How long does a late payment affect your credit
A simple mistake of missing a mortgage payment, or if you weren’t able to afford a mortgage payment can stay with you for a while. But just how long does a missed mortgage payment stay on your credit in the UK?
A missed mortgage payment, which is also known as a delinquency, will typically fall off your credit report after seven years from the original delinquency date. Missed mortgage payments stay on credit reports for six years, but as time passes and the missed payment ages, it will have less impact on your credit score.
What is a credit report and how is this used to obtain credit?
Your credit score reflects how reliable you are with credit. This in turn will affect your ability to borrow money.
Each mortgage lender or company providing credit will calculate their credit score in a slightly different way. They will also use difference credit referencing agencies too in order to decide if you meet their criteria.
Each organisation will use your credit history to decide whether or not to afford you the credit you are applying for.
Some companies take late payments into account when calculating your score. This is because overdue or missed payments suggest you’re either struggling to manage your finances or you are bad with money.
Here’s a list of credit reference agencies in the UK
There are a few credit reference agencies in the UK that lending institutions use to provide credit, these are as follows:
- Experian – Has a free credit score, which you can sign up to see, but you won’t have access to your report unless you pay a monthly subscription.
- Equifax – provides a free ClearScore report, but also charges a monthly amount to keep updated with your credit score.
- Callcredit – Noddle is their free credit reporting service, but they also have a number of paid-for add-ons.
These credit reference agencies create and keep hold of your credit reports. They gather information about your credit history on a daily basis. This information is put into a credit report to calculate a score for you.
This is what is used by banks to help in their lending decision. Which is why it’s important to keep a clean credit report.
How much can a late payment affect my ability to obtain credit?
Your credit score includes a wide range of information. If everything else on your credit report is favourable, a late payment won’t necessarily go against you for certain credit applications.
However, repeated missed payments or a missed payment in conjunction with other bad credit flags, like a county court judgement, would badly affect your score.
It boils down to the company’s or bank’s lending criteria. Sometimes a late payment may only reduce your score by a small amount. It could be that this reduction in your credit score isn’t sufficient to stop you from borrowing or being accepted for credit.
How long does a missed mortgage payment stay on your credit in the UK?
If you’ve had a late payment, which includes mortgage late payments, and it’s been recorded on your credit report, the late mortgage payment will stay on your report for six years.
But over time, and as the late mortgage payment ages, the impact on your credit score will diminish. Banks and other lending institutions usually pay more attention to your most recent credit history. Which means, so long as you keep up with future payments, you should see your score improve over time.
As time passes from when you had a missed mortgage payment, it should become easier to get approval for credit at better rates year by year.
Also, the number of missed payments on your credit report makes a difference too. Usually, the more missed payments, the more the negative impact to your credit score.
The other factor that will have a bigger impact to your credit score is the length of time between when you missed the mortgage payment and when you made good the payment.
So for example, if you manage to correct the late payment within 30 days, this would have less impact than a missed mortgage payment that took 90 days to correct.
But the other consideration is the potential for repossession. The longer you leave a mortgage payment outstanding, the more likely you’re going to be repossessed. Subject to how you communicate with your mortgage lender. If you communicate with your mortgage company, and certainly if you only miss one payment, you are unlikely to be repossessed.
But don’t that as a given. Always speak with your mortgage lender if you’ve missed a mortgage payment.
Example of how long a missed payment will stay on your credit report
If you had a late mortgage payment reported in September 2019. But then managed to bring your mortgage account up to date so you’re no longer in arrears in October 2019, the late mortgage payment would drop off your reports in September 2026.
The same principle applies if you happen to miss two mortgage payments in a row.
If the second late mortgage payment was reported as a late payment in September 2019, but you manage to catch up your mortgage payments by November 2019, assuming you managed to correct the first missed payment also, both late payments would be removed from your credit report in September 2026.
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