Problems with the CREDIT score may arise in the coming weeks as the protection against coronavirus topics will be lifted. This year, consumers and savers alike have been able to take advantage of pandemic support measures, and while creditworthiness has been shielded from negative effects in the past, they will soon be at risk in the days to come.
Credit scores have been protected from payment holidays for mortgages, credit cards, loans, and other debt instruments, but that protection will soon end. Starting October 31, lenders are required to provide a case-by-case rating of those who have taken advantage of the payment vacation and arrange additional assistance if necessary. However, this support is likely to have an impact on creditworthiness.
According to an analysis by TotallyMoney, most lenders are likely to take funds owed from payment holidays, add them to the outstanding balance, and recalculate monthly payments accordingly.
However, they warn anyone who is unable to make these lenders agreed repayments according to the new reality that their credit report is likely to show missed payments and defaults.
This could impact scores for over half a decade for some consumers, as missed payments and defaults remain on credit reports for six years.
The termination of payment leave arrangements can also be made particularly difficult because they coincide with the termination of the leave arrangements.
The FCA recently exacerbated these concerns as it confirmed that up to 12 million people now have poor financial resilience, indicating that families across the UK are struggling to get bills.
In addition, fears rise that layoffs and unemployment rates will rise in the coming year as government support wanes, making it even more difficult for consumers and savers.
Commenting on the upcoming changes, Alastair Douglas, TotallyMoney’s CEO, said: “With so many trying to make ends meet while protecting their health, the last thing anyone needs right now is more concern about their finances could be further influenced by these drastic changes.
“For this reason, it is regrettable that if someone is unable to keep up with their repayments, consumer creditworthiness will suffer for so long.”
“A lot has changed in the last three months. Therefore, a re-evaluation would be ideal to see what more can be done to protect the public.
“In the meantime, if you see missed payments or defaults on your credit report, you can contact any credit bureau and add a correction notice to your file.
“While this does not remove missed payments or defaults, it does allow you to explain the extenuating circumstances that may have resulted in them, such as: B. Coronavirus.
“Lenders need to take this into account when applying for a loan, which could help you get accepted in the future.
“At TotallyMoney our mission is to improve the UK’s creditworthiness and it is important to us that our customers’ financial futures are not adversely affected by the unpredictable effects of the virus.”
Unfortunately, these issues will affect some people more than others, as a recent survey by the FCA found that people with certain ethnic backgrounds are more likely to be affected by coronavirus-related challenges.
The regulator conducted a survey of more than 7,000 people, which found that nearly a third (31 percent) of adults have seen income falls, with household incomes falling by an average of a quarter.
These income problems are more likely to affect black and ethnic (BAME) people, with 37 percent of people in this group experiencing income loss.
Commenting on this, Sheldon Mills, Interim Executive Director for Strategy and Competition, urged consumers to seek assistance when needed: “We want to remind consumers, especially those who are new to financial difficulties, that lenders You can support.
“You have options that reflect the uncertainties and challenges many customers will face in the months ahead.
“It is also important that households in serious financial difficulties seek debt advice for support.
“We know that many people will continue to live in financial uncertainty if the effects of the coronavirus continue.
“Our surveys have shown that younger and BAME consumers are more affected than others. A large part of the population has already noticed significant changes in their financial stability since the beginning of the pandemic. “
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