Your credit score after coronavirus

Because of the coronavirus pandemic, most of us have had to cancel plans we were excited about this year. But will its lasting financial effects continue to mess with your plans in the future?

If you’re planning to buy a house, a car or even a new phone after your debt solution, you might be concerned about whether and how the pandemic has impacted your credit history. So it’s not surprising that we’ve noticed a lot of information about this online – but some of it can be misleading. In today’s blogpost we’ve rounded up the facts.

How coronavirus might have affected your credit score

Debts included in your debt solution

If you have a Debt Management Plan or a Debt Payment Programme under the Debt Arrangement Scheme, your lenders report the payments we make to them on your behalf as payments towards your debt.

If you have missed payments into your Debt Management Plan because you’ve agreed a payment holiday with us, there should be no change to your credit report.

But if you’ve missed payments to us without agreeing a payment holiday, your lenders may report these missed payments to the credit reference agencies – so they will affect your credit score.

If you’re on an IVA or Trust Deed, this works slightly differently – your credit score will take longer to recover at the end of your debt solution anyway. But it’s even more important that you don’t miss any payments without agreeing it with us first – otherwise your debt solution could fail.

Debts outside your debt solution

For the most part, credit scores will not be affected by any payment freezes or payment holidays granted during the pandemic, thanks to an agreement between lenders and the credit reference agencies. The records of these accounts will appear the same after the payment break as they did before.

This applies to all payment holidays on mortgages and other sources of credit, as long as you didn’t miss any payments before agreeing it with your lenders. But:

• Your credit score will be affected if you missed any payments without agreeing a payment break
• Utilities providers may be dealing with this slightly differently. So if you have arranged any payment breaks for your energy, water, phone bills or similar, check with the relevant providers to find out how this will impact your credit report.

And it’s a good idea to keep an eye on changes to your credit report. You can do this free of charge at:

• Equifax via Clearscore
• Experian
• TransUnion (previously CallCredit) via Credit Karma

The three credit reference agencies sometimes hold different information, so it’s best to check them all. Don’t worry – checking your report won’t affect your credit score.

If your credit report shows anything that shouldn’t be there – for example, if you’ve arranged a mortgage payment holiday but those missed payments appear on your account as arrears – then get in touch with the lender. The relevant credit reference agency may also be able to help, but try the lender first.

Lenders may consider more than just your credit score

Remember that lenders often have access to additional information when considering you for credit – for example, they might ask to see bank statements (or do so via Open Banking), for example. So if you make an application for credit in the future, after your debt solution ends, lenders could take into account any payment holidays you’ve had in the past.

That’s all the more reason to take whatever steps you can now to build up a picture of someone who is financially responsible, so any future lenders can view any payment breaks you’ve taken during the pandemic in their wider context.

So how do I boost my credit score?

During your debt solution

Check your credit report regularly using the details above

If some details are wrong, you can contact the agencies to get them corrected.

Get a boost from your bills

It’s important to stay on top of all your household bills: but there are some even smarter ways to give your credit score a helping hand while paying your monthly outgoings.

If you’re a private or social tenant, schemes such as The Rental Exchange and CreditLadder help you get your rental payments reflected in your credit history.

Some utility companies also share information about your payments with the credit reference agencies. This is good news for your credit score if you stay up to date – but remember, it works both ways! Your credit score could suffer if you fall behind on bills.

Register to vote

Make sure you’re on the electoral register at your current address, and that you’ve registered your bank account there too. This makes lenders more confident about lending money to you, because they can more easily check that you are who you say you are.

After your debt solution

Rebuild by saving

LOQBOX is like a regular savings account, except that your monthly deposits are recorded as loan repayments – a good way to build up a positive credit history and a savings habit at the same time.

Rebuild by borrowing – carefully!

Once you have completed your debt solution, if you feel able to manage credit without getting into financial difficulty, you could consider taking out a credit card. A credit builder credit card, for example, could help rebuild your credit score if you:

• stay below half the credit limit
• pay off the balance in full every month. Otherwise you’re likely to pay high rates of interest
• make your payments on time. Missing a payment on a credit card can have serious consequences for your credit score.

Remember that every time you apply for credit, this is recorded in your credit history. So if you try to borrow a lot of money at once from different lenders, or if you’re repeatedly turned down for credit, other lenders might see you as a risk. So plan your borrowing sensibly.

 

Whatever impact the pandemic has had on your finances, we can help you find a way through.

We’re posting regular updates for customers on our website so please keep checking for more information.

We’ll also be updating our Facebook page regularly, so please follow us there too. We are also on Twitter.