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If you miss mortgage repayments, is it going to affect your credit rating? If it does, what will the affect be? There are two ways in which you might miss a mortgage payment. These are: 1) Unplanned missed repayments, where you only don’t make a repayment and leave the building society to chase you to find their cash. 2) Planned payment holidays, probably allowed once each year, depending on the building society you have borrowed money from. With both of these the effects of missing your mortgage repayment might be totally different on your credit rating. For the first, an unplanned missed repayment (or at least you have not agreed it with your bank before your missed the payment) your bank is going to record it on your credit rating as a missed payment. But if you have arranged the missed repayment as a payment holiday in advance with your lender, 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 score? 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 prospective 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 bank, then this is not having the same effects and does not reflect on the rating. Your reputation remains unaffected. What is the problem with lowering your credit score? If during the course of your mortgage your credit score falls, then this might 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 though the bank regularly reviews your application, is it? Well, in a way, it does. Every few years your current mortgage becomes more expensive and you possibly 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 can 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 only any future remortgage that is affected if you start defaulting on repayments. If over the next few years you wish to extend any other forms of credit, this can be blocked. For example, car loan, new credit cards, building society overdraft and so on. Habitually absent mortgage repayments might affect your ability to get hold of cash cheaply in all sorts of ways and is without doubt best avoided! If you are struggling with repayments, get help from your lender.
Article Source: http://www.onlinearticlessite.com
Written by Keith Lunt of www.comparemortgagerates.co.uk. If you want to know more about how to compare current mortgage rates, call in!
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