The latest in our series of FAQs features a couple at odds over credit card debts. One partner is concerned with the other’s spending and worries that he will not be able to remortgage his property in order to pay off his debts. But is she right to be concerned? Howells Solicitors provides the answer.
Q: My boyfriend bought a flat two and a half years ago, which he could then easily afford thanks to regular bonuses at work. Those bonuses dried up 18 months ago and, since then, he's been overspending and running up huge credit card debts.
He missed a couple of credit card payments, but says all will be fine when he increases his interest-only mortgage after his current fixed-rate deal expires in six months’ time and he will be able to pay off these debts. Am I worrying over nothing?
A: No, you are not. I think your boyfriend may not realise how much the criteria for lending has changed in the last couple of years. A good credit score is essential if you are to get a competitive mortgage interest rate and a bad one might prevent you getting a mortgage altogether.
Your boyfriend must understand that missing a couple of credit card payments can have an adverse effect on his credit score and is likely to make it more difficult for him to get a new mortgage from either his existing lender, or a new one. Although, not impossible.
I see that he would ideally like to increase his borrowing, but he must remember that with most interest only borrowing, many lenders now require a borrower to sign a form of declaration confirming that he or she has a repayment plan in place to repay the capital at the end of the mortgage term.
Your boyfriend needs to appreciate that getting mortgage funding is no longer easy for anyone and he must get his finances in order and look after his credit score. He can try to improve it by making sure that over the next six months he does not miss any more credit payments.
How to Check Your Credit Rating
Checking your credit rating is vital if you’re looking to borrow, whether that be with a mortgage, credit card or loan. You can do this using a credit reference agency or via a financial advisor.
How to Improve your Credit Rating
Your credit score can be negatively affected by:
- A high level of existing debt
- Missing or making late payments
- Receiving a county court judgement (CCJ)
- Applying for a lot of credit at one time
- Leaving open credit cards that aren’t used
- Mistakes on your report
- Failing to be on the electoral register
- Moving home often
- Taking out credit with someone with a poor credit history
This is because, before offering you finance, lenders want to ensure you are not financially over-stretched, that you are reliable, that you monitor your finances well, that you are who you say you are, and that you won’t abandon your debt. The best thing to do to boost your credit score is to avoid the things mentioned above.
Remortgaging with Howells Solicitors
Whether you're in a similar situation to the client above or not, if you are looking for guidance on remortgaging and the law, our friendly and knowledgeable conveyancing solicitors can help. Get in touch with our team today!
