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Make Your Notice Of Correction Pay!

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1st UK has got a new mortgage lender, not featured on the main comparison sites who are much more willing to lend – at a competitive rate, for people that have completed a notice of correction.

The lender will do owner-occupier mortgages, buy to let mortgages and limited company buy to let mortgages. They lend against residential property only – no commercial property or mixed-use titles.

Many lenders simply ignore your well-chosen 200 words because they have not done the work to find out how it changes the risk profile of the mortgage.

Obviously, the amount of poor credit evidence in your file and how recent it is does still have an impact on their willingness to give you the good rate. For example, if you got a default very recently for a relatively large amount of money, they might not be particularly sympathetic.

Older credit entries, however, this lender may be willing to look the other way.

Due to interest rates being very low or in some cases negative, lenders are forced to take on sensible amounts of risk to get some interest on their money.

This lender offers:

  1. Purchases and Remortgages
  2. 2-year, 3-year, and 5-year fixed-rate deals. Plus, a discounted variable rate offering
  3. Low APR rates not far from the fussy prime high street banks
  4. No product fee, no lender fee, no broker fee, no booking fee, and no completion fee
  5. Low cost automated house valuation
  6. Repayment or Interest Only payments

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The abbreviation NOC stands for Notice of Correction. The Consumer Credit Act 1974 (CCA) requires that the entries on your credit files be accurate to represent a factual account of your credit history.

If you feel there are entries on your credit files that could be misleading lenders, you have a right to request the credit referencing agencies apply a Notice of Correction to any entry you feel may be misleading to potential lenders.

Excerpt from the CCA 1974

“Under section 159 of the CCA 1974, if any of the information held is incorrect the agencies can be asked to remove or amend it, or to add to their records a “notice of correction”. A notice of correction is simply a statement of up to 200 words written by the individual, which gives a clear explanation of why he considers the entry to be incorrect. If the agency amends the file or adds a notice of correction, it must also send the details to any lender who has consulted the file in the previous six months, and to those who do so in the future.”

~ Parliament.co.uk/commons-library (Briefing Paper on Credit Reference Agencies)

The wording of the Act can lead you to believe that NCOs are only applicable to errors recorded on your file. This is not the case as the purpose of a Notice of Correction is to give consumers a chance to explain the situation.

Inaccurate entries must be removed or amended by the credit reference agencies. When the information is factual, a NCO gives a sort of recourse to have your file amended to reflect the situation that resulted in whatever entry is on your file that you feel to be a misrepresentation of your credit history.

Of note here is that a NCO is only really going to be beneficial to those with only a single negative entry, or a small period of time on their credit report with multiple negative entries. This could be a result of a previous employer going out of business, or an accident that left you unable to work for a period of time, resulting in lost income, or perhaps a delay in sick-related benefits being paid either by your employer or by the State.

What a NCO will not be useful for is simply using it to insert excuses across multiple entries.

It’s a method that can be used when there’s been extenuating circumstances.

Extenuating circumstances are those that are outside of your control. Things like illnesses that aren’t a minor illness or a family bereavement. Those are extenuating circumstances that if applicable to the dates of entries on your credit file, may be worth adding a notice of correction to explain to lenders the situation you were in.

Extenuating circumstances are not mediocre excuses!

A Notice of Correction should not be used to record just any excuse for a failure to pay. This isn’t the intended purpose, so things like…

  • My wife handles bills and was away on a business trip, resulting in late payment
  • Payment was only late by one day
  • I didn’t receive a reminder notice
  • Failure to pay penalty disputed

Those won’t do you any good.

Here’s why…

Lenders must read NCOs before making a decision

In the paragraph earlier concerning the excerpt of the CCA 1974, it states that previous lenders to have viewed your credit file within six months of the NCO being added must view and consider the Notice of Correction. This applies to future lenders to view your credit file too.

What this will also do is eliminate all your credit applications from automated credit scoring processes, the reason being that it’s impossible for an automated process to evaluate the contents of a Notice of Correction.

Instead, the credit application must be manually reviewed. This will cause all your credit applications to take longer.

“Credit scoring models are used during the loan approval process to predict the likelihood of borrower delinquency. Online lending banks receive thousands of loan applications per day, and use automated assessments to approve or reject them in real time.” ~ Thetaray.com

When you consider that thousands of loan applications are made every day, you also have to consider the decision-maker of any application you’re making.

Once an application has been credit-scored, it’s usually then that the application will be manually reviewed by someone. By applying a NCO to your credit file, you’re effectively bypassing the automated credit scoring, ensuring that someone at the company reviews your application manually. As you can expect, for the decision-maker, they’re not going to be impressed if your entry simply states “payment late by only one day”. Especially if without that entry, the credit scoring system would’ve prevented your application reaching the manual review stage, thus saving them time.

A wise approach to using a NCO is to consider if what you have entered onto your credit file is likely to alter the opinion of the decision-maker.

For example…

A creditor has added a note to your credit file indicating an account in default. This could be a default of your contract with the company and not specific to a default on your payments.

It may be that you’ve agreed to a contract, but afterwards realised that you’d inadvertently added a high interest insurance premium, which you hadn’t realised when you signed and agreed to the contract terms. After learning of the additional cost, the account was settled and the contract cancelled without paying for the remainder of insurance premiums.

In such a case, a NCO could be used to provide lenders with a factual notice of correction.

Example NCO for above scenario

This account is and was satisfied. An insurance cancellation was not settled due to a misunderstanding of the contract terms. This is a contract default due to a misunderstanding of Terms and Conditions and not a payment default.

You have 200 words maximum to present your situation to potential lenders. In the above situation, the NCO would make it clear to the reviewer what the reason for the default is. It’s beneficial to them as they can now understand that the default is not a payment default but instead a contractual default due to a misunderstanding of the small print.

What you record using a NCO has to be read by a manual review of your application for any credit. The creditor should take it into consideration, but they aren’t obliged to do so. The only true way for a NCO to be effective is for it to be appealing to the decision-maker and not read as a simple excuse. Especially considering that they may not be impressed by the fact you’ve bypassed the automated process.

The information on your credit file doesn’t need to be wrong for you to add a Notice of Correction to it. If you feel there’s information that could mislead lenders recorded on your credit file, a “Notice of Correction” can be used to explain your situation.

To find out How to Add a Notice of Corrections, please refer to the individual help pages of the three UK credit reference agencies.

All three Credit Reference Agencies should be provided with the same NCO to ensure it’s applied to all your credit files and not just one agency.

NCO help pages:

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