If you miss a payment on your borrowings, your credit score could take a tumble… we find out by exactly how much.
When it comes to credit, you’ll typically agree to make monthly payments when you sign your agreement. It’s always important to keep up with the repayments, as you could run the risk of being turned down for credit in the future if you don’t.
However, life doesn’t always go to plan. A stressful month might mean bills aren’t the first thing on your mind – or maybe the boiler’s on the blink and repairing it has left you too stretched to make your payments on time… whatever the reason, we take a look at the real impact this could have on your score and how you could potentially move forwards.
How many points will I lose?
If you miss a payment, your score could take a bit of a tumble. It’s hard to pin down the exact amount your score may drop by, as credit agencies score you individually – there is no such thing as a universal credit score.
With that said, Experian have spilled the beans on how much you could expect your score to drop or rise using their scoring system. A missed payment could cost you around 130 points. Even if you’ve just missed your mobile phone payment of £25 or so, this’ll be seen as the same as missing a payment for thousands of pounds on your credit report. Therefore, it’s never a good idea to miss any kind of bill payment if you can help it!
If your payment escalates into a series of missed payments, then you could be issued with a CCJ. These can have a much more destructive effect on your report, with Experian claiming you can lose around 250 points in one hit.
How long will it stay on my report?
Your missed payments will stay on your credit report for up to 6 years before agencies remove it. While this may seem like a long time, you’ll be pleased to know that lenders see them as less of a problem the older they get. If you keep up with future repayments, this will have a positive impact on your report and lenders may look at your application more favourably in the future.
Can I remove it from my report?
You might have missed a payment because you’ve been made redundant or had a bout of ill health. If you feel you’ve got a valid reason for missing a payment, you could explain this to the lenders by attaching a notice of correction to your report.
Simply speaking, a notice of correction is a brief explanation of your side of the story. While this doesn’t remove your missed payment, it can be seen by all future lenders and it may make them see you in a more positive light. However, it’s important to remember that having a notice on your credit report doesn’t mean creditors will automatically agree to lend to you; their decision will still be based on a number of factors.
If the payment seems to have been recorded by mistake, you can get in touch with the credit agency to see if you can have it removed. Agencies can make mistakes on your report – after all, no one’s perfect!
How can I avoid missing payments?
There are lots of ways you could make sure you never miss a payment in the future and improve your credit score:
- Make a note of when your payments are due in advance
- Set up a Direct Debit or Standing Order to automate your payments
- Get email or text reminders before the payment is due
- Arrange to make the payments when you get paid
- Only borrow what you know you can afford to pay back
- Tell the lender in advance if you don’t think you can afford the payment
Remember, if you do set up a Direct Debit, then make sure there’s enough money in your account before the payment is due. Setting up text or email alerts is a service that many lenders provide and could be a really helpful way of letting you know when your payment is coming up.
In this blog, we take a look at how a payday loan could affect your score…