Will the health pandemic AFFECT MY CREDIT SCORE?

The global health crisis has seen more than 1.9m of us take mortgage holidays and more than 1.5m payment freezes on credit cards and loans*. How will this affect our ability to borrow in the future?

IF YOU TOOK A PAYMENT HOLIDAY…

Credit reference agencies have said that authorised payment breaks will not show up on your credit record, but they may still have an impact on your creditworthiness. ‘This is especially the case if you find yourself applying for a mortgage, as your credit record isn’t the only thing mortgage lenders will look at,’ says James Jones from credit reference agency Experian. ‘If you took a payment holiday, they can see this from your bank statement and it may result in you getting rejected or receiving a poorer deal. Lenders will get tougher, but making sure your bank account is in really good order can help with any applications when borrowing.’

IF YOU BORROWED MORE…

As part of a series of measures to help consumers, many banks increased their interest-free overdraft facilities to as much as £500 for a limited period. If you relied on overdrafts and still have one, this will be on your credit file, and any debt will inevitably reduce your score. ‘If you have an overdraft agreement, make sure it is affordable and that you can keep up with minimum payments,’ advises James. ‘If you miss payments and

start getting into more debt, then this will further affect your score.’

IF YOU AGREED LOWER REPAYMENTS…

This should not impact your credit score but other factors, such as the card’s balance and credit limit, will. To reduce any negative impact on your score, don’t miss payments and don’t spend more than 30% of your limit. ‘Avoid keeping a high balance on your credit card,’ says Kelli Fielding from credit reference agency Transunion. ‘If you do have a high balance, ensure monthly repayments are made and try to pay more than the minimum. It’s important to pay your bills on time, or early, as late payments are recorded on your report. You should also close down any unused credit cards and cancel old agreements.’

IF YOUR INCOME HAS DROPPED…

If your income is lower than at the start of the year and you are struggling with paying bills, be careful; your record will be affected by unauthorised missed payments. Contact your providers to see if you can agree on a more affordable payment plan or seek help from a debt charity such as Stepchange (stepchange.org). If you are claiming benefits such as Universal Credit, these won’t show on your credit file, but your drop in income will be taken into account on loan, credit or mortgage applications.