If you miss mortgage payments, is it going to affect your credit score? If it does, what will the affect be? There are two ways in which you might miss a mortgage repayment. These are: 1) Unplanned missed payments, where you just don’t make a payment and leave the lender to chase you to find their money. 2) Planned payment holidays, probably allowed once each year, depending on the lender you have borrowed cash from. With both of these the effects of not there your mortgage payment can be totally different on your credit score. For the first, an unplanned missed payment (or at least you have not agreed it with your building society before your missed the payment) your building society is going to record it on your credit rating as a missed payment. But if you have arranged the missed payment as a payment holiday in advance with your building society, then normally this will not be reported on your credit rating, which will show that you are correctly making agreed repayments - which you are (you and your bank have agreed the missed repayment in advance). So why do these affect your credit rating? Your credit rating is your history of whether you are correctly managing your repayments, which create your credit rating, which is an overall indication of whether you are possible to repay future debts. So, if you are seen to be struggling with your repayments, then this is going to reflect negatively on your rating and lower your score, whereas if you arrange a mortgage holiday with your building society, then this is not having the same effects and does not reflect on the score. Your reputation remains unaffected. What is the problem with lowering your credit score? If during the course of your mortgage your credit rating falls, then this may not seem to be a problem. After all, you already have your hands on the mortgage, why do you still need to prove yourself? It is not as even if the building society typically reviews your application, is it? Well, in a way, it does. Every few years your existing mortgage becomes more expensive and you probably want to remortgage to a cheap mortgage product by the same bank, or even a new bank. In this case, the building society reviews your credit history before making you an offer and setting your future repayment rates. This could mean that if your credit rating is showing that you have been badly managing your loans, you are unable to remortgage, or at the very least unable to remortgage so cheaply. What are the other problems? It is not just any future remortgage that is affected if you start defaulting on payments. If more than the next few years you wish to extend any other forms of credit, this might be blocked. As for instance, car loan, new credit cards, bank overdraft and so on. Habitually absent mortgage repayments can affect your ability to get hold of cash cheaply in all sorts of ways and is definitely best avoided! If you are struggling with repayments, get help from your lender.
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If you miss mortgage payments, is it going to affect your credit rating? If it does, what will the affect be?
Written by Keith Lunt of http://www.comparemortgagerates.co.uk. If you want to know more about how to compare mortgage interest rates, call in!
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