Advice needed for poor credit history!!

[moovet]

Hi all,

Have asked a couple of people on the forum about this problem privately and I appreciate their advice.

My partner has been contacted this week by Baycorp re: a $3000 credit card debt that goes back 4 years before we went overseas. We haven't got the details yet but we are assuming it is mainly made up in penalty fees and interest. She thought the account had been closed before we left 4 years ago. We have been back for 18mths and not heard anything about it.

Anyway worst case scenario if the debt is real and it has gone to Baycorp, does this definitely mean our credit history is screwed for 5 years?

More importantly, if it is screwed, what property investing strategies can I focus on to create wealth over those 5 years? Property finding? SLO's?

I have only 1 more property I can buy with my current bank before they class me as commercial so I was looking at changing banks soon as well.
If our credit is shot we will try and negotiate with the bank to get it restored if we pay the debt in full straight away but only after we are certain that we are totally liable. She is a director for both our LAQC and corporate trustee company.

Any brainwaves would be great!! There must be some ways around this.

Cheers,


Geoff

[captaincrab]

There sure is. You can use "lo-Doc" lenders who arent fussy about the odd Credit glitch. Companies like Approved mortgages, Bluestone Mortgages etc .Or, you could hide behind your Trust. Your Partner would have to step down as Director and Trustee but could still be protected by being a beneficiary.

[SuperDad]

Hi Geoff,

Did you vote on pooomba's poll? If so, did you select answer 1 ("To have a fabulous fulfilling relationship with a partner/spouse")?

If not, you can always trade in Helen for a model with a better credit history Besides, no wedding = another investment property!

But seriously, good luck.

Paul.

[Monkeyboy]

If you have to pay it make sure it is not paid until it has been removed from your credit report. If the bank says they want to see the money first then give it to your solicitor who will pay it out on a clean CRA.
It will need to be explained away everytime you go for a loan. Yes Lo-Doc is one way around it but you will incur higher interest rates. Better to get the issue sorted. Usually lenders will let the small ones go but when it is to a bank they get a bit weary. You can also negotiate a smaller amount with the bank, but the important thing is to clear up your wifes CRA. It also doesnt mean you have to be screwed up as you can just buy in your name anyway, leaving your wife out of the equation. Good Luck

[captaincrab]

Michael, I''ve seen this before. The Bank wont remove it and neither will Baycorp even when it is paid. Basically because the default sounds valid. She owed, she left, she didnt pay.....But, yes , it will have to be explained every time.

[Monkeyboy]

I know what you are saying CC and you are probably right regarding the Bank. They are pretty staunch when it comes to these issues. Usually the smaller ones can be removed. Baycorp are obliged to remove the file if requested to by the creditor.

[MikeO]

Captain Crab is right - they won't remove it. It is important to note though that the bay report shows both the original debt amount and also the amount currently outstanding. A paid default is often/usually viewed more favourably than and unpaid default and the bank is probably more likely to believe your explanation if you have subsequently paid the debt off.

[BusyLizzy]

Even if the bad credit rating remains, does this necessarily preclude you from borrowing again? Wouldn't that, in part, also depend on what equity you already have, and your DSR?

Surely the banks would take into account his partner's longer term history, and Moovet's history as well, when considering another loan application?

[MikeO]

Yes usually a range of factors are taken into consideration. Typically credit providers have what's called a credit scorecard which adds or subtracts points based on the information they have about you and this gives a final 'score' representing the overall default risk you present. They may also have rules around defaults on your bay file however I would be surprised if one paid default would be much of a problem (a large unpaid one may be however....)

[roseneath_rat]

Lenders typically take a dim view of unresolved defaults/collections on a credit report. It will all be taken into perspective, a nominal $200 from dispute over an electricity bill won't matter much, but a $3,000 unpaid credit card bill will raise eyebrows. Its at the point where it wasn't big enough to warrant serious investigation (especially while you were overseas) but large enough to affect your credit. The old $55 NZ Broadcasting fee collection used to pop up on a surprisingly large number of applications before those costs got wiped out.

At this level of 'default' you will definitely get the "please explain" call from the lender, it doesn't mean you credit is 'shot' but if it remains unresolved you will find an unwillingness to advance further lending at standard terms.

Once the debt is cleared with an adequate explanation provided then you should find it business as usual.

[Monkeyboy]

It would also be a good idea to get a good explanation from the bank in writing to back up any explanation you may have. This will help when trying to explain it with any lender. You must certainly get it cleared up otherwise a lender will only ask why it isn't cleared up and take a dim view of it.
If there is a dispute regarding the situation then it should not be registered with Baycorp. If you are disputing it then make all parties aware of this and it should be cleared off record.

[moovet]

Thanx guys. Good advice thats much appreciated. We are still waiting to get the exact details of what is owed and the history on it. If there is anything disputable we will dispute it. Otherwise we will clear it up straight away. I am finally getting agents coming to me with the 6 D's. I don't want to miss opportunities because of this. I have been working so hard these last few months and learnt a lot. This has just come along to test us but we'll get through. I just want to be prepared. Will get an update on my own personal credit history and make sure there are no surprises!!
Great idea Michael about getting written explanation from the bank. We will do that if necessary.

Regards,


Geoff