When you apply for a home loan, banks will be looking carefully at your credit history. Having a court writ or judgment on your credit file is a red flag that may have an adverse affect in getting your home loan approved. 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.
Do you qualify for a court writ home loan?
It is possible to qualify for a home loan if you meet the below criteria:
- You can borrow up to 90% of the property value.
- If the court writ is unpaid then you may be required to have a good explanation.
- The larger the 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.
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.
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.
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.
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. This notifies all potential creditors of the court action that you have been involved with and prevents you from being approved for most forms of credit, including home loans.
How long does it 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 (Veda Advantage) 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 your 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.
You can find more information about bad credit and judgment home loans on our support portal.