Payment holidays may hurt mortgage application chances via the back door - MSE News

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New information uncovered by MoneySavingExpert.com indicates taking a payment holiday on your mortgage or other forms of credit could have an impact on future credit applications despite promises that credit scores won't be affected...

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'Payment holidays may hurt mortgage application chances via the back door '

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  • [Deleted User]
    [Deleted User] Posts: 35,242 Forumite
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    edited 14 May 2020 at 9:20AM
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    I'm not sure this was ever a secret.

    A payment holiday means that the balance of the debt will go up - or at the very least stay static, regardless of any late or AP markers. A lender will clearly see that payments were not made and factor that into their risk scoring as appropriate.

    The insistence that CRAs don't change people's pretend credit scores has diverted people's attention from what actually appears on a credit file.
  • comeandgo
    comeandgo Posts: 5,744 Forumite
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    Why would it not?  You have shown you have no savings for unexpected events.  
  • Splatfoot
    Splatfoot Posts: 593 Forumite
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    comeandgo said:
    Why would it not?  You have shown you have no savings for unexpected events.  
    Yes and we can all afford to save on minimum wage jobs surely? 
  • Paul_Herring
    Paul_Herring Posts: 7,481 Forumite
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    Back door
    That's a tad over-dramatic, and totally inaccurate, isn't it?

    Why shouldn't a potential customer wanting credit have the fact that they were prepared to not/delay paying back credit bills under unusual circumstances not factor into a lender's decision to give that person credit.

    In fact, why shouldn't they be treated differently to those who didn't take such actions during the same circumstances?

    As a previous post alluded to, it's the difference between those who have things such as an emergency fund and those who don't - which of the two are likely to be seen to be a more preferential customer to someone offering credit?

    I'm not saying, in case people get the idea, that people should be denied credit because they couldn't afford to pay credit off, but only delayed it, in extenuating circumstances, but should the fact that they actually did (when others didn't) be totally ignored?
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
  • Hermann
    Hermann Posts: 1,360 Forumite
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    Splatfoot said:
    comeandgo said:
    Why would it not?  You have shown you have no savings for unexpected events.  
    Yes and we can all afford to save on minimum wage jobs surely? 
    Then how would they cope with a rise in interest rates?
  • Paul_Herring
    Paul_Herring Posts: 7,481 Forumite
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    Splatfoot said:
    comeandgo said:
    Why would it not?  You have shown you have no savings for unexpected events.  
    Yes and we can all afford to save on minimum wage jobs surely? 
    You have an unaffordable mortgage? How did you manage that?
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
  • Gonna-be-debt-free
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    Back door
    That's a tad over-dramatic, and totally inaccurate, isn't it?

    Why shouldn't a potential customer wanting credit have the fact that they were prepared to not/delay paying back credit bills under unusual circumstances not factor into a lender's decision to give that person credit.

    In fact, why shouldn't they be treated differently to those who didn't take such actions during the same circumstances?

    As a previous post alluded to, it's the difference between those who have things such as an emergency fund and those who don't - which of the two are likely to be seen to be a more preferential customer to someone offering credit?

    I'm not saying, in case people get the idea, that people should be denied credit because they couldn't afford to pay credit off, but only delayed it, in extenuating circumstances, but should the fact that they actually did (when others didn't) be totally ignored?
    I *do* have an emergency fund, however I still *would have* asked for a payment holiday had I been affected.  It would only have seemed sensible to increase the buffering effects of the emergency fund by making use of facilities available.

    Now that I know it could have an effect on future borrowing, I would be less likely to make use of the payment holiday.
  • Paul_Herring
    Paul_Herring Posts: 7,481 Forumite
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    I *do* have an emergency fund, however I still *would have* asked for a payment holiday had I been affected.  It would only have seemed sensible to increase the buffering effects of the emergency fund by making use of facilities available.
    Something someone offering credit would still (like to) use as a data point, no?
    Now that I know it could have an effect on future borrowing, I would be less likely to make use of the payment holiday.
    So. You're allowed to change how you act when presented with more data, but creditors aren't?
    Interesting.
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
  • Bibbitybobbitybop
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    Which is exactly why I didn't apply for one given I put in a new mortgage app this week due to us moving.
    My broker was clear - if the lender asks, you want to be able to say no I didn't need a payment holiday.
  • bradders1983
    bradders1983 Posts: 5,684 Forumite
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    This is hardly major breaking news is it? 
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