I have a young friend in his 20s to whom I give occasional basic financial advice – whether his tax code is right, whether a car loan he is thinking about is a good deal and so on. I can usually answer most of his questions as I know his situation well but I have come across one where I am not sure what the best advice to give him would be.
He acquired a county court judgment (CCJ) in rather frustrating circumstances last January. It was a simple parking ticket where the paperwork was sent to an old address and he had been relying on his old housemates to send on his post to him. The first he heard about it was after the CCJ had already happened. He paid the small debt of £265 to the debt recovery company within 24 hours, but now has a CCJ on his credit record. My understanding is that it will be there until January 2025.
In a few months’ time, he would like to buy a property with his girlfriend, who no longer wants to rent and has a stable teaching job. One option is to purchase a property in her name until the CCJ drops off, but it would limit what they could buy.
I have suggested going through a broker to find a mortgage rather than applying directly to lenders, but it brings up a query about a notice of correction. If I help him to write one, it may assist him in his application for a mortgage, although I am not sure how much attention is paid to them.
Would it be better not to write a notice of correction, given the small debt that was owed, so applications can be assessed automatically rather than having to be read by a person? His credit history is fine otherwise, with no credit card debt.
Will the fact the CCJ is for a relatively small amount mean it is not as big a blight as a larger one would be?
A notice of correction allows you to put a note on your credit file to explain any circumstances that resulted in an entry being made. That would allow the reasons for the late payment and consequent CCJ to be noted on the file. Lenders would then have to review the notice which may take it out of a more automated process without resulting in any real benefit. Although lenders should review the notice, it does not mean that it would make any difference to the ultimate decision.
In this case, the mix-up resulted from the error of not amending the registration address of the car – a harsh reminder of how important it is to keep correspondence addresses updated. While a notice of correction should not be viewed negatively at all, it may have limited impact on the success of a mortgage application.
Talking to a mortgage adviser initially would be a good step as they will be able to run through the individual circumstances as a whole. That should help establish whether an application stands a chance of being successful. Having a strong credit score could see the application pass a lender’s requirements in any case.
Making sure that the credit file correctly shows that the CCJ is ‘satisfied’, or paid off, is important and the greater amount of daylight between the CCJ and the application, the more likely a lender would consider it.
If the mainstream lenders will not take it on, then there are specialist lenders that will be able to consider the application although that may carry a slightly higher interest rate.
David Hollingworth is a mortgage broker at London and Country Mortgages.
Do you have a money question for our panel of experts?
At Moneywise, we have a panel of top experts to help with your money and investing questions. If you have a tax issue that’s keeping you awake at night, a question about investing that you’ve always wondered but been too shy to ask, or even need a full money makeover for free, we’d love to hear from you.
If you have been treated unfairly by a firm send the details to Moneywise’s Fight for your Rights and we could take up the fight for you.
If you have a question about your investments or investing in general, put it to our Investment Doctor.
If you have a question about your personal finances – anything from tax to state pensions, inheritance tax, property sales and more – write to our Ask the experts panel.
Would you like a full money makeover? We will arrange a free one-to-one meeting for you with an FCA-regulated independent financial adviser worth over £2,000.
See Moneywise.co.uk/money-makeover for more details.