Late payments and mortgage application

Tirian

Met with resounding silence on this query on the Mortgages board, so hoping perhaps someone here may be able to offer some insight ..

I intend to apply for a mortgage in the near future, so thought it might be a good idea to take a quick look at my credit record - expecting no problems.

Overall this was the case, however there is one blip. Among the 14 live and expired credit agreements showing on my Equifax report (which include several bank accounts and a number of credit cards), there is a marker for 2 late payments in January 2010 on a now closed Santander bank account.

In actual fact, what occurred here was that due to bank holidays over the Christmas period, my pay came in slightly after the beginning of the month - on the same day as some standing orders were due out. I was aware of this - but not of the fact that, unlike my other banks, Santander apply debits to the account before credits and therefore bounced two payments, charged me and then credited my pay.

I was extremely p**** off about this at the time, and rang to complain - they were not especially pleasant about it, but did agree to refund the charge - but I never imagined that they would mark this as a "late payment". I closed the account later that year, due to further unsatisfactory service.

My questions, in order of importance, are:

1) How likely is this marker to affect a mortgage application (success of, rates offered etc)?

2) Is it worth placing a note of correction on the report to describe what this was all about? Would this realistically make any difference?

3) Should I officially dispute the late payment markers? I've just had a look at their current account T&C on the web (I don't have actual ones they sent me at the time as I shredded it all a year after closing the account). The current T&C do not, as far as I can see, make any mention of the order in which credits and debits are applied to the account.

YorkshireBoy

Tirian wrote: »

1) How likely is this marker to affect a mortgage application (success of, rates offered etc)?

Your report will say you had a 'blip' 2 years ago. My feeling is that it shouldn't affect mortgage application outcome too much, but this particular question would be best answered by one of the mortgage brokers on the other board you tried.

2) Is it worth placing a note of correction on the report to describe what this was all about? Would this realistically make any difference?

You could try, but at the end of the day you breached your account T&Cs (see below) and that's why you have the problems you have now. Placing a NOC simply means that all automatic scoring is suspended and every application you make will be referred to an underwriter for manual assessment. You'd get the same outcome with any automatic decline anyway, ie you'd appeal and it'd be referred to an underwriter.

3) Should I officially dispute the late payment markers? I've just had a look at their current account T&C on the web (I don't have actual ones they sent me at the time as I shredded it all a year after closing the account). The current T&C do not, as far as I can see, make any mention of the order in which credits and debits are applied to the account.

You won't get anywhere with a dispute. The Santander T&Cs, like many other banks' T&Cs, state that you need to have cleared funds (account either in credit or has an overdraft facility in place) in the account the working day before scheduled payments, ie DDs/SOs are to be paid. In other words, "we (may) process debits before credits".

And finally, you're aware they're not 'late payment' markers? Markers on current accounts have a different meaning to credit cards, loans, etc. See here...

http://www.experian.co.uk/downloads/consumer/YCREJul08.pdf (pages 14-15)

jamesd

Don't bother with a notice of correction, it will harm you, not help you, because:

1. debit before credit is standard practice in banking. A bank will often refund charges once or twice if the debits and credits arrive on the same day but the rule is still almost universally that you're supposed to have the money to pay the debits in the account by the close of business on the day before the debits are due to come out.

2. you're supposed to allow a safety margin between pay due date and DD taking date that is sufficient to handle glitches caused by things like bank holidays or slightly late pay.

The key fault here was yours for not allowing a sufficient safety margin and that's why a notice of correction will harm you: it will suggest that you don't understand your responsibilities. And then compounded it with a notice of correction about normal banking practice.

I'm not trying to give you an answer you'd like, just being frank about what and why so you know the likely reaction if you did take the notice of correction approach.

Best to adjust your DD and other payment dates to give yourself a longer safety margin, and to seek an increase in any agreed overdraft facility so that it is sufficient to prevent non-payment. I tend to target a week or more after pay day because that allows for even long bank holiday combinations.

