Bad credit score

With the cost of living rising, it is anticipated that the number of missed credit and utility bill payments will increase. The FCA reported that the number of adults missing payments on domestic bills or credit commitments in 3 or more of the previous 6 months went up by 1.4million from 4.2million in May 2022, to 5.6million in January 2023. What isn’t always considered is the long-term impact of this on your credit file, and the implications of obtaining future credit, including a mortgage.


To outline the impact bad credit can have and the consequences of missed payments, we’ve asked Gemma Lawson, Property Finance Specialist to explain more.


Over to Gemma


Unfortunately, the long-term outcomes of missed payments can have a significant impact on your credit file and can worsen your chances of obtaining a mortgage. Below I’ve highlighted the implications of missed payments, the importance of seeking assistance, and how to navigate the mortgage market with bad credit.


1.Increasing Number of Missed Payments and Long-Term Impact


As said above, with the rising cost of living, it is becoming increasingly challenging for individuals to meet all their financial obligations. Missed credit and utility bill payments can have a lasting impact on your credit file. A negative payment history can lower your credit score and make it more difficult to obtain credit in the future or a mortgage.


2. Contacting Providers for Assistance


When credit commitments become unmanageable, it is essential to reach out to your providers for assistance. More financial services are offering support to their customers during these times. This includes the Mortgage Charter which has been drawn up to allow mortgage providers who opt in to offer some financial support to their existing customers.


3. Obtaining a Copy of Your Credit Report


If you have found yourself in a situation where you have missed payments and are looking to obtain a mortgage, either to purchase a new property or to remortgage due to your current deal ending, the first thing you should do is obtain a copy of your credit report to see what has been recorded on what agency and how this has impacted your score. There are lots of different credit reports available, however we recommend using checkmyfile as this gives data from 3 credit agencies which gives a full picture of your credit file.


4. Missed Payments and Mortgage Eligibility


Contrary to popular belief, missed payments do not automatically make you ineligible for a mortgage or a new deal if your current deal is due to end. Every lender takes a different approach to adverse credit and missed payments and using a broker like Signature means the adviser has expert knowledge of their lending criteria to know where to place your case.


Some missed payments can be ignored entirely – for example some lenders will ignore any defaults registered by a communications company if the case passes their internal scoring system.


5. Ask a broker for advice


Using a broker is important as they will be able to avoid completing multiple soft searches against your file due to their knowledge of criteria.


If your current mortgage deal is due to end and you are worried that recent missed mortgage repayments could impact your ability to get a new deal don’t worry. A lot of mortgage lenders allow you to change your mortgage deal without the requirement for underwriting or credit search if your mortgage repayments have been kept up to date. This will allow you to avoid the standard variable rate and a good broker will be able to advise you on the best option to ensure that next time your deal is due for renewal you are in a better position.


6. Consider other lenders


If you are looking to raise additional funds or move house, there are still lenders on the market that can consider applications with missed payments. It is important to consider that the interest rates may be reflective of this and potentially have higher fees however we will sit down with you and discuss all your options in full, so you have a full understanding of the impact.


7. The Danger of Missing Payments


If you do not keep up with your mortgage repayments the lender could repossess your property, therefore it is important to ensure that your mortgage commitment is kept up to date. If you are concerned about your ability to keep up with your mortgage repayments, please get in touch with your adviser and current lender.


Here to help


If you have missed payments or a history of bad credit but aren’t sure if you are eligible for a mortgage, we are here to help. To speak to one of our friendly advisers who can provide a tailored solution to fit your financial needs, click here.