Banks and building societies in the UK have agreed with regulators and HM Treasury to extend the provision of mortgage payment deferrals of up to a maximum of six months in the light of the tightened Covid-19 restrictions announced by the Prime Minister las week. But the devil is in the detail and those taking any form of deferrals or new reduced payments plans will have the changes reflected on their credit score.
Robin Fieth, Chief Executive of the Building Societies Association (BSA), said: “Building societies and credit unions recognise the financial pressures on some households and will continue to work hard to support customers in the coming months, working closely with the FCA.”
Customers seeking to access this support do not need to contact their lenders yet. Lenders will provide information after 2 November on how to apply for this support.
According to Money Saving Expert (MSE), as of 31 Oct, 11pm, the deferrals are on for payment holidays for mortgages that have been extended.
MSE stated that if you cannot resume your contractual repayments, lenders now need to offer “tailored support” based on your individual circumstances, rather than the ‘one-size-fits-all’ payment holidays that were available between March and October.
The FCA, lenders and the credit reference agencies (Equifax, Experian and TransUnion) all agreed when the blanket payment holiday help was first introduced that anyone on a payment holiday wouldn’t have it recorded directly on their credit report (though there were still ways other lenders could find out about them), stated MSE.
If you took a payment holiday with a permissible “missed payment” or repayment plan earlier this year, your credit rating would not have been recorded, but as of November, it will. This is to encourage people to keep up with payments if they can, otherwise, the banks’ will see their revenues drop and their customers’ debt deepen.
MSE has a useful checklist for what to consider when taking care of your credit score and has provided this link to check your credit reports for free.
Tips to improve your credit score
Prove where you live and register to VOTE.
Register on the electoral roll at your current address – you can do this even if you’re in shared accommodation or living at home with your parents.
Build your credit history.
Having little or no credit history can make it difficult for companies to assess you, and your credit score may be lower as a result. This is a common problem for young people and people who are new to the country. Luckily, there are some steps you may be able to take to build up your credit history.
Make payments reliably.
Paying your accounts on time and in full each month is a good way to show lenders you’re a reliable borrower, and capable of handling credit responsibly. Old, well-managed accounts will usually improve your score – although be sure to read about the potential impact of unused credit cards.
Keep your credit utilisation low.
Your credit utilisation is the percentage you use of your credit limit. For example, if you have a limit of £2,000 and you’ve used £1,000 of that, your credit utilisation is 50%. Usually, a lower percentage will be seen positively by companies, and will increase your score as a result. If possible, try and keep your credit utilisation at 25%.
Try to keep old, well-managed accounts. Credit scoring looks at the average age of your bank accounts, so try not to chop and change too much.
Check your credit report regularly for accuracy. You don’t want inaccurate negative factors affecting your score, so if you do find anything that needs correcting, contact the relevant company – we can also raise a dispute on your behalf.
Help protect yourself and your credit score. Look out for unfamiliar or suspicious entries in your credit report, as these could mean you’ve been a victim of fraud or identity theft. You can check your report anytime and receive alerts for certain changes to your report with a CreditExpert paid subscription. Note that if you do become a victim of fraud, your company should correct any damage to your report and score quickly.
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