Credit report’s… it’s a boring topic, we know! However, it was highlighted to us recently, just HOW important it is to have a client’s credit report up front.
We have a portfolio landlord, with 20 properties and they’re
looking to remortgage an existing
unencumbered property. The property’s a 7 bed HMO, worth £240,000 and we find a 5 year fixed mortgage of £180,000. This was the lowest overall cost over 5 years—jackpot!
All the figures stacked up, 3.69% fixed for 5 years, with a 1.5% arrangement fee & some cashback.
And then.. DECLINED?!
We start thinking, what’s the problem? We spoke with the lender and they confirmed the client had a good credit score but it was outside of policy. After speaking with the client, we reconfirmed that there had been no prior credit issues. So, we asked for a copy of the credit report so we could have a look for ourselves.
As we started flicking through, at first we couldn’t see the
problem—no CCJ’s, no defaults, all
impeccably maintained essentially!
Apart from one oversight.. There, hiding in a status code of a credit card account, was a number 2.
This meant the client had missed 2 payments on the trot. They had 2 credit card accounts with the same bank and were paying them manually every month, rather than setting up a direct debit. The last 2 months, the client had accidentally made all payments to 1 card, leaving the other with 2 payments in arrears.
The lender’s policy had specified they would only allow 1 missed payment in the last 12 months, and this was 11 months ago, explaining why our client was ‘outside of policy’ with 2 missed payments.
We found our client the next best mortgage available, but the interest rate was 0.25% higher, the arrangement fee 0.5% higher, no cashback and a slightly higher valuation fee. Whilst these numbers look small, the total effect was an extra £6,687 in costs over the 5 year fixed period.
If this was a purchase, the clients would have had to carry on or risk losing the deal. Luckily, because it was a remortgage, we could wait one month for the credit report to update and come inside of the lender’s policy. This did, however, come with no guarantees of acceptance when we resubmitted.
The moral of this story, is to ALWAYS get your credit report ready for a mortgage application up front. That way, we aren’t going to have any nasty surprises, that you may not even know about!
If you’d like us to take a look at your portfolio (or credit report), just get in touch and we’d be happy to discuss!