Financial victims of coronavirus ‘will see credit scores suffer for six years’
People experiencing financial hardship due to the pandemic could see their credit report impacted for years to come, according to TotallyMoney.
According to the financial website, a blanket end to financial support on 31 October will see lenders contacting the 323,700 borrowers on payment holidays to discuss tailor-made repayment options.
Although lenders must make assessments on a case-by-case basis, in most instances they will likely take money owed from payment holidays, add this to the outstanding balance, and recalculate monthly payments accordingly.
Those unable to meet their full repayments in accordance with what’s agreed are likely to see missed payments and defaults on their credit report.
This means vulnerable consumers could be left reeling from the financial effects of coronavirus for more than half a decade, as missed payments and defaults remain on credit reports for six years.
This will make it significantly harder to get accepted for credit cards, loans, mortgages, mobile phone contracts, and even paying for utilities by direct debit.
Alastair Douglas, CEO of TotallyMoney, said: “With so many trying to make ends meet while protecting their health, the last thing anyone needs right now is more worry about how their finances could be affected further by these drastic changes.
“That’s why it’s unfortunate that consumer credit scores will suffer for such a long time for anyone unable to keep up with their repayments. A lot has changed over the past three months, so a reassessment to see what more can be done to protect the public would be ideal.
“In the meantime, if you see any missed payments or defaults on your credit report, you can contact each credit bureau and add a notice of correction to your file. While this won’t remove the missed payments or defaults, it does give you a chance to explain any mitigating circumstances that may have led to them, such as coronavirus.
“Lenders must then take this into account when you apply for credit, which could help you get accepted in future.”