Payment in arrears and credit reports

markperky

I have recently been caught out by what I feel is an unjust missed payment entry in my credit report.

My mortgage payments are due at the end of the month. Whenever I phone them to ask if the account is up to date I get a 'yes' answer. The problem is my account is actually paid in arrears, meaning I pay for interest that has accrued from the beginning of that month. Technically my account is therefore in arrears during that month, gradually increasing until payment is made. I have been misled into believing that I have extra time (a month) to sort out any missed payments.

I was completely unaware of this arrears payment situation. Recently I didn't quite have enough money in the account to cover the payment, this was a genuine error which was corrected within a few days, but since my account was already (unbeknown to me) in arrears this meant the amount of arrears became greater than one month's payment threshold, and it triggered a missed payment entry in my credit report.

I think this is unjust. I should, as a consumer, be able to correct genuine mistakes without incurring any penalties as long as I do so in a timely fashion. I actually cannot fix the problem in time, as it is impossible for me to even be made aware of it until it's too late.

Now I know the situation I have moved my payments to earlier in the month. In fact another solution would be to set a standing order up early in the month to pay them a small nominal amount, say £50, which means if my main payment at the end of the month is missed I won't go over the one month in arrears limit, and I have time to fix any problems.

So has anyone successfully got their reports ammended due to this? I was actually told when I phoned up that people don't tend to realise this, and moving from standing order to direct debit can also cause problems like this due to the time taken to set the direct debit up.

Mark.

Tixy

I'd say almost all commercial loans are actually paid in advance. When you took out the mortgage initially they paid the money to you, you didn't straight away pay them 1months payment back, you wait until the end of the first month and then make your payment.

And in that time your balance does increase for that month's interest from the date of the loan to the date of the first payment.

I think your best chance would be to ask nicely - occasionally creditors will agree to remove an entry if its a first offence, apologise and ask nicely. But they may not. 1 late payment isn't going to have a huge impact on your file if everything else is always on time.

They are right people do sometimes experience a problem with standing orders in terms of missing due dates for the money reaching the creditor due to weekends/bank holidays etc, or if interest rates changing and not changing the payment amount on time (eg your on holiday when the notification comes that nexts months payment will be more and don't get back in time to read the letter and to amend the SO).
With a DD providing you make sure there isenough money in your account at the right time getting things like the date and amount right becomes their responsibility not yours. People certainly do manage by paying standing orders but you need to be very on top of your finances constantly I'd say.

I'd also say if you set up a small SO and then intend to pay the rest at the end of the month by DD and that payment goes wrong because of a lack of funds or whatever then they are still likely to mark the payment as late - because you haveb't paid the contracted amount on time.

Oneday77

As Tixy said, one late payment is nothing to be honest.
Set up a DD for earlier as you state however you can still set up a SO to pay a little extra each month anyway.
Even say a Fiver will help reduce your mortgage over time and reduce interest.
Not to mention bring you closer to your percieved payemnt due date.

markperky

Oneday77 wrote: »

As Tixy said, one late payment is nothing to be honest.
Set up a DD for earlier as you state however you can still set up a SO to pay a little extra each month anyway.
Even say a Fiver will help reduce your mortgage over time and reduce interest.
Not to mention bring you closer to your percieved payemnt due date.

Unfortunately it's not marked as a late payment, which I agree is nothing to be worried about, this has gone down as a missed payment which has found its way onto my credit report. That does have implications, not least the ability to remortgage. The point is I have no way to be made aware of it until it happens, by the time I'm even told about it by the bank the arrears are greater than 1 month which is the criteria for changing from late to missed.

markperky

Tixy wrote: »

I'd say almost all commercial loans are actually paid in advance. When you took out the mortgage initially they paid the money to you, you didn't straight away pay them 1months payment back, you wait until the end of the first month and then make your payment.

