More than a quarter – 26% – of people think they need to wait five years after a county court judgment (CCJ) to be able to apply for a mortgage, a study from a specialist lender found.
The latest Pepper Money Specialist Lending Study showed that two-thirds of people knew what a CCJ was, but many were unaware of how it might impact their mortgage prospects.
Some 18% believed there would be a wait of more than five years after receiving a CCJ before someone could apply for a mortgage, while 8% thought they needed to wait up to five years.
The study found that 4% of respondents had received a CCJ in the last three years, but this was the least common reason for consumers having adverse credit.
The most common reason why people had adverse credit was a missed credit payment, which applied to 11% of people, while 7% had missed several payments and defaulted.
Some 6% entered a debt management plan (DMP) within the last three years, while 5% had secured arrears.
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Difficulty managing money was the main reason people missed payments, as cited by 30% of respondents, and 27% said it was because they had reduced income for a period. For 22% of people, they missed payments because their expenses increased.
Paul Adams (pictured, right), sales director at Pepper Money, said: “The Pepper Money Specialist Lending Study is an important barometer for understanding the financial circumstances of the nation’s households, but it also shines a light on common misconceptions. Despite the fact that 78% monitor their bills monthly, there’s an upward trend of adverse credit in this year’s study. 8.38 million people have experienced adverse credit in the last three years. This is the highest figure since we began our regular research five years ago.
“There remain some significant misconceptions about the impact that adverse credit can have on a mortgage application, with more than a quarter of people believing they would need to wait at least five years after a CCJ before applying for a mortgage.”
Adams added: “The reality is that many people with a CCJ could still have a successful application within months of it being registered. This presents a big opportunity for brokers to work with existing customers and new customers to challenge the misconceptions and help more people to achieve their goals.”
Jon Stones (pictured, left), managing director at Mortgage 1st Business, said: “Unfortunately, just a little knowledge can be a dangerous thing. While it’s encouraging that so many customers are aware of their credit profile, this research shows there are still many people who don’t fully understand the impact it can have on their mortgage opportunities.
“As brokers, it’s important that we help to get the message out to our customers, existing and potential, that there are options for them, even if they have recent experience of adverse credit. If we allow these misconceptions to continue, thousands of people could be missing out on accessing the mortgages they need to help them achieve their goals.”
