Can I Get a First-Time Buyer Mortgage With Bad Credit in Scotland?

What lenders tend to look at

Lenders do not treat all adverse credit in the same way. When they assess a first-time buyer with past credit problems, their questions usually come down to these:

• What happened — a late payment, a default, a court decree or a formal debt solution.
• When it happened — older problems usually carry less weight than recent ones.
• How much was involved — the amounts, and how many separate problems there were.
• Whether it has been settled — and what your credit history has looked like since.
• Whether it is behind you — a single period of difficulty is generally viewed differently from a continuing pattern.

Two applicants with a default on their file can receive very different answers, depending on these details. Assumptions in either direction — that a mortgage is out of the question, or that it will be straightforward — are worth checking before you start viewing.

Why the deposit matters more

For a first-time buyer, the deposit is often where a credit problem shows most. A lender that will consider adverse credit may want a larger deposit, or may only offer certain products, particularly where the problem is recent or significant.

That affects your budget, your price range and the help schemes you may be looking at. Our guide to how much deposit a first-time buyer needs covers loan to value and the other cash you will need.

Court decrees in Scotland

In Scotland, a court order for unpaid debt is called a decree. Registry Trust, which keeps the public register, explains that decrees stay on the register for six years unless, for example, the decree is paid in full within one calendar month of its date and proof of payment is provided. A decree paid after that can be marked as satisfied, but it remains on the register for six years from the date of decree.

A satisfied decree is generally viewed more favourably than an unsatisfied one. If there is a decree you did not know about, or one that should have been removed, it is worth dealing with before you apply.

The Debt Arrangement Scheme, trust deeds and sequestration

Scotland has its own formal debt solutions. The Debt Arrangement Scheme lets you repay debts through a debt payment programme. A protected trust deed and sequestration (bankruptcy) are formal insolvency procedures. Bankruptcies and trust deeds appear on the Register of Insolvencies kept by the Accountant in Bankruptcy, and debt payment programmes are recorded on the separate DAS register.

Lenders will generally want to know whether the arrangement has been completed or discharged, and when. Some will not lend while one is still running. Others may consider an application once a period has passed since completion or discharge, often with a larger deposit. Keep your completion or discharge paperwork — you are likely to be asked for it.

How long information stays on your credit file

As a general rule, information such as defaults and insolvencies stays on your credit report for six years. Checkmyfile gives defaults as six years from the default date and insolvencies as six years from the date of issue, and notes that an insolvency which has not been discharged can remain on the report for longer.

Even once something has dropped off your file, a lender may still ask about it on the application. Answer honestly. Leaving out something you were asked about causes far more difficulty than the problem itself.

Checking your credit report before you apply

Before you approach a lender, it is worth getting copies of your credit reports from the main credit reference agencies and reading them carefully. Mistakes do happen — accounts that are not yours, settled debts still shown as outstanding, or old addresses linked to someone else.

• Check for errors — and challenge anything that is wrong with the agency concerned.
• Check your address details — being on the electoral register at your current address can help lenders confirm who you are.
• Keep current accounts up to date — your recent conduct generally matters more to lenders than older history.
• Avoid new credit and repeated applications — new borrowing, and applying to several lenders in quick succession, can affect how you are viewed.

It is far easier to put an error right before an application than after a decline. Our guide to agreements in principle explains how credit searches work at the early stage.

Being open about your history

It can be tempting to leave something out, especially if it happened a long time ago. It is better not to. Lenders check, and non-disclosure can lead to an application being declined, or to problems later.

Telling your adviser everything at the start is what allows them to look at lenders whose criteria may suit your circumstances, rather than discovering a problem halfway through an application.

Where to start

If you are a first-time buyer with a past credit problem, the most useful first step is a frank conversation about what is on your file, when it happened and what deposit you have. That gives a realistic picture of whether now is the right time to apply, or what may need to change first.

Our first-time buyer mortgage advice page explains how we help. If your situation involves more than credit history — unusual income or a non-standard property, for example — our complex cases page covers those as well.

Common questions