what if you are turned down for a mortgage?
First of all, if you can’t think of anything obvious like an ignored J1 college loan or an unpaid bill which resulted in a judgement against you, examine your monthly outgoings.
You may be looking to borrow just three times your salary but if you have a large credit card habit and a big car loan your lender might think you don’t have enough to realistically handle your monthly repayments.
You then need to check to see whether bad credit rating was the reason. Contact the Irish Credit Bureau and get a copy of your history for €6.50. Go to www.icb.ie for an application form to enable ICB to process your request, or you can telephone 01-2600388 and write to them at ICB House, Newstead, Clonskeagh Road, Dublin 14.
If you do have a small black mark it could be sorted – for example if you defaulted on a small loan you might be able to repay your debt and have it taken off your history. Also, in the credit rating game, like every aspect of life, mistakes can and do occur.
Maybe you made an error in completing your direct debit form and you missed a loan repayment on the due date, or your lender might have agreed to let you postpone your payments for a period, but forgot to change the report it sends to the ICB.
By law, financial institutions must ensure that information they hold or give to anyone else about you is correct and up to date so you have the right to insist that they rectify any incorrect information about you.
The history of a credit agreement is kept on file for five years before it is wiped from record. Keeping a consistently big outstanding balance on a credit card won’t show up, but if someone is in so much card-related debt, that part of it has to be written off and the card is revoked, then the credit card provider can add this to the report. Only overdrafts that are the subject of legal proceedings are included in the report.
Lenders take it on a case-by-case
Some lenders might be flexible with a person with a less than punctual approach to repayments while others want straight timely payers and that’s that. However, lenders are human and will take exceptional circumstances into account.
This is why it is important to keep in touch with your bank and don’t put that head under the duvet. If you have lost your job, for example, and cannot make repayments on your loans – go to the bank and tell them you are in difficulty and come to an agreement until you get a regular income again. It will stand to you to have on their records that you were open and honest as opposed to them hounding you with weekly tense letters.
If your arrears were minor- for example three repayments missed and you explained to the bank why – this should not stand in the way of your mortgage being approved.
The bank should be notified of any problems – such as bereavement, illness, redundancy – which can affect your repayment before it gets out of hand. It will show up on your record that you were open and honest.
Also keep in mind that if you previously set up a business that failed, leaving you with credit issues, but are now in PAYE employment and are tax-compliant, there could be a solution.
The rule is to always try with a mainstream bank before you go to a specialist lender as they offer better interest rates.
What to do if you are a ‘non-conformist’ mortgage seeker?
If you do really have a bad credit rating, stop blaming yourself and look to see what is available for you if you want to buy a property and get off the renting wheel.
It used to be nearly impossible to get a mortgage from a lender if you did not have a clean bill of credit-rating health.
However, the lending market (and the nature of employment) has become so diverse there are now mortgage providers who will arrange finance for those who cannot obtain a conventional mortgage.
According to the useful book “The Mortgage Maze Explained” by Liam Croke, there are now products offered to suit every credit profile though he warns: “It is impossible to find deals that are as competitive as those offered to mainstream borrowers”.
Mr Croke points out: “Impaired credit mortgages have historically charged rates of interest that are significantly higher than normal mainstream mortgages, often charging a premium of one, two or even three percent more than the traditional lenders.”
In his book Mr Croke explains that the interest rate charged will depend on the particular product, ie whether it is fixed or variable, your degrees of bad credit, whether you have or have had a mortgage or any other loan, how many months’ arrears you have etc.
All these factors will determine the interest rate offered and the difference can be significant.
Most lenders that service this market adapt a case-by-case approach and are likely to be more conservative in the amount they will lend out and more demanding in the size of the deposit required.
Many impaired credit lenders will only forward no more than 90% of the property value depending on your credit history reducing to 75% for those with particularly bad debts. Another downside is that there can be quite severe early redemption penalties.
These mortgage mainly operate through mortgage intermediaries so contact a mortgage advisor or broker for more details.
Examples of options apart from the mainstream
Irish business Start offers mortgages to the ‘sub-prime’ market and sells its products through a network of more than 100 brokers.
They offer mortgages to people with less than perfect credit histories and self employed people who need to self certify their income. They also remortgage for loan consolidation purposes.
The maximum loan they offer is between 70% – 80% of the property value. Their rates are not as attractive as other lenders, because of the higher risk profile of their customers.
Another lender available to those who can’t get traditional mortgages is GE Capital Woodchester. This GE money mortgage is for people who have difficulty getting a mortgage elsewhere which according to the website may be due to arrears on loans, judgements, written off debts, self employment and to those who have difficulty proving their income or who have revoked credit cards. The mortgage might suit a first time buyer, or those wanting to release some of the value tied up in their home or those wanting to roll their debts into one monthly repayment.
You need a minimum of six months permanent employment for PAYE workers or a year permanent employment for self-employed workers.
The loans are higher than the average standard variable rate. If repayments are made on time and in full for three or four years on the product the consumers credit status may have a good chance of being restored and they will be able to move their loan to one of the traditional mortgage providers and take advantage of the standard rate.
Here is the list of financial institutions that are listed with the Irish Credit Bureau
|ACC Bank||GE Money|
|AIB Bank||HFC Bank|
|AIB Finance and Leasing||ICS Building Society|
|AIB Credit Cards||IIB Bank|
|The Associates||IIB Homeloans|
|Bank of Ireland Bank||Irish Nationwide Building Society|
|BOI Direct||Lombard and Ulster Banking|
|Banking 365||Lucan District Credit Union|
|Bank of Ireland Finance||MBNA Europe Bank|
|Bank of Ireland Credit Cards||National Credit Finance|
|Bank of Scotland (Ireland)||National Irish Bank|
|Barclaycard||Open + Direct|
|BNP Capital Finance (now Fexco Asset Finance)||Permanent tsb|
|Bord Gais Finance||Permanent tsb Finance|
|Caterpillar Financial Services||POS Finance|
|CIT Group Finance Ireland Ltd||Premier Bank|
|City Financial||Roscrea Credit Unioin|
|Clydesdale Financial Services||St. Dominics (Waterford) Credit Union|
|CNH Capital Ltd||Start Mortgages Ltd|
|EBS Building Society||Tesco Personal Finance|
|Everyday Finance||The Exchange Insurance Company Ltd.|
|Fiat Auto Financial Services||Tipperary Credit Union|
|First Active||Tullamore Credit Union|
|First Active Credit Cards||Ulster Bank|
|Ford Credit Europe||Ulster Bank Credit Cards|
|Friends First Finance||Waterford Credit Union|
|Fexco Asset Finance (formerly BNP)||Western Finance|