Study reveals misconceptions about the impact of adverse credit
More than a quarter of people mistakenly believe they need to wait at least five years after receiving a county court judgment (CCJ) before applying for a mortgage, according to the latest Pepper Money Specialist Lending Study.
The study revealed that while 66% of respondents said they understood what a CCJ is, many were unclear on how it affects their mortgage prospects. The research found that 18% of people think they need to wait longer than five years after a CCJ to apply for a mortgage, while 8% believe they need to wait up to five years.
It also highlighted that 4% of respondents had received a CCJ in the past three years, though this was the least common form of adverse credit. The most frequent credit issues were missed payments (11%), defaults from multiple missed payments (7%), and unsecured arrears (7%).
According to Pepper Money’s Specialist Lending Study, 6% reported entering a debt management plan (DMP) in the last three years, and 5% said they had secured arrears.
Among those who missed payments, 30% cited difficulty managing money as the primary cause, 27% pointed to a temporary reduction in income, and 22% said increased expenses were to blame.
More than 15 million people in the UK have experienced adverse credit, the highest number recorded since Pepper Money began tracking this data five years ago.
Paul Adams (pictured), sales director at Pepper Money, said the findings underline widespread misconceptions about the impact of adverse credit.
“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 said.
“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 challenge these misconceptions and help more people achieve their goals.”
Jon Stones, managing director at Mortgage 1st, echoed Adams’ comments, stating that many customers do not fully understand how adverse credit impacts their mortgage options.
“If we allow these misconceptions to continue, thousands of people could be missing out on accessing the mortgages they need,” he said.
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