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Impaired Credit

Also known as bad credit or poor credit- applies to someone who has had problems keeping to credit agreements in the past. An impaired credit history will feature one or more of the following – missed payments (especially on mortgages and secured loans), defaults, CCJs, IVA or bankruptcy. A poor credit history does not necessarily mean you can’t find credit- but it can mean it’s more expensive, as you will be seen as a higher risk.

Income Calculation

Lenders carry out different kinds of calculations to assess affordability. Mortgage lenders use ‘income multiples’- the amount you can borrow is calculated by multiplying your annual gross income- usually by around 3 or 4 times. Secured loan lenders use different methods, usually a percentage of your monthly gross income which allows for living expenses etc. calculations are usually more generous for people with a good credit history, for joint borrowers, for those with high incomes and for those with a lot of equity in their property.

IVA ((Individual Voluntary Arrangement)

A formal, legally binding solution to personal debt problems. If you default on your IVA, you may be declared bankrupt. Also known as trust deed in Scotland.

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