To be really down about our financial situation - debt and no mortgage

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I was wondering if anyone has experienced anything like this or has any general advice.

My partner and I are both 25, we really want to buy our own house but it seems impossible at the moment and it's really getting me down.

Unfortunately, we both have poor credit ratings. Mine is very poor from a store card I had about 5 years ago (£400 debt!) which I ignored and has since defaulted. My boyfriend is the same - his is poor due to a few missed loan repayments which he is now paying off (£1000). From what I've seen online, it looks like these will remain on our credit records for 6 years before we are back to normal again.

Is there any way we will be able to clear this before 6 years and get our own mortgage? We want to have children soon and we both earn a decent wage but due to our stupidity when we were 21-22 we both won't even get credit for a new car.

Thanks.

might not be the best idea, but having a credit card and a small credit rating, can help boost your credit rating provided you repay your balance every month, even if it's £25 spent on the card and then you clear the balance to bring it back to the black if that makes sense. but you would need to be very disciplined not to other spend. speaking to cab might help as well, most of all though don't panic and don't ignore it, talk it through and get things started in the right direction. you're young you'll get though. good luck.

Thanks MrsFuzzy - I was going to look into this but wasn't sure I would get a credit card as I can't even get an overdraft.

Concentrate on saving deposit and house purchase costs so that in 6 years or whatever it is you are well placed to buy. 31 is not old to buy a house, it's young! 💐 and work on improving your credit rating. Presumably all debts are now paid off.
Do you have the deposit saved? As that can take a while.

some cards at very high interest but they are for people who struggle to get credit, you have to be very, very, tight with them though. hope you get some more help soon from other mns

You really need to concentrate on clearing the debts. Once you've done that and the defaults get older, they will have less of an impact.

I used to have an appalling credit rating in my twenties, CCJs, debt management etc. By paying everything off as soon as possible and then carefully building up my credit rating, I was able to get a mortgage in my early 30s. I checked my credit score recently and it's 999 out of 999. So it can be done.

Thanks for the replies all. It's good to know someone that was in my position is now debt free and a home owner.

Re. saving for a mortgage - honestly, I don't think it's going to happen anytime soon. We both want to live together which means renting a house. 25 is too old to be living with parents! Rent is so expensive I don't think we will be able to save more than £100 each a month each.

Money saving expert details cards to rebuked credit such as vanquis and Aqua.
If you get one and pay the full balance of monthly you won't need to worry about the I resent rate and you credit rating will improve.

In my experience, it's easier to get credit cards than overdraft. Might not be the same for everyone but I remember having 2 credit cards (one with the bank) but wouldn't allow me to have a overdraft even though I'd always paid the cards off.

Just borrow as much as you can and to whatever to get onto the housing ladder. Then you can start to move up.

Some have had to do 20 hour days for a few years to get there.

If you both earn a decent wage and live with parents how can you only save £100 per month , for a mortgage you will need a deposit ,your credit rating is only one element .

People do not do '20 hour days' as a matter of course for 'a few years', because working like that will wreck your health within months. Show me someone who thinks they work 20 hour days consistently (ie not just in an occasional crisis) and I will show you someone who is counting a lot of time that they're not actually being productive.

If living with your parents would enable you to save more, can you not do that for a bit longer? Once you start renting it's going to be harder to save up the deposit.

Floralnomad, we are in the process of moving into a rented flat at the moment. Property is very expensive to rent in this area meaning we will be struggling to save much at all.

CotswoldStrife, not really an option I'm afraid! Both of our parents have full houses and I think my parents will be very happy I am leaving I was only meant to move back in for 6 months after uni but ended up back for almost 2 years!

The debt you ignored, have you paid it? If you pay it off you can start to tidy your credit rating.

Mortgages aren't tested in the same way as car finance, they look at affordability first and foremost, then how you run your finances - so the ability to save, pay everything on time etc. They don't look at your credit score.

If you pay off your debts, pay all your bills on time, not excessive spending on eating out and clothes and stay in the black on your current account whilst saving up your deposit, you're likely to be approved for a mortgage in a couple of years.

I'm 25 too, bought my first house at 23 but spent every year from the age of 16 working alongside study and putting every single spare penny I had into a savings account. I had £20k when I turned 23 which became our house deposit. That's only 7 years and included 3 years at Uni, so if it's going to take 6 years for you to clear your credit history anyway just get saving! I paid the mortgage (£360), bills and everything except food on 1 wage of £16k a year and still saved £100 a month when me and DP first moved in together, so with 2 "decent" wages there's no reason why you couldn't save way more than that. I don't know what a "decent" wage is, but I'm now on £20k and save about £200 a month most months with the occasional slip up if the car needs repairs or something. Look at your spending and once the debt is cleared dont start living off that money, put the repayments into a savings account instead during the 6 years you're clearing your history. It's so so so doable.

Chin up, set a reserved day each week that you go out for drinks/ meal or whatever and stick to it. You'll get there :)

Keep your repayments on time for 12 months. This is generally the period that will be looked at when you apply for a mortgage.

The focus these days is more about affordability to service your debts (mortgage included), rather than how much debt you have. For instance if you a combined income of say, 50k and a couple of credit cards with a few grand on them, it's not really an issue as long as you haven't got any missed payments. Concentrate on building up your deposit and keeping your payments on time.
DH and I saved hard for 3 years to get a decent deposit together and just kept our payments on time. We had £10k of debt when we applied for our mortgage but as it was only ~10% of our income the bank felt comfortable in us managing that and still affording the mortgage.

Oh and our IFA advised to avoid using money supermarket type sites for searching things like car insurance in the months leading up to applying as they generate multiple searches on your credit file which the computer doesn't like.

You need to at least clear the defaulted balances as it will show that you have satisfied the default. A default will stay for 6 years from when it was registered but is better if you clear it so it shows as satisfied rather than unsatisfied. Another helpful thing is having savings. Each lender has different criteria for lending and you need to be able to show affordability as well as a good credit file.

Re the CC, get whatever car you can, even if it has an atrocious APR.
The idea is to buy little things (£) or whatever) but to ALWAYS repay in full at the end of the month.

Repay your debts ASAP (this will help you save anyway) and remember you are ONLY 25yo! You still have plenty of time to build up your savings and buy.

If you can't afford to save a deposit then it makes not a jot of difference at this point that you have a poor credit rating.

Well if you can't save for a depost then I'm not sure having a bad credit rating is the barrier to home ownership!

Alternatively stop putting your life on hold for a mortgage.

Work on clearing the debt, rent, live, be happy. Millions of people do.

Terrible advice up thread to borrow as much as you can and work 20 hour days! I've been through some terrible times health wise that were completely unpredictable and could have happened to anyone and now have a child with quite severe disabilities meaning we rely on one wage as I cannot work at present. If we had borrowed to our maximum we would have been truly screwed. Only borrow what you can comfortably afford and pay back in the event of a crisis.

How much debt do you actually have now? I was expecting you to say much more than the £1500 it appears to be - unless I have misunderstood. That is a very manageable amount for two people working full time to pay back reasonably quickly if you really budget carefully and shop at Aldi etc etc.

A charity like Christians against poverty (regardless of whatever religion you are, I'm not religious) are very helpful in these situations at working out repayments and informing you of your rights.

When I got divorced 7 years ago my dh left me with 26k worth of debt at the same time as finding myself made redundant and having to move home. That was pretty stressful! But once you have a plan it becomes more bearable.