Did you know that having a court writ or judgment on your credit file is a red flag that may impact your ability to qualify for a home loan?
Most banks will flatly refuse applicants with court writs, whether they’re paid or not.
Some non-conforming lenders may approve your loan but it will depend on a number of criteria.
How much can I borrow?
With select lenders, you may be able to borrow up to 90% of the property value.
To qualify, the following criteria generally applies:
- If the court writ is unpaid, you may be required to have a good explanation.
- The larger your deposit, the better chance you have in getting your loan approved.
Some lenders may want to investigate further into the nature of the court proceeding and most will want the writ to be paid before they issue your approval.
Please call us on 1300 889 743 or enquire online and one of our specialist mortgage brokers will be able to determine which lender best suits your situation.
Can I qualify with a bank?
Most banks want to see a clear credit history for their borrowers and will not approve loans for people with any type of bad credit. A few will review and consider applications on a case by case basis.
For the banks that can consider your application, you will not be able to borrow more than 80 per cent of the purchase price, so you will need a large deposit.
Having a strong financial position and a mortgage broker that can help you to present your case can help.
If we can assist you to qualify with a bank, then you will receive the same low interest rates as someone without an adverse credit history or court writ.
Please call us on 1300 889 743 or enquire online to find out more.
What if the writ wasn’t my fault?
More often than not, banks are not concerned with the circumstances that resulted in a court writ on your credit history. They just care that it’s there!
If it was your fault or not, the banks still see you as a high risk borrower that may default on their loan.
Sometimes your best option is to provide good evidence with strong supporting documents as to why you are not a high risk.
For instance, if the court writ was due to a business failure and you managed to find new work, or you have been on time with other credit payments.
Even then, getting a lender to listen to your situation isn’t easy!
There are borrowing options out there if you can provide sufficient evidence to make a case. Please call us on 1300 889 743 or enquire online to see how we can help you.
Can a specialist lender help?
Specialist or non-conforming lenders are great at assisting non-traditional borrowers. That is, borrowers who have a black mark on their credit file or who do not meet standard bank lending criteria.
Usually, specialist lenders won’t investigate the cause of the court writ. Instead, they will require a bigger deposit than standard home loans and will want to make sure you are in a strong financial position.
Some specialist lenders, however, will want to know the full story behind your court writ backed up with evidence such as a letter from your solicitor.
For others, a letter from you explaining what happened will suffice.
What will my interest rate be?
Specialist lenders typically charge 1 to 3 per cent above the standard bank interest rates, however this can vary. A higher interest rate is charged because you are considered a higher risk customer.
The larger your deposit the lower the interest rate that we can get you with a specialist lender. In some cases, we can assist you to qualify for standard bank interest rates!
How long do I need to stay with a specialist lender?
In some cases, after you pay back the writ, you can go to court and have it removed from your credit file.
Also, if you have made repayments on time with your specialist lender for at least 12 months, you may be able to refinance with a major lender.
Remember though, not all major lenders will accept you! They have their own internal database which includes past applications and accounts that you have had with the bank.
Some of your past credit problems will show up on these internal databases even though your credit file doesn’t have the court writ on it any more.
What is a court writ?
A court writ is a formally written document that is issued by the court. Warrants, prerogative writs and subpoenas are all types of writs that refrains the person it is addressed to, from doing a certain act.
In most cases, it’s a court case someone has lodged against you or the company you run.
A writ can be recorded on your credit file in some circumstances, in particular if you have not complied with the court’s order.
The credit file is held by credit reporting agency Equifax, which used to be Veda Advantage, and notifies all potential creditors of the court action that you have been involved with.
It can prevent you from being approved for most forms of credit, including home loans.
How long does a court writ stay on my credit file?
As soon as a statement of claim is issued against you or the company that you run, a court writ listing will be recorded on your credit history.
The court writ is considered by the Privacy Act to be public knowledge. As such, a credit reporting agency (Equifax) receives this data from the courts and will record it in the individual’s credit file.
A court writ will stay on your file for five years. It may be replaced by a judgment if the matter continues in the court.
Once you’ve paid your debt, there are options for removing a court writ but each state is different when it comes to the legal process.
For example, when it comes to court matters in New South Wales, a Notice of Discontinuance or a Consent Order will need to be used.
If the matter is settled with the plaintiff outside of court, a Notice of Discontinuance is used to set the matter aside.
If the matter progresses to a court judgment, a Consent Order will need to be signed if you want it removed from your credit file. This stipulates that the plaintiff consents to a judgment being set aside.
After the matter is settled, you can have you court writ removed from your credit file.
While a court writ or court judgment may seem like a death sentence when applying for a loan, the quicker that you pay off the debt, the better!
It shows that you are making a real effort to pay back your debts, rather than throwing in the towel and declaring bankruptcy.
To find out if you qualify for a credit home loan, please contact Home Loan Experts on 1300 889 743 or enquire online.