How many defaults and CCJs is too many?

In the same quarter, more than 320,000 County Court Judgements (CCJs) were registered against consumers in England and Wales, which is a record number, nearly 5% higher than then the same period last year.

The mortgage market has reacted to this situation, with a growing number of affordable options for borrowers with CCJs and defaults on their credit file. But how many CCJs and defaults is too many? At what point will your client run out of mortgage options?

The answer, as is often the case, is not that simple. While the number of credit events, like CCJs and defaults, on your client’s credit record will certainly be a consideration for underwriters, lending decisions are not made on number alone.

Instead a lender will also look at when the CCJs and defaults were registered, how much they are for and whether or not they have been satisfied. Even the type of credit agreement that was defaulted can be a consideration as some lenders can ignore utility, communication and mail order defaults.

For a specialist lender, when it comes to underwriting a case for a client with CCJs and defaults, the lending decision is largely based on the client’s current financial circumstances, the affordability and sustainability of the mortgage. With this in mind, and usually if the client has had at least a six-month period of a clean credit history, there is potentially no limit to the number or value of CCJs that have been registered to them in the past.

The most important consideration here is the story that accompanies those credit events. Is there a valid reason why a borrower experienced financial difficulty in the past and can the lender have confidence that these issues are unlikely to be repeated in the future? If there is a coherent story and good rationale for your client’s situation, there is no reason why a specialist lender should not consider their case.

If your client has a number of CCJs and defaults, don’t write off their chances for a mortgage, but do make sure that you communicate their story clearly to the lender so that any decision can be based on full and accurate information.