Well that's true. However, it comes down as to what is a missed payment, and what is a late payment as far as when payments are due to be paid. I was unaware that I had no time to fix things if they went wrong and was led to believe the account was not behind in payments when I got the 'yes' answer to whether my account was up to date. I still feel I should be able to correct genuine mistakes (quickly of course) without incurring penalties. The situation is that there is no room for error whatsoever, be it my fault or not, because this immediately triggers a missed payment. (The same BTW doesn't seen to be true for credit cards, usually you can be a few days late in paying without this causing problems.)

Tixy wrote: »

And in that time your balance does increase for that month's interest from the date of the loan to the date of the first payment.

Is that correct? Does the balance really increase until you make the first payment? This means that they have effectively lent you money for your first installment, which you'll pay interest on! So up to the first month's payment you are not paying in arrears, they are gradually lending you more money. Given you pay each month, subsequent month's payments won't be in arrears either as you can't slip into arrears unless you miss a month.

Tixy wrote: »

I'd also say if you set up a small SO and then intend to pay the rest at the end of the month by DD and that payment goes wrong because of a lack of funds or whatever then they are still likely to mark the payment as late - because you haveb't paid the contracted amount on time.

Again I have no issue with it being marked as a late payment, but it actually gets automatically marked as a missed payment and your credit rating is affected.

Oneday77

markperky wrote: »

Unfortunately it's not marked as a late payment, which I agree is nothing to be worried about, this has gone down as a missed payment which has found its way onto my credit report. That does have implications, not least the ability to remortgage. The point is I have no way to be made aware of it until it happens, by the time I'm even told about it by the bank the arrears are greater than 1 month which is the criteria for changing from late to missed.

Sorry but missed and late are the same thing. A payment not in the correct month for that period in time is missed.
Also 1 mark on your credit file is nothing at all, don't worry. If it then becomes 2 or its a missed payment every second month its an issue.
Certainly approach your provider but be nice about it. They have no obligation to remove it and sweetness and light will always win over bull in a china shop.

Tixy

Have you checked you credit report? with which agency? what does the account actually show? what is the latest status code for that account?

markperky

Oneday77 wrote: »

Sorry but missed and late are the same thing. A payment not in the correct month for that period in time is missed.
Also 1 mark on your credit file is nothing at all, don't worry. If it then becomes 2 or its a missed payment every second month its an issue.
Certainly approach your provider but be nice about it. They have no obligation to remove it and sweetness and light will always win over bull in a china shop.

Technically you are correct, not paying at the required time is a missed payment. However, when affecting credit reports (at least with my lender) once you go over 1 month's payment in arrears this goes on your credit report. So they make a distinction between the two conditions. I've simply made that distinction by calling one late and the other missed.

markperky

Tixy wrote: »

Have you checked you credit report? with which agency? what does the account actually show? what is the latest status code for that account?

I did a few weeks ago but lost the report when my hard disk crashed, so I'm going to get another one tomorrow. I'll let you know what it says...

Tixy

If its a single '1' status code, which is all it is likely to be, and everything else is all zeros it really won't have much impact on your credit rating. Certainly a few months down the line its not going to have an significant impact on your ability to get credit etc.

Hanky_Panky

OP - I honestly think you are confusing things talking about late/missed payments. As previously stated there is no difference at all and it is simply your interpretation that is causing the confusion.

Believe it or not it is very,very common for there to be 'trailing arrears' on a mortgage account. This happens because of fluctuations to the interest rate and subsequently the payment you are asked to make not coinciding exactly therefore leaving a small amount of 'arrears' on the account each month. This can go up and down depending on whether rates go up or down and over an extended period of time (25 year mortgage) may often even itself out. They are certainly not classed as arrears by the lender as it is so common. I have seen cases where say the monthly repayment is £101 per month and there are £99 'trailing arrears', however monthly repayment being made on time so no issues. Same example but interest rate goes down so that normal monthly repayment is now £90 per month and all of a sudden the customer is now over 1 month in arrears and arrears letters get sent out.

In your case you missed a monthly payment therefore making yourself more than 1 month in arrears hence the '1' status on your credit file. Really nothing to worry about and you are taking exactly the right action to remedy it for now and in the future.