One of the first questions we’re often asked at Negative Equity UK is ‘will negative equity affect my credit rating’?
Clients are often worried about how their current property debt situation will affect their ability to borrow in future, whether it’s to buy another house, or take out personal loans to cover any other expenses that might arise.
What is a credit rating?
A credit rating is essentially an estimate of a person’s ability to meet their financial commitments based on their financial history. When you apply for a mortgage or other personal loan, your lender will use your credit rating to determine whether or not you qualify for a particular product.
When you apply for a loan, your credit rating will determine whether or not your application is successful and can influence the interest rate that you end up paying.
Borrowers with a higher credit score are usually seen as being more able to meet their repayments and therefore presenting a lower risk of default to the bank.
A number of factors can affect your credit rating including how much of your available credit you’re suing and how much debt you have in total; your history of making repayments on any loans you’ve taken; public records showing any country court judgments (CCJs) against you.
Will negative equity affect my credit rating?
Having negative equity on your property won’t affect your credit score in and of itself, but if you run into financial difficulty and can’t keep up with your mortgage payments, or you need to move house while your current property is in negative equity then some of the ways we can help you deal with this property debt might affect your credit score.
In helping you to deal with your property debt we will always try to come to agreement with your lender to write off as much debt as possible. In some cases, where an informal agreement isn’t possible, an Individual Voluntary Arrangement (IVA), or even bankruptcy might be suitable.
Because in these cases you won’t fully repay the money you owe to your lender, they will have a negative impact on your credit rating. However, this shouldn’t put you off dealing with your unaffordable property debt.
A poor credit score can be fixed over time by paying bills and other loan payments when their due. You will fix your credit score a lot faster by dealing with your property debt quickly when you realise there’s a problem, rather than waiting for the situation to get worse.
We can help.
If you’re struggling with unmanageable property debt, whether your home is in negative equity, you’ve fallen into arrears, or you can’t afford to repay the principal on an interest only mortgage, take a look at our reviews and contact Negative Equity UK on 0161 631 2727 or go to our website to arrange an initial free, no obligation consultation and begin the process of becoming debt free.