We have made some of the most complex subjects, simple..
This is simply a grand way of saying bad credit. It’s a general term which covers any type of previous credit issue someone might have experienced, such as debt management plans and individual voluntary arrangements. These terms are all explained below.
Bankruptcy is a nuclear option if someone owes more than £5,000 and can’t pay it back. It wipes out existing debts and lets people make a fresh start. However, bankruptcy can have a major impact on a person’s credit record for many years.
A broker is someone who buys and sells goods and assets on behalf of someone else, or negotiates contracts for them. At Tailored Money, our mortgage brokers do all the hard work and form-filling on behalf of our clients.
County Court Judgements
In England, Wales and Northern Ireland, a County Court can make a judgement that someone has to repay a debt. CCJs are a form of legal action, telling the debtor how much they need to repay and over what time period. Money is often deducted from a person’s wages until the CCJ is paid off.
Credit Reference Agency
Credit Reference Agencies are legally allowed to receive and retain information about everyone’s financial history. There are three CRAs in the UK – Experian, Equifax and TransUnion, who were previously known as Callcredit.
Each CRA produces its own type of credit report on individuals. Each report details the person’s financial background, their history of debt and how promptly they’ve repaid it, and so forth. People with good credit reports are more likely to be approved for the best mortgage deals and loans.
Credit reports are long (and quite dull!), so CRAs summarise their findings in a credit score. This provides a quick summary of how good a person’s credit history is. Higher numbers are always better, but the scales range from 0 to 700 (Equifax), 0 to 710 (TransUnion) and 0 to 999 (Experian).
Debt Management Plan
A debt management plan is a way of paying back money over a fixed time period. It’s less damaging to a person’s credit report than a CCJ, and is often set up by a specialist debt management company. They will assess a person’s incomings and outgoings, to decide what they can afford to repay.
Debt Relief Order
People with little spare income or assets might be able to get a debt relief order from an authorised debt adviser. It prevents them being pursued for debts, which are often written off after a year. A DRO could affect someone’s ability to rent property, get credit or even retain a bank account.
A default on a loan or repayment plan happens when the scheduled payment isn’t made. A single missed payment might be regarded as a default by the lender, though other creditors take a more sympathetic approach. Even so, any defaults will be logged against that person’s credit history.
Equity is the money you’d receive into your bank after selling a property and paying off any mortgage debt. A property worth £100,000 with a £75,000 mortgage outstanding contains £25,000 of equity. This can often be unlocked by remortgaging.
An individual voluntary arrangement, or IVA, is a legally binding repayment plan between a person and a creditor (anyone the person owes money to). IVAs are negotiated by insolvency practitioners, and they ensure creditors are paid everything they’re owed over a mutually-agreed time period.
If your car loan is due to be paid on the first of the month, but you don’t make the payment til after that date, it’s late. A history of late payments won’t concern mortgage firms as much as a history of defaults, but it’ll still lower your credit score.
Lenders provide funds to customers for remortgages, personal loans and other financial transactions. A mortgage lender is the company handing over the funds for a remortgage. As such, the lender is often distinct from the broker or mortgage advisor negotiating the deal.
Loan To Value (LTV)
This is a percentage figure based on the amount being borrowed for a mortgage, compared to the value of the house. A £75,000 mortgage on a property valued at £100,000 would have a 75 per cent loan-to-value. Lower LTV percentages tend to result in lower interest rates and cheaper repayments.
Panel Of Lenders
A panel of lenders is a shortlist of companies who can be approached with enquiries and applications on behalf of a broker or advisor’s customers. It means mortgage brokers are restricted in where they can look for deals and competitive offers. Tailored Money isn’t limited in this way.
Second Charge Mortgage
A second charge mortgage is a long-term loan secured on someone’s home. It’s an alternative to remortgaging, if the existing deal has an early repayment fee or a competitive rate. Second charge mortgages can be for however much equity is left in the property after the mortgage is repaid.
Secured borrowing is any loan taken out with a property as security. If the person taking the loan fails to repay it, the lender can seize that property and sell it to get their money back. Secured borrowing has low interest rates, because the lender knows they won’t end up out of pocket.
Standard Variable Rate (SVR)
Many mortgage/remortgage products have a low introductory interest rate, for a set period. After this, mortgages tend to default to a standard variable rate which sits a certain percentage above the Bank of England’s interest rate. This is often a good time to remortgage for a better deal.
The information listed on this page is accurate at the time of going to print. However, lender policies and lending criteria are constantly changing, so please speak to one of our advisors for the latest advice. This content is meant for general information, and is not intended to serve as financial advice, or to represent every reader’s specific financial circumstances. Tailored Money advisors are fully qualified to provide mortgage advice under rules laid down by the Financial Conduct Authority, and they are able to provide specific advice based on your financial history and requirements. Mortgages are secured against your home, and your property may be repossessed if you do not keep up with repayments. Equity released from your property will also be secured against it, so please think carefully before taking out debts secured against your home.