The reasons a Delayed Remortgage Repayment Impacts Your Credit Rating

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Your credit rating is the guiding feature of your future mortgage and loan applications. So if you make a late payment, how is that going to affect your credit score?

Put quite simply, your credit rating is a system that is supposed to reflect to future budding lenders just how good, or bad, a credit risk you will be for them. If you are a good credit risk then they are more potential to get their money paid back on time, but a poor credit risk increases the chance of late payments, defaults and even repossessions.

This means that a poor credit rating might mean that you may not be offered a mortgage or loan when you next apply, or that if you are offered the money, then the reward might be a higher APR, which will price you a fortune more than the years.

So just how will not there a payment affect the score? Well, this is what the lenders are trying to work out from the rating - whether you are liable to miss payments or make them all on time. This is what the credit rating is trying to indicate to banks and, therefore, missed payments will be reflected.

But, there are degrees of missed payments. If you merely forget a single payment, but it is made a day or so late, then it might even be that the bank does not notice the delay and does not even record it on your publicly available credit rating.

However, at the other extreme if you are defaulting regularly or even worse you have a few of the loan written off instead of paying the loan in full, then this will affect your credit score and in quite a strong way.

Even these so called ways of getting out of debt by legal loop holes, that may sound a amazing idea at the time, ultimately mean a whole pile of missed payments and the building society writing off the debt. They are not only going to walk away from this, they are going to record the missed payments on your credit rating so that future building societies may not be willing to deal with you at all.

So it is all in balance. A late mortgage payment could affect your credit rating, but it depends on how late your payment is and how often you make late payments. If you know that you are not going to be able to make a future payment it would be worth speaking to your building society so that they are aware of your situation and might even offer you a mortgage payment holiday. This is a way of omitted a payment with their permission. And because it is with their agreement, it is not going to affect your score at all.

Your credit scoring is all round how you manage those debts. Odd slightly delayed payments should only have a minimal affect on your credit rating, but the effect rises as your frequency and lateness of repayments increases. The aim being that if you miss stacks of payments, other building societies know not to lend to you.

Article Source: http://depositarticles.com/

Written by Keith Lunt of compare mortgage rates. If you want to know more about mortgages, call in!

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