When you look at your credit report, you may see numbers (typically 0-6 and 8) or AR etc so in this post I will go through what all of those statuses on a credit report mean, when applying for a mortgage.
The statuses on a credit report can vary from credit report to credit report, CreditKarma (which used to be Noddle/Call credit) for example uses letters instead of numbers but as that is rarely used I will just stick to how the rest of the market works.
If you do not have a copy of your credit report, there is a good one called CheckMyFile which shows all 3 of your credit reports in one file and therefore you can see all of the statuses on a credit report from all three credit agencies at once. There is a monthly subscription cost for this after the 30 day free trial, but you are able to cancel at any time.
Everything is ok (Status 0)
The best thing on your credit report is the number 0. This may also show as “OK” If this is showing, it means your payments are up to date and there are no current issues for that commitment.
These type of statuses on a credit report are nothing to worry about and show lenders that you have been making your payments and maintaining your credit agreements.
Status 1 to 6
A Status 1 typically means you were either late paying (this could be by a day or 30 days or anything in between) or you missed a payment completely.
Status 2-6 means you have gone 2 to 6 months in arrears and have missed a number of payments consecutively.
These type of statuses on a credit report can signal issues for some. Generally speaking lenders are ok up to a Status 2, once it goes beyond that there are Regulatory rules which may kick in and so lenders have to follow rules beyond their control. Although a lot will depend on how long back you had the arrears statuses.
Status 8 or “D”
Status 8 means the account has gone in to Default. That means you have missed 6 consecutive payments and the account has been closed as it is in Default.
These type of statuses on a credit report are quite serious when looking at applying for a Mortgage.
Lenders are typically interested in 4 things when it comes to a Default:
- When was it registered – generally speaking if they are over 3 years old, they have less of an impact.
- How much was it for – the higher the default, the more of an impact it will have. A lot of lenders have a tolerance for Defaults, typically £250 or £500.
- Has it been Satisfied – lenders stance on this varies and whether you should Satisfy the default or not or put the money towards a bigger deposit is a question that crops up periodically.
- How many defaults are there – 1 default from 4 years ago gives you a good chance of high street rates. 10 Defaults from 6 months ago gives you probably no chance of high street rates for a couple of years.
AR Status on a credit file means an Arrangement to Pay is in place. These type of statuses on a credit report tell the lender that you have either set up a payment plan with the creditor or you have entered a Debt Management Plan.
What are we looking for as a Broker?
Firstly, at Mortgage Success we just want to ensure that what you have told us is correct and that. That is not to say we do not trust you but it is easy to mention what you think are the big things are there could be something else that causes a problem (for example a Status 3 less serious than a default in the main but could stop an application in its tracks), so we just want to ensure we have everything correct before doing the research.
We also want to make sure that the balances and repayments on commitments you gave us are correct. Again it is not to say we do not trust you, but we potentially liable for any mistakes, so we need to ensure what we are submitting is correct but more importantly, it also helps to ensure your application is correct and prevents any issues down the line making your application a lot more seamless – it is better to pick up on any potential problems before we submit an application and make sure we cover it all off upfront.
We also like to weigh up the likelihood of your application being accepted with a particular lender. We always say that fitting criteria and being accepted can be worlds apart and from experience we get to know which lenders are likely to accept your application and which are less so.
We just want to make sure that we are getting you the best deal we can and also that your application will be accepted. It helps to prevent loss of fees (such as valuation or booking fees) and saves time.