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COVID-19: Will my Credit Score be affected by a Mortgage Payment Holiday?

29 April 2020

Coronavirus mortgage payments holiday

Think Plutus can confirm that taking a break from your mortgage payments during the COVID-19 crisis will NOT affect your credit rating. Credit reference agencies have announced that this is the case, so you can rest assured that if the pandemic has you struggling financially, that won’t be reflected in your credit file.

There is widespread concern about the possibility of loss of income due to wage cuts and job losses. Nevertheless, many have been reluctant to take up the option of a mortgage holiday due to fears that their credit score will be adversely affected. This is because missed debt repayments usually have this kind of impact, and that can make it harder to borrow in future.

The big three credit reference agencies, Experian, Equifax and TransUnion, have confirmed that people’s credit scores will be protected if they need to take one of the newly-introduced mortgage holidays. This is made possible by the implementation of a special measure known as an “Emergency Payment Freeze”, which guards against damage to credit scores during a formal payment holiday. Essentially, these holidays will not appear on your credit report. Ever.

Jonathan Westley, Experian’s chief data officer, noted how “challenging” these times are. He acknowledged that people’s fears about their income are just as valid as fears about their health. He advised people to “speak to…lenders and other providers as soon as possible” if they are “worried about meeting regular payments”.

There will be delays

You must act now to obtain your lender’s agreement to a payment holiday if you haven’t already. Do not cancel your direct debit, as this will appear on your credit record as a missed payment, which could damage your chances of borrowing or remortgaging in future. If you’ve been trying to contact your lender to agree a payment holiday, please be aware that they are experiencing a high volume of calls right now, so it may take longer than usual to get a response.

Some lenders are offering the facility to apply for payment holidays online, so check your lender’s website to see if they have this feature. Also, consider whether an alternative option to a payment holiday might make your monthly costs more manageable – your lender will be able to discuss your options, or get in touch with our advisers who will be more than happy to help you.

Written By

Dave Relfe MCSI DipPFS CertSMP

Dave is the principal mortgage and protection adviser at Think Plutus. He has more than 15 years of experience in financial services and holds the Diploma in Financial Planning from PFS, Investment Advice Diploma from CISI, and the Certificate in Advanced Mortgage Advice from the Society of Mortgage Professionals. He has devised the unique Think Plutus approach that has helped many clients, from first-time buyers to buy-to-let investors and property developers, to people looking to remortgage or release equity from their property. Connect with Dave on LinkedIn.

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