Borrowers to protect scores

BORROWERS agreeing temporary “payment holidays” with lenders due to the financial impact of coronavirus will have their credit scores protected, the UK’s three major credit reference agencies have confirmed.

Experian, Equifax and TransUnion said that consumer credit scores will be protected in cases where lenders have agreed to push the pause button on people’s regular loan repayments.

Earlier this month, the Government announced that home owners badly affected by the crisis can ask their mortgage lender for a payment holiday of up to three months.

To help people applying for payment holidays, credit reference agencies are implementing a measure called an “emergency payment freeze”. This ensures that someone’s current credit score is protected for the duration of an agreed payment holiday.

Jonathan Westley, chief data officer at Experian said: “Many lenders are offering payment holidays or other arrangements to help people who have been affected by the outbreak. Through this new industry agreement, Experian, TransUnion and Equifax are helping protect people’s credit scores during these difficult and unprecedented times.”

Lenders may be able to make special arrangements across other forms of credit, which may include a payment holiday, reduced payments, paused payments or increased credit limits.

The major credit reference agencies said these are also covered by the CRA emergency payment freeze agreement, which means any impact on credit scores will be minimised.

Information from credit reference agencies on how the initiative will work states that if you and your lender agree an emergency payment freeze, the payment status of your account with that lender will not get worse while your payments are paused.

For example, if your account was upto-date before the freeze started, it will continue to show as up-to-date until the freeze ends.

It added that credit reference agencies cannot guarantee that payment holidays will not impact a consumer’s ability to get credit in the future, as lender policies will be different across the industry. But this should be discussed with lenders directly.

Several mortgage lenders have recently updated their websites to allow customers to apply to pause their payments online.