For the mortgage, do let the lender know in a note accompanying the application what happened. Be sure to note what YorkshireBoy and I have written and give it as facts. Not as you being wronged, because you weren't wronged. It's just a glitch, those happen and a once-off glitch is fairly likely to be accepted even though it was your responsibility to prevent such glitches from affecting payments.

Don't feel restricted by any mortgage application forms. There's nothing to prevent you expanding on your situation with additional material. I did, you can too.

Tirian

You won't get anywhere with a dispute. The Santander T&Cs, like many other banks' T&Cs, state that you need to have cleared funds (account either in credit or has an overdraft facility in place) in the account the working day before scheduled payments, ie DDs/SOs are to be paid. In other words, "we (may) process debits before credits".

Interesting - didn't see this on my scan through the T&C last week. As I said, I knew in advance that it was going to happen but didn't think it was an issue since with Co-Op (my main bank) it's reconciled at the end of the day, not the beginning. Plus it didn't occur to me that money coming in via an automated payment, that is immediately available at the beginning of the working day in question (which it always is) wouldn't be available to make payments going out on that day.

And finally, you're aware they're not 'late payment' markers? Markers on current accounts have a different meaning to credit cards, loans, etc. See here...

I'm just repeating what it said on the Equifax report. There was a yellow box with "2" on January 2010, and the key at the side said yellow stood for "Late Payment". I inferred that 2 was for 2 bounced payments.

I think they must use a different system to Experian - a code 2 wouldn't make any sense as the account was never 2 months late with anything. I can't recall exactly how long it was over by, but it was a matter of days not months - and the previous month was green (i.e. no problem) - fine in December and then two months overdue in January doesn't really make sense.

Anyhoo, I won't bother with the note of correction, doesn't seem to be worthwhile based on what you say. Am still very irritated by this, since it is not an indication of how I have ever managed my money.

And despite what you say, I've now taken a close look at Santander's T&Cs ( link ) and I can't see anywhere where it says money must be there the day before a payment is due to go out - or anything at all about the order of application of debits and credits to the account.

Section 4.6 says "Money deposited by electronic transfer is available for withdrawal the day it is credited to your account"

Section 6.4(d) says "If your Payment Instruction specifies that the payment is to take place on a specific day ... then we will treat it as having been received on the day specified"

Absent any other information on processing of payments and credits (which I can't see anywhere) I can't see any reason why you should assume that money that is available for withdrawal should not be available for making payments.

Tirian

jamesd wrote: »

You're supposed to allow a safety margin between pay due date and DD taking date that is sufficient to handle glitches caused by things like bank holidays or slightly late pay.

The Christmas combination of weekends and bank holidays ate into the margin - but I genuinely thought it was fine because the money was going to be there in time for the payments to go out.

There were zero unplanned transactions going through the account - it simply collected standing orders from myself and my flatmate to cover rent and bills, and paid out direct debits to cover those bills. If I'd thought for a moment that the debit/credit issue was going to be a problem, I'd have just transferred in a couple of hundred quid for a week to cover it.

Best to adjust your DD and other payment dates to give yourself a longer safety margin, and to seek an increase in any agreed overdraft facility so that it is sufficient to prevent non-payment. I tend to target a week or more after pay day because that allows for even long bank holiday combinations.

If you think that I didn't already do that immediately after this whole debacle then you underestimate me!

For the mortgage, do let the lender know in a note accompanying the application what happened. Be sure to note what YorkshireBoy and I have written and give it as facts. Not as you being wronged, because you weren't wronged. It's just a glitch, those happen and a once-off glitch is fairly likely to be accepted even though it was your responsibility to prevent such glitches from affecting payments.

Noted, thanks.

Experian_company_representative

We have a much newer credit report guide than the one mentioned above, here: http://www.experian.co.uk/downloads/consumer/experian-YCRE.pdf

Like others have said, I doubt the blip two years ago will make much difference to any credit rating a lender calculates today.

James Jones

jamesd

Tirian wrote: »

If you think that I didn't already do that immediately after this whole debacle then you underestimate me!

I don't know you well enough to over- or under-estimate, just being sure that the obvious was written for anyone who didn't think of doing it. Glad you did!